A Bitter Pill to Swallow


The long-running negotiations on a settlement between large mortgage servicers and the state attorneys general have been dragging on too long.

It’s time for servicers to settle, swallow the bitter pill of the large fines they will have to pay, and move on.

Why? Because the robo-signing scandal at the heart of this controversy needs to be moved on from.

For the sake of the national economy as well as the well-being of the mortgage industry, there needs to be something else on the horizon.

If you look hard enough, you may be able to see the prospect of a normal servicing environment way off in the distance.

The business is roughly in the middle of the foreclosure bulge that has dampened home prices and values, blighted neighborhoods, and helped mire the industry into the most dismal years it has ever seen.

It’s hard to remember now, but even five years ago observers would have been astonished at the prominence of the servicing business.

The originators had all the light and heat and headlines, while servicers remained steady, back-office bastions that made small but steady profits for their owners.

Now it is the servicing business that bears the brunt of opprobrium.

Richard Cordray, who is the new head of the Consumer Financial Protection Bureau, has said CFPB will closely supervise servicers.

Examinations may come as soon as March, and will include nonbank servicers as well as those owned by banks.

What the servicing business needs to do is to engender a little forward momentum. With momentum, the last half of a task will go more quickly than the first half. And won’t that be a relief!

True, government efforts to help out, while well-meaning, haven’t always been efficacious.

And while helping hundreds of thousands of borrowers is fine (especially if you one of those borrowers), the goal was to help millions of borrowers.

Servicers may miss being the center of excitement, but that’s more rightly the province of originations.

Buying and financing a home is inherently more exciting than collecting the payments and handling the PITI.

And perhaps it has been too exciting for those in the industry who will welcome a return to the kind of thriving, purposeful mortgage business we saw before the boom and bust.

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