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.
