No Bank Mortgage Bailout 2.0: Will America's Middle Class, Pension and Retirement Funds Again Pay the Cost of a Settlement?

WASHINGTON, Nov. 16, 2011 /PRNewswire-USNewswire/ -- The Association of Mortgage Investors (AMI) is asking some basic questions about the impact and cost to America's unions, pensions and retirement systems as a result of a global settlement among state Attorneys General and the large bank-servicers in connection with alleged robo-signing violations.   "Please do not settle this investigation and bail out the banks by using the money of seniors, retirement savers and other investors, namely other people's money," warned Chris Katopis, AMI's Executive Director.

AMI's members manage tens of billions in mortgage assets (bonds) for state and local pension and retirement funds for a range of public institutions on a daily basis.  These pension and retirement funds also independently own private label residential mortgage-backed securities.  Recent news reports reveal some details about the proposed remedy for the state and federal investigation into alleged servicer and foreclosure misconduct, such as robo-signing.  AMI welcomes relief for America's homeowners, including the reported terms such as improving servicing.  However, AMI seeks transparency.  We urge federal and state authorities to fully disclose the losses incurred by pension funds from these bad acts, to disclose breaches of fiduciary duties by servicers, and to avoid any remedy whereby the bank-servicers settle these improper practices by modifying loans in RMBS investment trusts.  Such modifications would hurt the value of bonds held by pension, union, and retirement funds.  Any bank that wishes to settle by modifying loans within a trust that they do not own, should pay for it through a reimbursement to the bond-holders. "Investors in mortgage trusts, such as unions and pensions, do not service these loans and certainly did not create these woes for borrowers.  The use of mortgage trust money (from pensions funds, unions and charities) to settle the investigation is tantamount to a bank bail-out that could also destabilize state and local governments.  In turn, we are concerned that property taxes need to rise to cover this bailout. We hope that principal modifications on investor loans in securitizations should not be credited against any settlement," explained Katopis.  

Earlier this year, AMI released a white paper concerning loss mitigation and its proposed remedies for any such settlement concerning the robo-signing allegations. AMI and its members are ready and willing to remain a resource to policymakers who want to create a truly viable plan offering long-term, sustainable, and effective solutions.  The timely resolution of the foreclosure crisis is in the best interests of homeowners and fixed income portfolio investors who rely upon returns from investments in the U.S. mortgage market.  State and local governments, such as California and New York, own a substantial portion of the current $1.1 trillion of private label MBS securities.  "The basic questions surrounding the investigation, including the result of any investigatory report and the resulting tax consequences on the public, must be explained," noted Katopis.

As the state Attorneys General continue the settlement talks, the impact on the trusts and public institutions must remain high on the agenda.  This will affect many public institutions back home and America's seniors for decades to come.  "On behalf of the  public-at-large and our institutional partners, mortgage investors ask that any final settlement be transparent and carefully consider the impact on all stakeholders, including state and local pensions, retirement systems, unions, life insurance, and medical savings plans," noted Katopis.

The Association of Mortgage Investors represents private investors, public and private pension funds, and endowments, all of whom support the efforts of Congress and the Administration to help responsible, though distressed homeowners avoid foreclosure. For more information, please visit www.the-ami.org.

The AMI is now live on Twitter with the most recent news on mortgage investing. Follow us: @MortgageInvest.

The AMI Loss Mitigation paper may be found online at: http://the-ami.org/category/resources/

SOURCE Association of Mortgage Investors