H.R. 4953 Miller, Ellison Introduce the Mortgage Servicing Conflict of Interest Elimination Act Bill to Address Conflict of Interest in Mortgage Companies

Washington, D.C. – Just moments before the House adjourned last week, Reps. Brad Miller (D-NC)  and Keith Ellison (D-MN), both Members of the Financial Services Committee, introduced legislation that will eliminate a conflict of  interest that may be preventing large mortgage companies from modifying troubled mortgages voluntarily. Many large mortgage companies own second mortgages on the same homes that they service.  These secondary mortgages are an investment, creating a conflict of interest. The bill, H.R. 4963 – the Mortgage Servicing Conflict of Interest Elimination Act – would prohibit mortgage servicers from owning debt secured by a home that secures a mortgage that they service.

Two-thirds of all distressed mortgages are now serviced by the four largest banks – Bank of America, Wells Fargo, Chase and Citibank. These banks own about $477 billion in second liens

“Servicers are required to act in the best interests of the investors who own the mortgages. In many, those four banks hold interests in other debt secured by the same home that would be affected by a decision to modify the mortgage or to foreclose, placing the banks’ interests in irreconcilable conflict with the interests of investors,” said Rep. Miller

“The obvious conflict of interest between the investors and servicers may well be a factor in the failure of servicers to modify mortgages voluntarily,” said Rep. Ellison.

The bill gives servicers a reasonable time to divest themselves either of any interests in home mortgages, or the authority to service mortgages. The likely outcome would be that the four biggest banks would “spin off” their mortgage servicing business, which would resolve the conflict of interest between servicer and investors and result in smaller, less complex banks.




H. R. 4953
Mortgage Servicing Conflict of Interest Elimination Act

2 Responses to “H.R. 4953 Miller, Ellison Introduce the Mortgage Servicing Conflict of Interest Elimination Act Bill to Address Conflict of Interest in Mortgage Companies”
  1. polifrog says:

    Unsurprisingly our high brow NC Representative, Brad Miller, has a shill at the New York Times, one that likely thinks herself “quite adroit” in her choice of titles, In This Play, One Role Is Enough. Polifrog finds the amalgamation of the NYT, and Brad Miller just another example of a campaign of privilege and Miller elitism.

    Morgenson described Miller this way:

    “…a Democratic representative from North Carolina who was elected to Congress in 2002, talks straight and understands how big banks can put consumers at peril.”

    From nearly the first lines we are told by the NYT that Brad Miller is “your man” and that whatever follows is NOT HIS FAULT. Yet where was his vaunted understanding of banking and housing prior to the near depression we have been experiencing? Brad Miller’s mealy mouthed answer is found later in the article:

    “A member of the House Financial Services Committee, Mr. Miller concedes that he did not see the financial crisis coming. But he said that several years ago he became aware that increasingly poisonous mortgages were being peddled to consumers.”

    Are these the sentiments of a leader or just a man doing the two-step with responsibility?

    The reality?

    What was being peddled was not only that home ownership at any cost was a proper role for government but that home ownership through the enticement of inexpensive debt was the path to that end. The fact that the mortgage industry responded to the government’s push to lend to riskier and riskier individuals seems to be lost on Brad Miller.

    Has an election passed in which a politician has not uttered the terms “home ownership” or used the phrase “affordable homes”? Over the years the phrases became an election mainstay, but it wasn’t just election rhetoric politicians were enticing the voters with, it was the danger of cheap debt . Being lawmakers, the politicians had tools at their disposal to make good on their campaign promises of “affordable homes”, promises we still hear from Brad Miller today.

    This Government intervention in housing market for the laudable goal of “home ownership” resulted in a mega bubble that, like all bubbles, popped. Although the current downturn began in the sub-prime mortgage market, it spread across a loan industry weakened with the risky debt holders forced upon it by DC. and others who stretched themselves thinly to take advantage of the “cheap home loans”. Since then our country has been careening toward a near depression.

    What is Brad Miller’s solution now? Bolt tweaking on failed government policy.

    “Enter Mr. Miller’s bill, the Mortgage Servicing Conflict of Interest Elimination Act. It bars servicers of first loans they do not own from holding any other mortgages on the same property. ”

    If you think this is a solution for anything but Brad Miller’s need for electioneering before an election, Polifrog has some prime swampland in eastern NC to sell you.

    Government intervention in the economy has consequences but under this congress and the leadership of Brad Miller, the buck stops everywhere but their desks. And before you buy Miller’s Brooklyn Bridge built on shifting blame, ask yourself if a true leader with all of the much referenced qualifications of Brad Miller would have lead this nation into our current financial malaise.

  2. Dawn says:

    They Want Blood!
    have underwater 1st and 2nd with WAMU since 1996 – The 1st was recently acquired by FREDDIE- Chase Home Finance now ownes the totally underwater 2nd – Chase through seperate divisions is servicing both – Everytime I try to workout a MOD or Short Sale with the 1st the 2nd refuses and then who was helping with the MOD and Short Sale refuses to return any of my calls. I am 75; due to age related mental deterioration, obsolesense of my skills and the economy, I was forced into involuntary retirement 3 years ago. My only income is Social Security – I dilluted my savings and borrowed from Life Ins. and everywhere I could to make the payments until the money ran out. Foreclosure was filed against me last month.

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