What The Fed proposes to do is to force the principal repayment to happen before the lien is released. This effectively destroys the remedy, since without the ability to pledge the collateral for the new loan it will be impossible to obtain the new loan.
TILA and RESPA violations are one of the most-potent tools available when a consumer has been legitimately screwed. The risk of having the loan's security interest voided and then paid at principal value only is a tremendously powerful tool to force lenders who have screwed a borrower to come to the table with a realistic and reasonable modification that cures the original breach of good faith.
As has been the practice over the last 20 years, The Fed's position on this makes clear exactly who The Fed represents - and who it doesn't. It also makes a mockery of the claim that The Fed "protects consumers" and "polices lenders" - if it had there would have been no housing bubble and the predatory lending practices that were rampant during the 2000s would have led to enforcement actions and criminal referrals.
Now that the bad debts are floating to the surface and stinking up the joint The Fed proposes to remove one of the tools available to those who got screwed in finding justice - in the name of "lower costs" for lenders (read: yet another attempt to keep illicitly-gained money.)
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