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: CL&P Blog

Fed Governor Gets It Right - Mortgage Servicing is Broken

By Alan White

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The newest Federal Reserve Governor and former state banking regulator, Sarah Bloom Raskin, spoke at this week's National Consumer Law Center conference in Boston about systemic problems in mortgage servicing. Unlike other bank regulators, she does not attempt to minimize the failures revealed by the robosigners scandal.

Foreclosure affidavits attest, among other things, to the fact that a homeowner is in default. Servicers are getting this wrong on a regular basis, as a result of misapplication of payments, forced-place insurance, and other errors. Governor Raskin also points out that there are no major economies of scale in servicing defaulted mortgages, and no effective competition for the business. The implication is that homeowners and investors are not well served by the extreme level of concentration in this slice of the banking industry (the big four banks service more than 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."

Full post as published by CL&P Blog on November 14, 2010 (boomark / email).