House Republicans push back at plan to settle with mortgage servicers
Republican lawmakers serving on the House Financial Services Committee sent a letter to Treasury Secretary Tim Geithner Wednesday warning him that a government proposal to settle with the nation's five major loan servicers could disrupt the functioning of the mortgage finance market. The letter addresses a proposal sent to large U.S. banks by Obama administration officials and state attorneys general last week. The proposal, which currently does not include the unverified $20 billion or more fine servicers would have to pay, puts forth guidelines on how mortgage servicers should operate going forward. The Republican letter comments on both the proposal and the potential fine. The Republican congressmen took issue with not being informed on what role their committee will play in the settlement. But their foremost concerns regard how the settlement will impact the mortgage finance market. Further, the letter challenges the authority of regulators to enforce such a proposal. "If the terms of the draft settlement are implemented as proposed, the settlement would transform the mortgage servicing industry and fundamentally change the rules that have historically governed relationships among borrowers, servicers and investors," the lawmakers wrote. "The breadth and scope of the draft settlement proposal raise significant concerns about its effect on the financial system, as well as concerns that the administration and state agencies are attempting to legislate through litigation." The lawmakers, which included one of the letter's authors Randy Neugebauer (R-Texas) and Scott Garrett (R-NJ), chairman of the House Financial Services subcommittee on capital markets and government-sponsored enterprises, also pushed back on an issue that has been a major concern of Neugebauer's: the role Elizabeth Warren's Consumer Financial Protection Bureau played in crafting the settlement. The letter describes the agency as one that played some role in the agreement even though it "does not yet have any regulatory or enforcement authority," the West Texas republican said. Neugebauer has been a strong critic of the CFPB, claiming it lacks the appropriate regulatory oversight. Lawmakers also criticized the settlement for resuscitating foreclosure prevention programs that have already failed to accumulate a large number of successes. "For instance, the settlement agreement seeks to revive the Home Affordable Modification Program, a failed Obama administration initiative that Congress is currently considering terminating, and to require write-downs of mortgage principal, which both the House and Senate have rejected in the context of bankruptcy proceedings," the congressmen wrote. On Tuesday, the Obama administration said it would veto bills that would kill foreclosure prevention programs if they pass Congress. Republicans are asking for a reply by March 18. Write to Kerri Panchuk.