Category Archives: Banking industry

The New York Times reports faithfully that the Department of Justice has entered into the biggest fair lending settlement on record with Bank of America on charges that Countrywide had charged more 200,000 Hispanic and black borrowers higher rates and fees than white borrowers with similar credit records. It also engaged in discrimination by marital status.

Impressive, no?

Quite a few housing market experts have argued that principal modifications to viable borrowers are the best way to resolve the housing market malaise. In the stone ages when banks kept the mortgages they originated, mortgage modifications, including principal mods, were standard practice when a borrower got in financial difficulty but was still salvageable. And because these restructurings were done behind closed doors, no one but the banker and his grateful customer were the wiser. But now that servicer bad incentives have meant they don’t do mods unless cajoled or bribed by the government (and not much even then), the topic has entered the public debate.

It had appeared that any principal mod program was going to come over the dead bodies of the banks, who have been feigned compliance with various Federal programs but either dragged their feet and/or gamed the schemes. So it was surprising to read that the acting head of the FHAF, Edward DeMarco, is considering what amounts to a principal mod program implemented through bankruptcy courts.