Housing Industry Leaders Call on U.S. Regulators to Investigate Pro-Foreclosure Campaigns

PHILADELPHIA, April 15, 2015 /PRNewswire/ -- Housing industry leaders today sent the below letter to top federal officials, including The Honorable Mel Watt at the Federal Housing Finance Agency, The Honorable Jack Lew at U.S. Department of the Treasury, and The Honorable Richard Cordray at Consumer Financial Protection Bureau, calling for an investigation into pro-foreclosure campaigns launched by Wall Street giants including the largest hedge funds, mortgage bond traders, and insurance companies.

April 15, 2015

The Honorable Jack Lew
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Ave, N.W.
Washington, D.C.  20220

The Honorable Mel Watt
Director
Federal Housing Finance Agency
400 7th Street, S.W.
Washington, D.C.  20024

The Honorable Richard Cordray
Director
Consumer Financial Protection Bureau
1275 First St. N.E.
Washington, D.C.  20002

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

SOURCE National Housing Resource Center