Mar 10 2011

Shelby Blasts "Global Mortgage Servicing Settlement"

U.S. Senator Richard Shelby, ranking Republican on the Committee on Banking, Housing, and Urban Affairs, today at a hearing on the state of the housing market blasted reports of a so-called “global mortgage servicing settlement” proposal by federal financial regulators. 

Excerpts of Shelby’s statement are immediately below in bold, followed by the full text of his prepared remarks:

“What is occurring appears to be nothing less than a regulatory shakedown by the new Bureau for Consumer Financial Protection, the FDIC, the Fed, certain Attorneys General, and the Administration, led by Elizabeth Warren.  This proposed settlement appears to be an attempt to advance the Administration’s political agenda, rather than an effort to help homeowners who were harmed by a servicer’s actual conduct…

…Just last year, I warned that the new Bureau of Consumer Financial Protection would prove to be an unaccountable and unbridled bureaucracy.  I did not expect to be proven correct so quickly…

…The long-term consequences of this settlement could be even more serious.  It would politicize our financial system…      

…As troublesome as the substance of the settlement is, the process by which it is being imposed is potentially far more concerning…

…The precedent these strong-arm tactics could set, however, should be of concern to all citizens.  If these tactics can be used successfully on financial institutions, they can be used on any business…

…Because of the longer-term consequences of the proposed settlement and the serious due process issues involved, I am requesting that this Committee begin a immediate inquiry into the facts and circumstances surrounding this effort…

…I am also requesting that the Administration and our financial regulators refrain from entering into any settlement agreement until Congress has had an opportunity to conduct appropriate oversight on this matter.”

 OPENING STATEMENT OF SENATOR RICHARD C. SHELBY

Committee on Banking, Housing, and Urban Affairs

March 9, 2011

“Thank you Mr. Chairman.

“I hope that this will be the first of many hearings by the Committee on the housing market and housing policy.  The well-known problems in the housing market deserve the Committee’s full attention.

“Over the past three years, national home prices have declined sharply from the unprecedented levels reached at the height of the housing bubble.  Not since the Great Depression has our housing market experienced such a severe correction.

“Today we hope to learn the present state of the housing market and what the future may hold.  How close is the market to bottoming out?  What will it take for home sales to reach normal levels?   How does the housing market vary by region and what factors account for the differences?  What is the appropriate level of home ownership and why?

“In addition, it is my hope that today’s hearing will set the stage for a discussion of the future of housing finance.  Without question our housing finance system is broken.  The Federal government now backs approximately 97% of all new mortgages.  Our once thriving private markets have been largely replaced by government programs. 

“This is a dangerous situation that will not only erode innovation and competition, but ultimately reduce the availability of housing and expose taxpayers to future bailouts.  The Committee should fully examine our housing markets with the goal of promptly adopting any needed reforms. 

“We will soon be upon the third anniversary of the American taxpayer’s bailout of Fannie Mae and Freddie Mac.  If ever history provides a clear lesson on the importance of Congress acting in a timely manner, it is this Committee’s failure to address the GSEs.  The demise of Fannie and Freddie could have been prevented had this Committee acted sooner.

“Unfortunately, the GSEs were a very powerful political force right up until the time they collapsed.  Fannie and Freddie’s disproportionate influence on this Committee and Congress ultimately cost the taxpayers billions and should be long remembered as a major policy mistake.  

“Finally, Mr. Chairman, I would like to take a moment to discuss recent news reports about a proposal that is being described as a ‘global mortgage servicing settlement.’

“Based on the facts reported, I have serious concerns not only about the substance of the proposal, but also about the process.  What is occurring appears to be nothing less than a regulatory shakedown by the new Bureau for Consumer Financial Protection, the FDIC, the Fed, certain Attorneys General, and the Administration, led by Elizabeth Warren.  This proposed settlement appears to be an attempt to advance the Administration’s political agenda, rather than an effort to help homeowners who were harmed by a servicer’s actual conduct.

“Just last year, I warned that the new Bureau of Consumer Financial Protection would prove to be an unaccountable and unbridled bureaucracy.  I did not expect to be proven correct so quickly.

“Under the guise of helping homeowners hurt by improper foreclosures, regulators are attempting to extract a staggering payment of nearly $30 billion for unspecified conduct. The $30 billion would most likely fund a new slate of housing programs long sought by the Administration, but previously rejected by Congress.

“Setting aside for a moment the attempt to end run Congress, I question whether removing $30 billion in capital through a back-door bank tax is the best way to jump-start lending.  The long-term consequences of this settlement could be even more serious.  It would politicize our financial system.       

“For example, the proposed settlement requires the appointment of third-party monitors paid for by the banks.  Mr. Chairman, I thought our financial regulators monitor our banks.  Under this incredible proposal, however, those days would be over. 

“Who might these third party monitors be?  ACORN or other community organizers?  Or, perhaps other special interest allies of the Administration?  We need to know.

“As troublesome as the substance of the settlement is, the process by which it is being imposed is potentially far more concerning.  The proposed settlement would fundamentally alter the regulation of our banks.  Yet, this would be done without Congressional involvement.  Instead, it would be done by Executive fiat through intimidation and threats of regulatory sanctions. 

“The Administration and our financial regulators are clearly hoping the banks will consent to these new regulations.  The precedent these strong-arm tactics could set, however, should be of concern to all citizens.  If these tactics can be used successfully on financial institutions, they can be used on any business. 

“I want to be very clear.  If any person was harmed by the actions of these banks, I believe they should be compensated to the full limits of the law. 

“As everyone knows, I did not vote to bailout the banks, and I strongly opposed TARP, because I believed banks should be responsible for their actions.  They should be held accountable here, as well.

“However, efforts to help homeowners who were legitimately harmed by the banks should not be hijacked for the purpose of imposing a regulatory agenda the American people clearly rejected in the last election.

“Because of the longer-term consequences of the proposed settlement and the serious due process issues involved, I am requesting that this Committee begin a immediate inquiry into the facts and circumstances surrounding this effort.

“I am also requesting that the Administration and our financial regulators refrain from entering into any settlement agreement until Congress has had an opportunity to conduct appropriate oversight on this matter. 

“This is too important for Congress to sit on the sidelines.

“Thank you Mr. Chairman.”