A consortium of housing advocacy groups is calling on the U.S. Department of the Treasury, the Federal Housing Finance Agency, and the Consumer Financial Protection Bureau to investigate “pro-foreclosure campaigns,” which the groups say are being perpetrated by “Wall Street giants including the largest hedge funds, mortgage bond traders, and insurance companies.”
In a letter addressed to Treasury Secretary Jack Lew, FHFA Director Mel Watt, CFPB Director Richard Cordray, the groups say they are “concerned by recent media reports stating that some of the largest hedge funds, mortgage bond traders, and insurance companies appear to be pushing servicers to foreclose on borrowers,” instead of offering the borrowers loan modifications or principal reductions.
“These are many of the same Wall Street investors that contributed to the mortgage crisis and have continued their unscrupulous practices,” the groups say in the letter.
“Once again, they are putting their own economic self-interests above our communities and the sustainable growth of our nation's economy,” the letter continues. “If loan servicing companies are restricted from offering effective and common sense modifications, there will be no alternative to foreclosure, which will only aggravate an already untenable situation with blighted neighborhoods, distressed communities, and unnecessarily displaced homeowners.”
The letter comes from HomeFree USA, the National Community Reinvestment Coalition, theNational Community Stabilization Trust, theNational Housing Resource Center,Neighborhood Housing Services of Chicago, Neighborhood Housing Services of Greater Cleveland,Neighborhood Housing Services of New York City,Neighborhood Housing Services of South Florida,New Jersey Citizen Action and the Northwest Side Housing Center Chicago.
The groups say that they work with mortgage companies, mortgage servicers, and community leaders to help borrowers stay in their homes, and cite one servicer as an industry leader in providing principal reductions and loan modifications – Ocwen Financial (OCN).
Ocwen itself came under fire from a group of investors, which reportedly includes BlackRock, MetLife, and PIMCO, who said that Ocwen failed to perform its contractual obligations as a servicer by failing to properly collect payments on $82 billion of home loans.
In a subsequent letter, cited in a report from Compass Point Research and Trading, the investors said that Ocwen’s failures as a mortgage servicer cost bond investors approximately $26 billion.
Ocwen responded to those claims, calling the charges “baseless” and “groundless” and accusing the bond investors of pushing foreclosures. Later, in a letter sent to the trustees and master servicers for 119 residential mortgage-backed securities, Ocwen accused the bond investors of having a “pro-foreclosure, anti-modification” agenda.
Now the housing advocates are echoing that message and citing Ocwen as an example of how servicers help to keep borrowers in their homes.
“Any actions that might impede the ability of servicers to work with struggling families must be stopped,” the group’s letter states. “This pro-foreclosure campaign by certain investors contradicts the foundation of the 2012 National Mortgage Settlement negotiated by the U.S. Justice Department and Attorneys General in 49 states. The NMS specifically requires banks and other mortgage market participants to participate in meaningful engagement with community organizations and to develop foreclosure prevention programs, including principal reduction modifications.”
Ocwen is part of the NMS, and subject to its conditions.
“We urge you to seriously investigate and prevent these private interests from promoting policies which lead to unnecessary foreclosures,” the letter states. “Access to principal reduction programs like Ocwen's Shared Appreciation Modification Program should be applauded; our communities need it. We ask you to encourage mortgage transfers to servicers who offer principal reduction as a solution to help struggling homeowners instead of other servicers who are more likely to pursue foreclosures.”
The groups say that they would like to meet with the Treasury, FHFA and CFPB as soon as possible to discuss the issues raised in their letter.
“Please help us protect these homeowners in our communities,” the group’s letter concludes. “It takes all of our hard work to keep our neighborhoods vibrant and healthy. Please help us to save more homes. Please don't allow Wall Street to railroad our families again.”
The full text of the letter is below.
Dear Secretary Lew, Director Watt, and Director Cordray:
As non-profit housing industry leaders, we want you to know that the national housing crisis is far from over. In many hard hit areas, particularly communities of color, struggling households are stuck with mortgages that are far greater than the value of their home.
Too many hard-working families cannot keep up with their mortgage payments even when employed. Too many are still facing foreclosure and losing their homes, halting their transmission of wealth generationally. Loan modifications – including those that involve a principal reduction – are critical in both helping families with underwater mortgages and stabilizing communities.
We are concerned by recent media reports stating that some of the largest hedge funds, mortgage bond traders, and insurance companies appear to be pushing servicers to foreclose on borrowers rather than offering them loan modifications and principal reductions. These are many of the same Wall Street investors that contributed to the mortgage crisis and have continued their unscrupulous practices. Once again, they are putting their own economic self-interests above our communities and the sustainable growth of our nation's economy.
If loan servicing companies are restricted from offering effective and common sense modifications, there will be no alternative to foreclosure, which will only aggravate an already untenable situation with blighted neighborhoods, distressed communities, and unnecessarily displaced homeowners.
Our organizations work in a variety of ways with mortgage companies, servicers, and community leaders to help borrowers save homes and rebuild their lives. During this process, we have found that some servicers offer more effective types of loan modifications than others. Ocwen Financial Corporation, for example, leads the industry in offering principal reduction modifications and partners with organizations like ours to ensure that qualified homeowners obtain mortgage resolutions that allow them to stay in their homes.
Ocwen's leadership position has also been recognized by a recent research report by Morgan Stanley titled, "Understanding Ocwen Servicing." The report found that Ocwen's approach to modifications is more effective in keeping borrowers in their homes. Specifically, their analysis concludes, "Not only does Ocwen have a higher success rate on mortgages that went delinquent when it held the servicing rights, but it also seems to succeed at keeping borrowers in their homes when it takes on a delinquent or modified mortgage from another servicer," (page 5).
Ocwen also has a strong commitment to open dialogue with housing industry organizations. They are the first non-bank servicer to create a Consumer Advisory Council demonstrating their commitment to keeping people in their homes. Together, as a group, we share ideas, discuss policy issues, and collaboratively identify opportunities that will have a positive impact on our communities, particularly those hit hardest by foreclosure. Despite this work, there is still a lot to be done.
Any actions that might impede the ability of servicers to work with struggling families must be stopped. This pro-foreclosure campaign by certain investors contradicts the foundation of the 2012 National Mortgage Settlement negotiated by the U.S. Justice Department and Attorneys General in 49 states. The NMS specifically requires banks and other mortgage market participants to participate in meaningful engagement with community organizations and to develop foreclosure prevention programs, including principal reduction modifications.
Please help us protect these homeowners in our communities.
We urge you to seriously investigate and prevent these private interests from promoting policies which lead to unnecessary foreclosures. Access to principal reduction programs like Ocwen's Shared Appreciation Modification Program should be applauded; our communities need it. We ask you to encourage mortgage transfers to servicers who offer principal reduction as a solution to help struggling homeowners instead of other servicers who are more likely to pursue foreclosures.
We would like to schedule a meeting with you at your earliest convenience to discuss these very important issues.
It takes all of our hard work to keep our neighborhoods vibrant and healthy. Please help us to save more homes. Please don't allow Wall Street to railroad our families again.
Thank you,
HomeFree USA
National Community Reinvestment Coalition
National Community Stabilization Trust
National Housing Resource Center
Neighborhood Housing Services of Chicago
Neighborhood Housing Services of Greater Cleveland
Neighborhood Housing Services of New York City
Neighborhood Housing Services of South Florida
New Jersey Citizen Action
Northwest Side Housing Center Chicago
