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HousingWire: Rep. Waters says proposed $20 billion settlement falls short of servicing goals

February 25, 2011
In The News

by Kerri Panchuk

Regulators may have their hearts set on a $20 billion settlement with mortgage servicers, but that's not enough to make up for the $1 trillion lost in family wealth since 2008, Rep. Maxine Waters (D-Calif.) said Friday.

Waters issued that statement after reports surfaced that regulators have plans to settle with embattled lenders and servicers for $20 billion. Any money from the proposed settlement would be used to help borrowers who are underwater on their mortgage and to support loan modifications.

"Particularly, I am concerned about the $20 billion settlement figure, spread across 14 servicers, that has been noted in various reports," Waters said. "Though this figure sounds like a large settlement to those unfamiliar with the scale of the foreclosure crisis, we must remember that over 3 million homes have been lost to foreclosure since 2006, and some analysts expect an additional 11 million foreclosure filings in the near future. Moreover, the Center for Responsible Lending estimates that foreclosures between 2009 and 2012 will result in $1.86 trillion in lost wealth for families."

Waters said the settlement is too small and is likely to result in borrowers receiving inconsequential principal reductions or no help at all.

"I am also concerned about the fact that this settlement, as reported, contains no discussion of mortgage servicing standards going forward," she added. "Though I was pleased that the administration briefly mentioned the need for servicing changes in their Fannie Mae and Freddie Mac reform proposal, we have yet to see the details of their plan for servicing reform. As I have reiterated for years, meaningful servicing standards are absolutely necessary to protect the millions of borrowers vulnerable to foreclosure."