This week in Washington, D.C., key parties met for face-to-face settlement negotiations surrounding the mortgage servicing and foreclosure investigation into alleged misconduct, such as robosigning. The Association of Mortgage Investors (AMI) urges all state and federal parties to the ongoing investigation to protect the rights and investments of investors so that the final settlement only penalizes the servicers who have acted irresponsibly, acted to the detriment of borrowers and pension funds, and does not result in another government bank bailout.
“The Association of Mortgage Investors is gratified to continue its series of constructive, thoughtful meetings with the Attorney General Executive Committee on these matters, including the impact on public institutions back home,” said AMI executive director Chris Katopis. “However an incorrectly structured settlement could have devastating effects on the already depressed housing market, America’s middle-class, and the parties invested in the market, such as state pension and retirement systems, unions, and university and charitable endowments.”
Earlier this year, AMI released a white paper concerning loss mitigation and its proposed remedies for any such settlement concerning the robosigning allegations.
“Any settlement that mandates principal reduction of first mortgage loans prior to a reduction of second lien home equity loans is a costly mistake for America," said Katopis. "It will result in sharp decline in housing prices, market uncertainty, and a tidal wave of private litigation. Once again U.S. citizens, homeowners, and investors will suffer losses from the actions of banks, the servicers and lack of appropriate action of regulators. The administration goal of reducing government’s role in housing finance and privatizing the housing finance industry will be set back years."
The federal regulators and state law enforcement are looking for settlement mechanisms to resolve mortgage servicers and banks alleged past faulty practices. Investors are troubled by proposals that would assign the costs of settlement mandated principal reductions, potentially costing aggregating in excess of $100 billion, to American’s pension and retirement funds, rather than to the servicers responsible for the alleged servicing misconduct. Remember the investors are not a party to the settlement. Critics observe that permitting the servicers to pass along costs to the investors is the equivalent of another government bank bailout.
The AMI and its members are ready and willing to remain a resource to policy-makers who wish to create a truly viable plan that offers long-term, sustainable and effective solutions. The timely resolution of the foreclosure crisis is in the best interests of homeowners and fixed income portfolio investors reliant upon returns from mortgage-backed securities.
“It is the greatest hope of mortgage investors that any final settlement carefully consider the impact on the soundness of all stakeholders, including state pensions, retirement systems, unions, life insurance, and medical savings plans,” said Katopis.