Unsatisfied with last week’s cease and desist orders issued to major lenders last week by the Office of the Comptroller of Currency (OCC), congresswoman Maxine Waters (D-CA) has created a bill that she believes will be far more effective in “fixing” the mortgage servicing industry than the “light slap of the wrist” that lenders received last week[1]. Waters’ bill has updated and revised her Foreclosure Prevention and Sound Mortgage Servicing Act (HR 1567) to mandate loss mitigation efforts – including mandatory loan modifications – before they can begin the foreclosure process.

Waters has indicated that this latest revision is only “one of several” that she plans to introduce to the House floor to “further regulate the servicing industry and to protect homeowners.” She hopes to ultimately not only reform the lending industry, but change the way that short sales work, require principal reductions for underwater mortgages and prohibit on demand payments[2]. Many people agree with Waters that the cease and desist letters issued last week are not enough of a deterrent to poor lending and servicing practices, but do you think that mandatory loan modifications and principal reductions will resolve the problem or just potentially send lenders under? Does it matter?

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[1] http://www.dsnews.com/articles/waters-introduces-bill-calling-for-mandatory-loss-mitigation-2011-04-18

[2] http://california.realestaterama.com/2011/04/18/congresswoman-waters-reintroduces-landmark-legislation-to-prevent-foreclosures-hold-servicers-accountable-ID01071.html