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Show Us the Fine Print!

posted by Bob Lawless

From what I've seen, I completely agree with my fellow Credit Slips blogger Elizabeth Warren's characterization of the president's subprime announcement as a "slick deal." It looks like too little with too many loopholes. Although it will help a few homeowners, the ones who most need relief will be left out. The primary effect of the announcement is to give the Bush administration and the lenders some cover to make it look like they are taking serious steps to address the problems from the explosion of home mortgage foreclosures.

But, I base all that on what I've seen in media reports. As I write these words (about 3:15 PM CST on 12/6/07) I cannot find the actual text of the agreement anywhere on the Internet. I've looked on the web sites for the White House, the U.S. Department of Treasury, and the Department of Housing and Urban Development. I've also searched through a few major media outlet web sites. As a lawyer, I know the important terms are always in the fine print. Exactly what does this agreement provide? Who has signed the agreement? In his remarks, Treasury Secretary Paulson characterized the agreement as "industry standards." Is there any requirement that mortgage servicers abide by the terms of this agreement? What happens if they don't? The agreement supposedly freezes interest rates. What happens to the foregone interest? Is it forgiven?

It worries me greatly that this agreement is not widely available. If it is great as its proponents claim, why not let the world see it? Until we know precisely what the agreement says, none of us can be sure that the agreement will provide any relief for homeowners. An industry group made of major players in the residential mortgage industry forged this agreement. Are we just supposed to trust them? Surely, an important document like this agreement will not and should not be hard to find. If anyone has a copy, send it to me, and I'll post it here.

UPDATE: The agreement can be found here: http://www.americansecuritization.com/uploadedFiles/FinalASFStatementonStreamlinedServicingProcedures.pdf. Thanks to Valparaiso law professor Alan White for pointing me to this link in his comment below.


The detailed description of the "teaser freezer" plan is available at the ASF web site: http://www.americansecuritization.com/ .

I look forward to looking at the details, but the first problem that I saw with the proposal was that it left unspecified who makes the determination whether a debtor has the ability to pay. I assume that would be the lender, who has a vested interest in finding an ability to pay. If the debtor disagrees, to whom would an appeal be made? Since its an industry program, the answer to that would apparently be -- no one.

With Bob, I'm very uncomfortable with any program that begins with the proposition "trust me."

Thank you Alan!

I've taken a quick look through the "freeze" program on the ASF website. I'm reminded of the dialogue in Pirates of the Caribean talking about the "Pirate Code". When challenged, Barbosa says, "they're not really rules, they're more like guidelines".

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.