Chris Dodd may have put pressure on the Fed to aid a troubled mortgage servicer.
Forbes is reporting that the Senator from Connecticut helped Carrington Mortgage by sending a letter to the Federal Reserve urging easier terms for mortgage servicers taking part in the TALF program.
If the Fed had changed the TALF program, Carrington may have been the only company to benefit. Carrington is owned by a hedge fund based in Greenwich, Connecticut.
The Fed, however, turned Dodd and Carrington down.
In the letter he argued that the terms of the TALF advances were not “economically viable” for mortgage servicers. The TALF, for those of you gagging on the alphabet soup of financial rescue programs, is the Fed’s program to subsidise the purchase of asset backed securities. Its goal is to encourage more securitization of auto-debt, home loans, student loans.
From the letter: “Independent servicers argue that the terms of the TALF [Term Asset-Backed Securities Loan Facility] advances are not economically viable. As a result, a number of independent servicers may not be able to continue modifying loans.”
“The officials were surprised by the senator’s Aug. 7 letter because it followed an eight-month lobbying campaign by a handful of mortgage servicers and benefited one firm more than any other: Carrington Mortgage.”
In March, the Fed expanded the TALF lending program to include bonds backed by money owed to servicers. With this change, servicers can issue new debt using the money they will collect down the road once they get reimbursed. This helps servicers cheaply refinance their existing bank credit lines.
But of America’s independent servicers seeking help through TALF, only Carrington was failing to gain traction.
Forbes says that the letter comes on the heels of Carrington’s CEO Bruce Rose trip to DC to plead his case.
This is all made more controversial because Carrinton is accused of refusing to do reasonable loan modification and providing really crappy service to customers. Last month, Ohio Attorney General Richard Cordray sued Carrington –the first lawsuit of its kind- saying the servicer refused to offer reasonable loan modifications to eligible borrowers and provided incompetent, inadequate and inefficient customer service in connection with its servicing of Ohio mortgage loans.
At the time, Cordray said: “This lawsuit makes it clear that we have reached zero tolerance for this kind of behaviour from loan servicers. We’ve tried to work with them, but now we must take action. I am determined to see that mortgage servicers step up, take responsibility and start making it right with Ohioans. No more excuses.”