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New Mortgage Task Force is Like Groundhog Day

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Obama says don't worry


You don’t have to own investment property to realize that our country’s foreclosure debacle is continuing to suppress property values and wreak havoc throughout the economy.  While administrators hope to reveal the final terms of a settlement on the mishandled foreclosures front, President Obama announced the deployment of a new watchdog group.

The group is tasked with the objective to investigate how the bank’s handled their policies and procedures during the overall crisis. The new team will be comprised of over 50 official investigators, and subpoenas are expected to be sent out to 11 major financial firms for any documentation involved in tracking their mortgage deals.

In addition, another team will be formed that will – in theory – work hand-in-hand with the first team, albeit with a different end goal.  U.S. Attorney General Eric Holder and Department of Housing and Urban Development Secretary Shaun Donovan unveiled plans for a “Residential Mortgage-Backed Securities Working Group” that will work towards affordable mortgage plans for hard-hit homeowners as well as distribution of these mortgages to bring down risk.

The announcement of these groups comes in the wake of several failed probes, and critics want to know how this new probe will be any different from the earlier ones.  This is especially true given that the new team is comprised of several firms and individuals that have been participating in similar regulatory investigations starting with Obama’s first task force that deployed in 2009.

Additionally, conspicuous in its absence is the office of the U.S. Attorney for the Southern District of New York, the outfit with easily the most familiarity in the investigation of such cases. Real estate market players are questioning the seriousness of a task force that leaves out the most experienced hands on the block.  In fact, one former special inspector general – Neil Barofsky – described the plan as nothing more than “window dressing.”

Another potential issue is the compatibility of having these two groups deployed, in effect, side-by-side.  Although government regulators believe both groups can seamlessly coexist, others aren’t so sure.  In Fact, Jamie Dimon, CEO of JP Morgan Chase, went so far as to opine that the coexistence of both groups could threaten the $20-$25 billion settlement discussions that are happening between the government and the big banks.

As you can see, there are a lot of pros and cons associated with the Obama Administration’s handling of the investigations.  And unfortunately something tells me that this initiative may follow the pattern of other government task forces – that is, good in theory, but poor in execution and bogged down by bureaucracy.  The end goal may in fact ultimately be achieved, but most likely at a bloated cost in terms of time, money and resources.  The feds simply are not efficient, plain and simple.

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