All 50 state attorneys general and multiple federal agencies had joined forces last year to hammer out a pact with big mortgage servicers. Among the terms under discussion was making banks reduce struggling homeowners’ mortgage principal, accept loan-servicing standards, and pay financial penalties for “robo-signing” and related foreclosure abuses.
That looks to be dead. Instead, the Federal Reserve, Office of the Comptroller of the Currency, FDIC and other bank regulators have started signing individual “consent agreements” with Bank of America (BAC), Wells Fargo (WFC) and other large servicers.
Legal experts who have reviewed the government’s agreement (which you can review here) describe it as exceptionally weak. Banks aren’t forced to cut loan balances or pay a fine. They also don’t have to admit any wrongdoing in connection with the robo-signing scandal. Rather, banks are simply required to tighten their internal loan modification and foreclosure processes. Said Georgetown University law professor Adam Levitin, a noted housing finance expert:
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