The Federal Reserve, in response to repeated instances of wrongdoing and fraud by banks against mortgage owners, has decided to issue a new regulation gutting the right of rescission for fraudulent activities, citing “compliance costs”:
Hundreds of consumer, civil rights, legal services, community and labor groups and private and public interest attorneys representing homeowners, along with the coalition Americans for Financial Reform, urged the Federal Reserve Board to withdraw a proposed rule that would destroy a key legal tool to unwind illegal loans and avoid foreclosure.
“We are astonished that, with the nation facing its greatest foreclosure crisis since the Great Depression, the Board’s proposal would eliminate the single most powerful legal tool that homeowners currently have to stop wrongful foreclosures, the federal right to rescind an illegal loan,” said Margot Saunders, Counsel to the National Consumer Law Center.
Basically, what rescission says is that if the loan was fraudulent, then the contract is broken, the lender cannot foreclose, and all interest, penalties, and fees revert to the homeowner, though the lender is still due his principal………Eventually.
The Fed’s proposed new rule says that you can get rescission only after the principal has been repaid in full, essentially gutting that right, it allows for much larger misstatements by the bank as to the estimated monthly payments and in the total amount of the loan.
Additionally, they are proposing changed the rule on reverse mortgages that forbade issuers to require the purchase of another product as a condition for that loan, so now, so long as it is at least 10 days from the issuance of the reverse mortgage, it will be hunky dory, which has the AARP seriously pissed off.
This is egregious enough that the New York Times inveighed against this change in regulation.
I’m mad enough to agree with Ron Paul, and suggest that we shutter the Federal Reserve completely, or at least transform it from a quasi-private entity into one that is more responsive to politics.
Actually, my preferred position is to leave it in charge of monetary policy and money supply, and strip all regulatory powers from it, since it has shown itself to be completely unwilling and unable to create or enforce balanced regulations on the banks.