House Panel Okays Servicing Safe Harbor

The House Financial Services Committee has approved by voice vote a bill that would shield mortgage servicers from investor lawsuits so they can modify loans and help more troubled borrowers avoid foreclosure. The bill (H.R. 5579), sponsored by Reps. Michael Castle, R-Del., and Paul Kanjorski, D-Pa., would create a safe harbor for servicers who carefully consider loss mitigation options and decide to modify a mortgage. "Homeowners and investors alike benefit by finding terms and conditions that would allow at-risk homeowners to stay in their homes, while providing investors some rate of return for their investments," Rep. Castle said. Industry groups oppose the bill. But Rep. Castle said his bill would "eliminate some of the payoffs" required under a Federal Housing Administration refinancing bill the committee was scheduled to mark up on April 24. The FHA bill requires investors/servicers to write down the loan amount to refinance an "underwater" mortgage into an FHA-insured mortgage.