Even as lenders have initiated a historic campaign to help delinquent borrowers avoid foreclosure, some in Congress continue to hold out judicially mandated loan modifications as the panacea for the housing crisis.
As policymakers search for solutions to the burgeoning problem of an indebted generation of college graduates, some lawmakers are zeroing in on mandating loan modification schemes or allowing more troubled student borrowers to discharge their unpayable debts in bankruptcy.
It is as if the SEC had just relaxed the capital rules, the Congress had mandated loans to poor people, or the Justice Department outlawed FBI cooperation with anti-terrorist agencies.
Or perhaps the American Bankers association, which recently cried that a consumer financial protection agency "needlessly rips apart all the existing regulatory agencies... and creates a new agency with powers to mandate loans and services that go well beyond consumer protection".
In 2011, The Wall Street Journal found that more than a third of states allow borrowers to be jailed, even though federal law mandates that loan repayment be treated as a civil issue rather than a criminal one.
The legislation mandated that loans be affordable, but Congress conceded that banks might fear the legal consequences if the mortgages did not comply.
Although it passed the 2012 national budget, it has failed to put into effect most of the unpopular changes mandated by the loan agreement that the previous government made back in 2010, when the country first admitted it was broke.
Underwriting mandates for new-money loans, as opposed to those used to refinance existing debt, are few and far between.
NTIC's Gail Parson told Newstips the Treasury Department has to begin using the authority given it under the bailout bill to mandate broad-based, permanent loan modifications -- including reductions of principal and interest.
The settlement will allow Citigroup to move beyond an expensive review of loans mandated by regulators in 2011.
