By Moe Bedard
It seems that Main Street isn’t the only important party angered by safe harbor clauses in the pending cramdown bill, mortgage investors are agitated as well. While Main Street looks at safe harbor clauses as an appeasement to banks to allow cramdowns under extreme circumstances, mortgage investors are also asking themselves…”Hey, wait a minute, if banks can avoid prosecution for offering predatory loans by providing loan modifications and complying with cramdown provisions, will we lose our shirts like the common American mortgage holder too?
The answer is…possibly; and it seems the powerful investment lobby has greater control over public policy than Main Street. So what does all this really mean? Here’s what I think: As it pertains to who controls our politicians the order of importance is: major lenders and their needs both economic and legal; mortgage investors and, at the bottom of the list of importance…common American citizens like you and I.
From CNNMoney.com
Mortgage investors are engaged in an 11th-hour effort to weaken or derail a measure, now pending before the U.S. Senate, to grant legal protections to mortgage servicers that modify loans.
The investors, including large insurers, hedge funds and investment-management companies, claim the legal “safe harbor” for servicers would violate their rights.
“The broader the safe harbor, the more loans are likely to be modified and the more homeowners likely to be helped,” said Joseph Pigg, American Bankers Association vice president and senior counsel.
This is just too funny! The spokesperson for the American Banker’s Association has the last name Pigg (insert witty joke about Capitalist Pig here). While bankers argue they need greater protection from prosecution to “help the common American” the mortgage investors are arguing that the same safe harbor clauses will hurt their abilities to earn money from loans in America. Is this an impasse? I think not. Call me a cynic but the way I see this playing out is that banks will weasel their way in to protection clauses regardless of whether Main Street Benefits from anything remotely resembling the cramdown bill…in short, banks will avoid lawsuits from consumers by providing loan mods regardless of whether or not the cramdown bill passes and our legislators will leave a loophole in the safe harbor clauses that will allow investors to collect where and when they need to. As for Main Street, I sincerely doubt any more of this cramdown debate really applies directly to their benefit.