Researchers from The Ohio State University, Rutgers University, the Chicago Fed and Georgetown University have concluded banks are attempting to influence voters’ opinion of the Dodd-Frank Act, hoping to discredit the truth: That the financial reform measure has been great for consumers. It’s also opined the banks are seeking to influence Congressional action on a bill to reform the financial measure.
Specifically, the study authors posit in their working paper, “The Politics of Foreclosure,” that banks responsible for servicing delinquent mortgages held off on proceeding with foreclosures in electoral districts where members of the House Financial Services Committee are poised for re-election. The researchers discovered that although there was no difference in the rates of mortgage delinquency between non-committee districts and committee districts, the committee districts had far lower rates of foreclosures.
Basically, the banks were turning down the volume on the foreclosure complaints committee members would receive. Because there would not be as many foreclosures in those districts, there would be far fewer complaints from constituents regarding the financial hardship of the mortgage crisis fallout. In turn, the Congressional leaders would be more lenient during the debate on the bill, giving the banks an edge.
Although the authors of the study noted that such political strategy is not only complex but extremely cumbersome, it’s not something that should be written off, considering that we know banks are already willing to spend mammoth sums on lobbying efforts to influence our leaders in Washington. MarketWatch reports the 10 top mortgage servicers in the country (which includes J.P. Morgan, Citi, Bank of America and Wells Fargo) collectively spend some $44 million annually in lobbying, with $1 million going directly to campaign contributions for committee members.
Meanwhile, the cost of the delaying the foreclosures in committee members’ districts, researchers estimate, would be about $30 million.
In addition to resulting in fewer foreclosure complaints to committee members, such delays may have the added benefit of bolstering the re-elections of certain politicians who might be sympathetic to the banks’ position. The politicians themselves probably benefit too by applying public pressure to banks to be lenient on borrowers in their district – something banks are pretty much doing already.
The researchers say the primary question they asked in their research was whether banks were delaying the initiation of the foreclosure process on delinquent mortgages in districts where House Financial Services Committee members were in elected. The analysis period was during 2009 and 2010. This was the time frame during which Dodd-Frank was being deliberated, and you may recall, it was also a time when the public was demanding action against large banks and mortgage servicers for their role in facilitating a financial crisis. The study authors controlled for loan specific variations, loan location variations and other factors that might have influenced the length of time it took to process a typical foreclosure.
Researchers concluded that during that time period, banks delayed foreclosures by 0.5 months, relative to the average 12 months.
These delay tactics were referred to as “novel,” but they aren’t surprising to our Miami foreclosure attorneys. Banks have long been working to manipulate the conversation on any regulatory provisions that clip their ability to rake in more profits – no matter how negatively it may affect the public.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.
Banks delayed foreclosures to influence discussion of Dodd-Frank, paper finds, Nov. 20, 2017, By Andrea Riquier, Market Watch
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