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Mortgage oversight review has questionable scope, solutions

April 21, 2011 - Mike Maneval
An article by David Dayen for the American Prospect looks at federal initiatives on mortgage-lending reform and finds troubling points on an investigation's scope and the solutions the investigation produces.

First, on scope, Dayen finds a multi-agency review of foreclosure practices "basically stopped at robo-signing" — a practice under which foreclosure orders were signed with little assessment by unqualified and under-qualified staff — and other instances of document fraud. Dayen lists illegal fees tacked on to mortgages and non-compliance with loan-modification requirements as two aspects unexamined by the investigation, conducted by the Federal Reserve, Office of Thrift Supervision, and Office of the Comptroller of the Currency. Dayen also notes the review relied frequently on banks' self-evaluation.

As far as the solutions, Dayen calls them "toothless" and penalties for wrongdoing "confoundingly light." Dayen then ponders whether future assessments would ever produce even those "confoundingly light" penalties, as the reviews would be conducted by private contractors selected and paid by the banks themselves.

Dayen holds out hope that the findings from the Federal Reserve and the other two agencies will prompt state attorneys general to take aggressive action themselves. But with the coast-to-coast devastation left by the housing bubble's burst, Dayen's important thoughts invite the question: Will the White House interject itself to provide pressure for better, more critical oversight? The report from the Fed and the the other regulators is now more than a week old, and the clock is ticking.


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