Article on William Frey, Countrywide and the Servicer Safe Harbor Published in Lombard Street E-Journal

I am excited to report that FinReg21, a leading website on financial services regulation, has published a feature-length article by me, entitled Why Should Servicers Get a Safe Harbor? How One Investor’s Lawsuit Forced Bank of America to Seek Shelter in Washington, in its Lombard Street e-journal. Lombard Street is billed as “the first e-journal focused exclusively on financial services regulation in the 21st century.”

The article tells the story of William Frey and Greenwich Financial Services’ (“GFS”) legal challenge to Countrywide’s settlement with the Attorneys General, and how this lawsuit spurred the passage of the Helping Families Save Their Homes Act by Congress. The article pulls together many of the facets of this story that we have followed on The Subprime Shakeout, from the cycle of securitization that led to the subprime mortgage meltdown, to Washington’s push for loan modifications that led to Countrywide’s $8.4 billion settlement with Attorneys General from over 30 states, to the litigation and legislation that followed.
The last two sections of the piece go further, however. In the second-to-last section, I provide a legal analysis of how the Servicer Safe Harbor could run afoul of the Fifth Amendment’s Takings Clause if it operates to deprive GFS and other investors of their claims against Countrywide and other loan servicers. In the final section, I offer an alternative solution to the mortgage foreclosure crisis that would be more efficient and equitable than the blunt strokes that Washington has taken thus far.
I look forward to hearing any feedback that readers may have on this proposal or any other aspect of the article. Thanks to Doug Winthrop, Christine Camp, and Michael Ginsborg at Howard Rice for providing skillful editing and insightful feedback, and to Charley Spektor, and Marilyn Cohodas at FinReg21 for supporting critical, non-partisan analysis on this and other issues affecting the regulation of financial services.
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