This article can been read in full at http://www.creditslips.org/creditslips/2011/03/foreclosure-fraud-settlement-the-empire-strikes-back-or-why-are-republicans-so-obsessed-with-backdoo.html#more
.Requiring servicers maximize NPV is just making explicit what is stated in most PSAs--that the servicer will manage the loan as if for its own account. That means maximizing NPV. Any corporation that isn't maximizing the NPV of its assets is committing waste. Business judgment rule means that there's a lot of leeway in determining what maximizes the value of a firm's assets, but the principle is inherent
If anything, we should be pushing much harder for principal reductions. At this point, it seems that every financial-related market has cleared except for housing.
Reality is that banksters are being allowed to hold back the recovery while they feed at the trough of the federal reserve. It is a total scam by the banks and the government.
Levitin goes on:
At this point if a buyer and seller can agree on a sale for $150,000 the transaction isn't going to happen because the bank won't take $150,000 on a $200,000 mortgage, even if the bank will only get $100,000 in foreclosure. By my estimates, banks denied around 200,000 short sales last year. The real impact was much greater, however, because realtors are refusing to handle short sales. Realtors only get paid if the sale closes, and they rightly see no point in putting in the effort to do a sale only to have it collapse because the bank refuses to sign off. Widespread denial of short-sales is chilling the entire short sale market.
So how is this market going to clear? It will clear via foreclosure sales, but that is the slowest, worst way we can do it, and robosigning and chain of title problems only make it a slower and less effective market clearing mechanism. Congress unfortunately took a pass on bankruptcy cramdown as a method for clearing the market, so that really only leaves voluntary principal reduction mods. (And remember, if the banks agree to buy peace with a settlement, any mods that occur thereunder would be voluntary). If Congressional Republicans and pundits have a better idea, I'm all ears. But I really can't believe that foreclosure sales are the best way for the market to clear. No one thinks that they are an efficient market mechanism.
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