On The Money with Peter Hebert

December 3, 2010

Ask the Federal Reserve to Stand Down

Filed under: Commentary — Peter Hebert @ 7:41 PM

Dear friends,

There is a financial sector war being waged against homeowners. That’s the central premise of MORTGAGED AND ARMED. Write the Federal Reserve a brief note, and ask the agency to stand down. The Federal Reserve has proposed amending the extended right of rescission within the Truth in Lending Act. This has been used as a defense against foreclosure when lenders defrauded their borrowers by failing to provide disclosures at closing. The foreclosure rate today is three times greater than the foreclosure rate in 1933, which was during the banking panic and opening years of the Great Depression. The public comment period ends December 23, 2010. Ask the Federal Reserve to stand down. Submit your comments to: regs.comments@federalreserve.gov.

In the September 24, 2010 issue of the Federal Registry, the Federal Reserve proposed amending a 42 year old right of rescission provided by the Truth in Lending Act. The three year rescission provision has been used by homeowners, who have discovered after closing, that their lender had violated the law in the application process by not providing all of the required disclosures. They discovered fraud. Homeowners in foreclosure have used forensic loan audits to uncover material disclosure violations in order to exercise their extended right of rescission. When successful, this defense against foreclosure forces the creditor to drop its security interest and its ability to foreclose. The homeowner then refinances and pays off the outstanding loan balance minus the payments made and finance charges and fees from closing.
The significance of the Federal Reserve’s proposal should not be downplayed. It erodes the provisions of the defense to foreclosure provision in Subtitle B of Title XIV, the Mortgage Reform and Anti-Predatory Lending Act. Not unlike the battle lines drawn in the fight that led to Watters v. Wachovia, the Mortgage Bankers Association leans in favor of the Federal Reserve. In contrast, 16 national consumer and civil rights organizations, 33 state and local legal services programs, and 216 attorneys regularly representing homeowners fighting foreclosure opposed the proposal. In a letter to the Federal Reserve, they asked that any proposed regulatory changes be made after the Bureau of Consumer Financial Protection assumes its statutory responsibilities on July 21, 2011.

“FEDERAL RESERVE SYSTEM, 12 CFR Part 226 [Docket No. R–1390], Regulation Z; Truth in Lending,”
Federal Register/Vol. 75, No. 185/Friday, September 24, 2010/Proposed Rules, 58539;
Online at http://edocket.access.gpo.gov/2010/pdf/2010-20667.pdf.

Tony Pugh, “Fed Wants to Strip a Key Protection for Homeowners,” McClatchy Newspapers, December 1, 2010;
Online at http://www.truth-out.org/fed-wants-strip-a-key-protection-homeowners65589.

Letter to Withdrawal Request for the Proposed Truth in Lending Mortgage Regulations
(FRB Docket Number.R-1390), November 16, 2010;
Online at http://www.federalreserve.gov/SECRS/2010/November/20101117/R-1390/R-1390_111610_54647_562063438823_1.pdf.

The Book
Amazon.com has set a holiday special price of $14.36 on MORTGAGED AND ARMED. Everyone needs to understand how to fight back and force the system to change. If you are not part of the solution, you are part of the problem. Get copies today as gifts for loved ones and friends.

Peter Hebert

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