From time to time, Housing Perspectives features posts by guest bloggers. Today’s post was written by Patricia McCoy, Liberty Mutual Insurance Professor, Boston College Law School, and former Assistant Director for Mortgage Markets, Consumer Financial Protection Bureau.
Since 2007, the federal government and servicers have groped toward striking the right balance between cost-effective loss mitigation and unavoidable foreclosures for homeowners with delinquent home mortgages. Among other things, this painful experience resulted in a cornucopia of data about the right way and wrong way to do loss mitigation. Nevertheless, none of the leading housing finance reform proposals has incorporated these lessons. Take, for example, the Johnson-Crapo bill, which was the leading reform contender and made it to the Senate floor. That bill would vaguely require servicers to establish “loss mitigation options that seek to enhance value” but says nothing about the best way to do so. That oversight is unfortunate because it sets us up to repeat the mistakes of the past.