The notion of national mortgage servicing standards was recently mentioned during a Dec. 1 hearing held by the Senate Banking Committee on the foreclosure problems. There, Federal Reserve Board Governor Daniel Tarullo said the current system cannot handle the high number of troubled mortgages and called for national standards to be adopted.
"The system as it is now simply was not developed with a large amount of troubled mortgages in mind,” he said. “We do need more of a national effort to impose standards on everybody.”
The authors called on federal agencies to take on a coordinated rule making effort implementing national standards under the Dodd-Frank Act.
They pushed back against the suggestion by some regulators that new legislation would be needed to adopt such standards, calling them "misplaced."
"We cannot wait for uncertain future legislation to accomplish something that is clearly appropriate under ... Dodd-Frank and current law," they said.
Some of the standards that should be adopted include making banks accountable for lost paperwork on loan modifications or continuing the foreclosure process while a homeowner is modifying his loan; changing the compensation structure to provide incentives for effectively managing long-run performance risk of securitized mortgage assets; and requiring bank and non-bank servicers to certify in writing every year that they are compliant with applicable laws.