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Via David Dayen, at least one federal regulator wants to do something about the foreclosure crisis. Federal Deposit Insurance Commission Chair Sheila Bear has proposed implementing rigid standards for mortgage services in the financial reform regulatory rulemaking. She's advocating the idea of a claims commission for homeowners.

Federal Deposit Insurance Corp. Chairman Sheila Bair wants a foreclosure claims commission set up, similar to the one established during the oil spill crisis in the Gulf of Mexico last year, to help homeowners victimized by improper foreclosures....

Lenders and servicers have restarted foreclosures from the robo-signing scandal and have begun refiling thousands of affidavits. Chase said it would mail out $2 million in refunds to those families.

But Bair wants to consider more in compensation and in new regulation.

"The mortgage servicing industry is fundamentally flawed and in desperate need of reform. It does not provide significant incentives to provide borrowers enough loss mitigation needs," Bair said.

She added that some servicers have become too big to succeed. Since 2000, the five largest servicers grew their market share from 32% to more than 60% today, Bair said, adding that these companies were either incapable of or reluctant to commit the resources necessary to implement effective loss mitigation practices.

As the 50 state attorneys general continue their investigation into the servicing industry, Iowa AG Tom Miller has said a fund to compensate borrowers victimized by robo-signers is on the table, but not necessarily pending.

It's good as far as it goes for those who've already been victimized by the mortgage servicing industry, but there's an immediate need to stop these unwarranted foreclosures and prevent their being further victims. Dday:

A nationwide compensation fund is fine, but in the end it’ll probably end up as just a payoff, the cost of doing business for the banks. You have to add to that real modifications with principal reductions, to reset the entire housing market and stabilize it. And you have to provide consequences for illegal behavior, which is in the background of virtually every foreclosure action over the past several years. Judge Arthur Schack is taking on foreclosure lawyers because they are lying in his court and breaking the law. The remedy for that is to throw those people in jail, and that needs to go all the way to the top. “I’m not going after lawyers, I’m out to do justice,” Judge Schack said. “We have something called due process of the law.” And there’s no justice without actual sanctions for criminal behavior. “We’re not Animal House,” concluded Judge Schack. “Some animals, like banks, are not more equal than others, to bring George Orwell into this.” It was Animal Farm, but have I mentioned that I love Judge Schack?

It's a start, and a good thing that someone in the administration is talking about doing something, anything on this issue. But it is just a start.

Originally posted to Daily Kos on Thu Jan 20, 2011 at 06:32 AM PST.

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Comment Preferences

  •  Sheila Bear? (2+ / 0-)
    Recommended by:
    neroden, ontheleftcoast

    At last we have a real Mama Grizzly in a position of power!

    ;)

    "[R]ather high-minded, if not a bit self-referential"--The Washington Post.

    by Geekesque on Thu Jan 20, 2011 at 06:45:10 AM PST

  •  Be suspicious. Be very suspicious. This smells (4+ / 0-)

    like some kind of national limitation of liability.  

    FDIC is bought and paid for by banks, and certainly has no interest in seeing any larger exposure to liability of banks.  Of course, overall that's good that banks have less liabilities, I suppose, if there's a a federal guarantee of deposits.  But here, the victims of the banks may well end up subsidizing the FDIC guarantee.  

    I should point out that there already are claims commissions in all fifty states; they are called "courts", and banks don't like them.

    You have exactly 10 seconds to change that look of disgusting pity into one of enormous respect!

    by Cartoon Peril on Thu Jan 20, 2011 at 06:46:31 AM PST

    •  The court system is stacked against (3+ / 0-)

      homeowners and in favor of banks who can hire lawyers by the thousands.

      "[R]ather high-minded, if not a bit self-referential"--The Washington Post.

      by Geekesque on Thu Jan 20, 2011 at 06:50:55 AM PST

      [ Parent ]

      •  Not necessarily, in most states judges (2+ / 0-)
        Recommended by:
        PsychoSavannah, brooklynbadboy

        are elected locally, and the system is far more open and accessible than any FDIC process ever could be.  Rules of evidence govern and there is a right to a jury trial in tort cases, such as abuse of legal process, which would be the claim against the banks.

        What banks fear here is a repeat of the smokers' claims cases against RJ Reynolds etc.  Claims here however would be much easier to bring in court, even by an individual.  The evidence would be fresh, and obvious, no medical evidence needed, and, bad for the banks, justice might well be swift.

        You have exactly 10 seconds to change that look of disgusting pity into one of enormous respect!

        by Cartoon Peril on Thu Jan 20, 2011 at 07:08:28 AM PST

        [ Parent ]

  •  Judge Schack sounds awesome. (3+ / 0-)

    “I’m not going after lawyers, I’m out to do justice,” Judge Schack said. “We have something called due process of the law.” And there’s no justice without actual sanctions for criminal behavior. “We’re not Animal House,” concluded Judge Schack. “Some animals, like banks, are not more equal than others, to bring George Orwell into this.”

    Yeah!  Too bad that seems to be an endangered point of view these days.

    If you want to fight and die for my right to sit here and bitch, sleep with whomever you want.

    by talismanlangley on Thu Jan 20, 2011 at 07:06:45 AM PST

  •  Ya the BAR will get right on that (0+ / 0-)

    and if you believe that....

    ..but if youre a writer you say all i wanna do is leave behind one story - Harlan Ellison

    by cdreid on Thu Jan 20, 2011 at 07:09:51 AM PST

  •  Too big to succeed (2+ / 0-)
    Recommended by:
    PsychoSavannah, neroden

    "She added that some servicers have become too big to succeed."

    I like that.  Say that some more.

  •  Banks should be stopped from foreclosing... (0+ / 0-)

    ...improperly.  And, yes, they should be required to file the paperwork properly.  However, they also should have the right to foreclose if somebody isn't paying the mortgage.  A lot of these things seem to merely be people who want a free (or reduced price) house.

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