[Editor's note: Thomas Cox, the "hero" lawyer from Maine whose work is often credited with leading to the $25 billion National Mortgage Settlement, asked HousingWire to publish his reaction to another blog today where Christopher Whalen called the current regulatory environment "legalized extortion." While HousingWire is not in the habit of airing personal attacks, Cox's position and passion will hopefully prompt continued, constructive conversation on the sensitive and national topic of foreclosure. Here are those comments.]

Mr. Whalen,

You and Martin Andelman simply haven't a clue about what you are talking about.

I know that Martin does not go to court, and I doubt that you have any practical experience in the real world of foreclosures.

I train lawyers all over the country.

I speak to lawyers all over the country every day.

I go to foreclosure mediation often and I go to court often.

Your theories simply do not match reality. 

There is daily and massive evidence in our dealings with the servicers outside of court, in our foreclosure mediation programs and in our court cases, that the servicers could care less about keeping homeowners in their homes. In fact, in a high percentage of cases where homeowners are demonstrably able to afford loan modifications that would benefit investors, the servicers work their hardest to deny those modifications.

Don't go blaming the homeowners for this--I am referring to huge numbers of cases where they have either housing counselor assistance or legal assistance, where complete loan modification applications are submitted, and where the servicers, in defiance of the National Mortgage Settlement and now in daily defiance of the new CFPB regulations, fail to review the applications and wrongfully deny them.

Martin Andelman excuses the servicers, claiming that “it is hard” for them to do modifications. They have had more than five years now to do it right. The reality is that they are unwilling to invest in sufficient resources to do it right, because doing so will eat into their profits.

You act outraged at the efforts of states like Massachusetts and the efforts of the CFPB to protect homeowners. If the servicers were acting in accordance with the motivations that you so nicely ascribe to them, there would have been no need for these protective efforts. Rather, they are reflective of reality — the servicers do not want to modify loans, they do not care about keeping homeowners in their homes. 

Why don't you advocate for legislation and regulations that will allow homeowners' lawyers to sue servicers for lack of good faith, for negligence, and for deception in their dealings with homeowners? Servicers call the shots and control the modification process, so why shouldn't homeowners be able to sue them when they fail to act in accord with the pure motives that you ascribe to them?

I don't know whether Levitan and Toomey are correct in what they have said about servicers' motives, but I do know that all of the evidence that I and homeowner advocates see every day all across the country is that servicers do not act rationally and appear to be motivated to foreclose rather than to make rational decisions on modifications that will benefit both homeowners and investors.

I represented banks for years.

I am certain that if the actual parties with the money at risk in these mortgages were working out their own loans, without servicers in the middle, the outcomes would be far different. Until the legal and regulatory systems, and the financial industry at large, come fully to terms with the reality that servicers truly don't give a damn about protecting the interests of the investors whom they supposedly serve, states will continue to enact their protective measures, and the financial industry will have itself to blame.

You accuse the regulators of extortion. That is a strong word and an outrageous accusation. What the regulators are doing is trying to stop the extortion by the servicers of homeowners who are qualified for loan modifications but cannot get them. That extortion comes in the form of wearing down the emotional stamina of homeowners to stay with the modification process until they get fair and honest treatment.  I just had a homeowner get a Freddie Mac modification that she first applied for five years ago. Most homeowners would have given up in tears of frustration before being able to stay with the process that long.

Accusations of extortion are outrageous. Your utterly unwarranted attack upon Richard Cordray is so off the wall that it reflects back directly upon your own political agenda. That agenda clearly is to sacrifice homeowners upon the alter of improved corporate profits for the financial industry.