Iowa Attorney General Tom Miller blasted a study Tuesday that said proposed servicer settlement terms could cost the economy $10 billion a year. Miller, who is leading the settlement on behalf of the attorneys general, said the study was "grossly inaccurate," and noted it was paid for by the financial services industry, including some of the servicers involved in talks with the AGs.
"This is a flawed study based on inaccurate assumptions, and it reaches grossly inaccurate conclusions," Miller said in a press release. "This study was bought and paid for by the industry, and that fact is reflected throughout."
The study found that the proposed settlement with the top five mortgage servicers could prolong the foreclosure crisis, drive up mortgage interest rates, slow new home construction and cost $7 billion to $10 billion a year. The study, which was obtained by ASR sister publication American Banker, was written by three economists: Charles Calomiris, a professor of financial institutions at Columbia Business School; Eric Higgins, a professor of finance at Kansas State University; and Joseph Mason, the chair of banking at Louisiana State University and a senior fellow at the Wharton School.
Miller said the study's conclusions were wrong.
"The study's assertion that our proposed settlement will lengthen foreclosures is off the mark," he said. "Our proposal, if properly implemented by the servicers, should not increase the duration of foreclosures. By making foreclosures functional, servicers will make up time they're losing now. The current dysfunctional system prolongs foreclosures."
Miller is conducting the settlement talks along with the Justice Department, Housing and Urban Development and the Consumer Financial Protection Bureau.