Banks Battling To Keep Reforms From Becoming Permanent
Ben Hallman, Huffington Post
The promises made by five of the nation’s largest banks under the much-ballyhooed $25 billion mortgage settlement have a surprisingly short shelf life.
Under the deal struck in February, Bank of America, Wells Fargo, Citigroup, JPMorgan Chase and Ally Financial pledged to stop the illegal practices that sparked false documentation and “robo-signing,” which helped push many homeowners into foreclosure and caused endless headaches for millions of other borrowers.
But the legal agreements among the banks, and the states and federal government hold for only three-and-a-half years; the pledge runs out in 2015. Now many of these banks are battling California Attorney General Kamala Harris over her push to make permanent some of the settlement’s most important “servicing standard” reforms by writing them into state law.
“The success of the national mortgage settlement in terms of reforms is laudable, but it only lasts for three years,” Harris said. “We need to make the fixes permanent.”
Banks do not seem to agree. The California Bankers Association, along with four of the five banks that settled the abuse investigation by federal and state governments in March — Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo — spent about $500,000 on lobbying efforts in California during the first three months of 2012, according to state disclosure records. It is not possible to tell from disclosure forms how much of that money was spent to influence the pending mortgage legislation, but state officials who support the legislation said lobbyists for all the settling banks except for Ally, which is much smaller than the rest, have spoken out against the proposed laws.
The California legislation is known as the “Homeowner Bill of Rights.” If enacted, all banks and servicers in the state — not just the biggest — would be required to adopt the settlement reforms. One measure, for example, would restrict “dual-tracking,” in which banks pursue foreclosure proceedings against homeowners who are pursuing a trial loan modification at the same time. Another would require financial institutions to establish a single point of contact for troubled borrowers — a response to widespread complaints from homeowners that when they called for help, they never could speak to the same person twice.
