There is much to talk about with the alleged settlement of the big five (BofA, Chase, Wells, Citi, Ally/GMAC) and the Attorneys General (AGs even though it is wrong to say Attorney Generals). The deal is not final but there are a variety of documents describing the basics of the agreement. See chart of anticipated money flows here for example.
Of course the focus of the inquiry and thus settlement is the servicers’ foreclosure processes. As a result, the lenders at issue allegedly agreed to some new servicing standards. (Note that Fannie and Freddie were involved in the negotiations and made sure the standards were not too tough because they knew that they would have to follow them too implicitly. Kinda despicable.)
New Servicer Standards
Anyway, a PDF of the “new” standards is found on the settlement website (nationalforeclosuresettlement.com) is here. Of course it is hoped that servicers stop blatantly violating every known law in their quest for money. So in that vein the standards say in part that servicers are to really start following the law now. See, before there were laws passed by Congress and signed by the President, or passed by the state legislatures, etc. Yeah, the lenders ignored these in millions of cases for years and years. Well this settlement says that lenders agree to follow standards written on a PDF on a website. (It also requires additional checks to improve the fairness in the system.) But who would doubt lenders would violate these new standards? Come on, it is typed up, digitized, spell checked, on the web and everything.
One of the many laws that the servicers agreed to follow in the new standards was the Protecting Tenants at Foreclosure Act which is the very last paragraph of the new standards:
E. Tenants’ Rights
Servicer must comply with applicable state and federal laws governing the rights of tenants living in foreclosed residential properties; and, the servicer must develop and implement written policies and procedures to ensure compliance with those laws.
Settlement Servicer Standards, page 10, here.
Well maybe lenders will really start doing it now since it is a PDF. Folks certainly should not look to the federal government to do anything to help. The Treasury Department has long ago indicated that it will do anything possible to assist the industry. With regard to the Protecting Tenants at Foreclosure Act, government controlled Fannie and Freddie have been the top violators of the Act themselves. Story here.
New AG Enforcement Changes Playing Field
But maybe some state AGs will actually be able to enforce the laws, even against the national banks whereas in the past only the industry-controlled Office of the Comptroller of Currency (part of Treasury) could take action against the biggies. (Normally the big banks did not have to follow any of the laws because OCC was their regulator and in this scheme the state-chartered lenders and others wanted out of enforcement too otherwise the biggies had a competitive advantage. So local political forces prevented AGs from doing anything even against smaller players.) The settlement changes the playing field. Another part of the site describes another feature of the settlement giving AGs new powers:
State AG oversight of national banks for the first time. Something no court could award.
- National banks will be required to regularly report compliance with the settlement to an independent, outside monitor that reports to state Attorneys General.
- Servicers will have to pay heavy penalties for non-compliance with the settlement, including missed deadlines.
National Foreclosure Settlement website, About, Key Provisions of Settlement, here.
So maybe, just maybe somebody is serious about this law (and hopefully a few others).