Larry Platt testified at a hearing held by the Senate Banking Committee on Tuesday, October 29, considering standards for mortgage loan servicers, particularly in connection with loss mitigation activities. The hearing was one of several designed to examine housing finance reform and the essentials of a functioning housing finance system in the Committee’s continuing deliberations over the fate of Fannie Mae and Freddie Mac and other provisions in the proposed Housing Finance Reform and Taxpayer Protection Act of 2013.
Larry Platt cautioned that any federal law should not go beyond the recent regulations of the Consumer Financial Protection Bureau and mandate that loan servicers and loan holders provide defaulting borrowers with net present value positive loan modifications. He described the extensive set of loss mitigation servicing standards already in place, whether imposed by federal and state statutes and regulations, by Fannie Mae and Freddie Mac, or through settlements with enforcement bodies. Mr. Platt explained that while the CFPB focuses on consumer protection, it established its recent loss mitigation servicing standards with the understanding that holders of mortgage loans have an important and legitimate interest in enforcing the borrowers’ repayment obligations, including through the collateral. In fact, reliance upon that collateral is the key to the availability of affordable mortgage credit. Accordingly, he testified that enacting legislation that imposes inflexible loss mitigation “outcome-based” requirements, on top of the myriad existing requirements, would be unnecessary, burdensome, and in the end costly for all mortgage borrowers.