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Democrats' plea to Fed on foreclosures

Thursday 6 January 2011 - by Will Henley

A group of influential Democratic Senators has written to the US Federal Reserve urging it to reconsider a rule which they say will make it easier for banks to foreclose.

Orchestrated by Senator Sherrod Brown and incoming Senate Banking Committee chairman Tim Johnson, the letter suggests that a proposal to limit "rescission", which is used to block foreclosure demands arising from fraudulent or otherwise faulty loans, should be ditched.

"In this time of record foreclosures and reports of systemic problems with the operations of the largest mortgage servicers, the proposed revisions are unfortunate and unnecessary," the letter from the six senior congressman argues.

"The mortgage market needs greater oversight and accountability to restore borrower confidence lost in the mortgage crisis. The proposed rules would undermine this goal."

Under the terms of rescission, banks lose their capacity to foreclose on a home owner and cannot collect interest or fees when a borrower wins a case in court proving that the loan was written inappropriately.


The Fed however has proposed that individuals should be forced to repay their loan balance before the bank loses its foreclosure right, in effect meaning that many would still have to give up their homes.

The letter has been signed by former Senate Banking Chairman Chris Dodd, Daniel Akaka, Jeff Merkley and Jack Reed.


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