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FDIC Looks Into Mortgage Disclosure For Big Banks

Mortgage News > FDIC Looks Into Mortgage Disclosure For Big Banks
Date: 01/10/2011    FDIC Looks Into Mortgage Disclosure For Big Banks

In an effort to create more transparency between big banks and mortgage investors the Federal Deposit Insurance Corp., or FDIC, is seriously considering placing new disclosure regulations on the financial giants across the country that package and sell mortgage securities to investors.

The reason for disclosures is due to the great conflict of interest that exists due to the amount of second-liens these financial giants hold.  Lending moguls such as Bank of America Corp, Wells Fargo & Co, JP Morgan Chase and Citigroup are responsible for nearly $500 billion of the nations second mortgages.  Not only do they hold the billions in second mortgages, they own the largest servicers.

Henry Sommer, director at the National Association of Consumer Bankruptcy Attorneys “The servicer won’t modify the second-lien loan because of what it means for their parent bank’s balance sheet, and the mortgage investors of the primary loan, in return, won’t want to modify the primary mortgage if the second lien is not being modified.  However, the servicer is supposed to act in the best interest of all parties, not just the second-lien loan its parent bank owns.”

The FDIC is hopeful that new regulations will ease the process of mortgage modification and allow millions of homeowners nationwide to stay in their homes.