Calling
the document "unprecedented in its scope and prescriptiveness," the Securities
Industry and Financial Markets Association (SIFMA) has
criticized the so-called settlement agreement with mortgage servicers issued by
the 50 state attorneys general in early March. It also rather pointedly requested a
seat at the negotiation table.
Randy
Snook, executive vice president, business policies and practices at SIFMA said that, while the group
recognized that the term sheet was only a draft,
"it requires a careful legal and market impact analysis, particularly for
unintended consequences." Snook
said that any reform of mortgage servicing standards must reflect the interests
of the consumer, the housing market, and the broader economy as we continue to
address foreclosure issues.
The settlement agreement which was sent to the five largest loan servicers (Bank of
America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial), arose after an
investigation of mortgage servicing abuses by the attorneys general. The document covers a number of topics
relating to servicing and the relationships among servicers and customers,
investors, and regulators and sets out specific recommendations for correcting
perceived abuses in managing loan modifications, setting fees, handling loan
documents, and pursuing foreclosures.
The SIFMA statement notes that any settlement agreement that sets out
such terms "will likely be viewed as new industry standards, and therefore
have a broad impact beyond those firms. We therefore express initial concern
that such critically important and consequential mortgage servicing reforms are
being contemplated in a closed process." After laying out the specific criticisms
of the settlement as summarized below, the statement says, "Given the
broad impact of this reform, we firmly believe the process of developing broad
servicing standards should be open to input from a range of stakeholders."
According to SIFMA, the proposed terms would put at risk investors in mortgage-backed
securities (MBS) who stand to absorb the losses from significantly extended
foreclosure timelines due to the implementation challenges of the prescriptive
terms of the settlement." The end
result, SIFMA says, would be to further hurt investor confidence in
private-label securitization markets "that are so vital to the nascent
economic recovery." Extending those
foreclosure timelines would also adversely impact communities with large
inventories of vacant buildings. In
addition, the terms are so broad they could increase the price of mortgages to
consumers.
SIFMA states that it brings
together the shared interests of hundreds of securities firms, banks and asset
managers. Its stated mission is to support a strong financial industry,
investor opportunity, capital formation, job creation and economic growth,
while building trust and confidence in the financial markets.