Here's the banks' counterproposal for a servicing fraud settlement. I can sum it up in two words: drop dead. Or two letters: F.U. This proposals is so pathetically thin that it's not a good faith counterproposal. This document only deals with servicing standards--nothing in it whatsoever about penalties, modification quotas, etc. But even on servicing standards it is a bunch of empty promises to have internal controls and try harder.
The first point about this counterproposal is simply to note what's absent from it:
(1) nothing about principal reductions
(2) nothing about second liens and conflicts of interest
(3) nothing about MERS (reserved for later)
(4) nothing about in-sourced vendor fees or force-placed insurance to affiliates. This makes the fees and force-place insurance sections pretty meaningless.
(5) nothing about pyramiding of fees.
I'm sure I'm missing a bunch of important points that aren't addressed, but these seemed to be the most obvious ones.
Next, it's worth noting just how little it actually promises and how cagey the promises are. For many points it does not promise results. Instead, it promises "processes reasonably designed" or "procedures reasonably designed" to do something or another. Basically a lot of it boils down to promises to implement internal controls, reviews, and procedures to make sure things don't happen again.
Put differently, this is the servicers' saying "trust us." Ummm, that's the whole problem. No one trusts the servicers--not investors, not homeowners.
Let's look at some specific terms. Orwell couldn't have drafted these any better:
Read more: http://www.creditslips.org/creditslips/2011/03/the-banks-servicing-fraud-settlement-proposal.html
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