Check out this petition:

This was recently launched by the folks at Naked Capitalism, along with some other finance blogs. Yves Smith explains:

To further the effort to curb servicer abuses, please visit the website, StopServicerScams, and sign the petition. As we have written, and as experts and foreclosure defense lawyers have reported in Congressional testimony, and as pending lawsuits by attorneys general in Arizona and Nevada allege, servicer abuses are a significant cause of foreclosures. These include including delaying and misapplying payments, using false hopes of pending mods to extract more payments from consumers, and applying compounding junk fees.

Here’s the text of the petition:

To Secretary Geithner, Chairman Bernanke, Chairman Bair, and Comptroller Walsh:

Foreclosure fraud, illegal fees, and just plain incompetence have gone on long enough. We believe that it is time that regulators put some rules on big banks and mortgages. As part of the new Wall Street reform bill, you have the authority to impose rules on new mortgages going forward.

Please stop these big banks from cheating their customers.

Concurrently, Representative Brad Miller is pushing a letter in the House which calls for new foreclosure regulations. It is parallel to a similar call by a group of 50+ economists, including Nouriel Roubin, James Galbraith, and Dean Baker. Mike Konczal explains some of the virtues of the letters from Miller & the economists. But more importantly, he provides a really great, concise explanation for how the massive amount of second lien mortgages owned by the biggest banks is influencing how loan servicers are relating to homeowners.

If there is a principal reduction the second and other junior liens will be wiped out. That’s great for homeowners, lenders, and the community, but really bad for these major banks that made dumb junior loans.

However, if the servicer keeps the homeowner in limbo, encouraging them to make their relatively smaller second lien payment while not making their first payment, allowing servicers to juke the process and necromance a zombie homeowner, that is really great for the largest banks but a disaster for homeowners, lenders, and the community.

We simply don’t know what is happening here. But lenders are very worried, and they are right to be. These simple reporting and process requirements will take care of the worst parts of this information asymmetry that exists in reporting on the second lien. They keep homeowner debt from becoming zombified into limbo, and instead force a serious process, negotiation or resolution and foreclosure, to start moving.

Notice what isn’t on this list: There’s no “give poor people a free home.” There’s no “let’s make excuses for people not paying their mortgages”, or whatever other bizarre thoughts banking lobbyists have about their opponents. There is simply a call for accountability, good information, reliable process, and allowing for win-win, improving agreements to be made by interested parties. Or in other words, an actual market that works for lenders and borrowers, not the corrupted process that works only for the middlemen we have now.

The foreclosure mill is largely being driven by big banks’ desire to squeeze homeowners for every possible penny, reducing the total losses the banks face from “dumb junior loans.” Regulations that aim to stop this sort of behavior, add transparency, and create restore a healthy relationship between homeowners and the banks that own their mortgages is critical to stopping the foreclosure crisis.

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