Federal Reserve Governor Admits "Mortgage Servicing is Broken"
The CL&P Blog has posted an article about how the newest Federal Reserve Governor, Sarah Bloom Raskin, admitted that the mortgage servicing system currently in place is not effective and can even be called "broken." She spoke last week at the National Consumer Law conference in Boston about general mortgage servicing problems and, unlike other banking regulators, she didn't ignore the mortgage servicing industry's failures- such as the "robo-signing" scandal.
Mortgage loan servicers continually get it wrong that foreclosure affirms that the homeowner is in default. This is because of a variety of errors, such as misapplied payments or "force placed insurance." Raskin also pointed out that there aren't any "major economies of scale in servicing defaulted mortgages, and no effective competition for the business." This means that the mortgage industry doesn't receive as much concentration from the banks as it should, which is partly due to the fact that four major banks own about half of all mortgages.
This sentence from the Governor's speech sums it up nicely:
"While there may be some specific practices--"robo-signing" among them--that are possible to isolate and eliminate, chronic, uncured problems continue to plague this industry."
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