Today, the Comptroller of the City of New York along with the presidents of several large unions sent a letter to some of the biggest baddest banks in the foreclosure mess and told those banks to get their acts together and start making mortgage modifications.
In a press conference in lower Manhattan, Comptroller John Liu, Michael Mulgrew, President, UFT, George Gresham, President, 1199 SEIU, John Samuelsen, President, TWU Local 100, and New York Communities for Change announced a letter sent to Citigroup, JPMorgan Chase, Bank of America and Wells Fargo demanding that the banks do “everything possible” to avert foreclosures.
The heft and power of these entities as depositors and investors is such that they expect the banks to sit up and take notice. The banks have a deadline of September 1st or 45 days to respond with a plan.
While the City and the pension funds have not outright threatened to take their business elsewhere if the banks don’t start doing modifications, the implication is clear.
Further, this public action could inspire other municipalities and large pension funds to follow suit.
One of the things that frustrates me is that neither the servicers nor the trustees of RMBS will tell you who the investor is. They will often say that the investor won’t let them modify. This makes no sense.
As I previously pointed out, the investor almost always does better by modification than foreclosure. The servicer does better in foreclosure. Yet the trustees, who owe a fiduciary duty to get the best return for the investor, seem to prefer the foreclosure route which results in a near total loss for the investor.
The investors have the ability to force modifications by suing the trustees to make them do those modifications.
So, municipalities, state pension funds and unions have two tools at their disposal: 1) threatening to move their deposits and, 2) if they hold RMBS in their portfolios, forcing the trustees to write down principal and adjust interest rates to return non performing mortgages to a diminished but still performing status.
By today’s actions, we see that they are beginning to use tool #1. Hopefully they will begin using tool #2 before all the value is gone from their RMBS investments.
[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]