Available at: https://scholarship.law.unc.edu/ncbi/vol30/iss1/5
Summary:
Joseph A. Smith, Jr.’s Thirty Years, Give or Take: Reflections on My Life in Banking is both a personal memoir and a structural history of modern American banking, told through three distinct phases of his career: as bank counsel in the 1990s, North Carolina Commissioner of Banks in the 2000s, and Monitor of the National Mortgage Settlement in the aftermath of the Financial Crisis. Across those roles, Smith traces the dramatic transformation of banking from a decentralized, quasi-utility model into a highly consolidated, market-driven financial system dominated by a handful of large institutions.
In the 1990s, Smith describes the rapid consolidation of regional and community banks driven by deregulation, including the repeal of geographic and functional restrictions such as those embodied in interstate banking laws and the Glass-Steagall framework. What began as an effort to allow regional banks to compete with money-center institutions ultimately resulted in the erosion of local banking and the rise of national financial conglomerates. This shift also brought a cultural change within banking—from relationship-based lending toward a sales-oriented, profit-driven model that expanded into securities, insurance, and other financial products.
As Commissioner of Banks in the early 2000s, Smith oversaw a system that appeared healthy but was increasingly exposed to risk, particularly through heavy concentrations in commercial real estate lending. He candidly recounts the difficulty regulators faced in addressing these risks during the “Indian Summer” before the crisis, when banks were well-capitalized and markets were booming. When the Financial Crisis hit, that apparent stability quickly unraveled, leading to widespread loan defaults, bank failures, and emergency regulatory interventions. Smith and his colleagues were forced into a triage role, attempting to stabilize institutions, raise capital, and manage failures while navigating tensions with federal regulators enforcing strict “prompt corrective action” rules.
Finally, Smith’s role as Monitor of the National Mortgage Settlement placed him at the center of the government’s response to widespread mortgage servicing abuses following the crisis. He describes the Settlement as a massive, coordinated effort to impose servicing standards and deliver relief to distressed homeowners, while also acknowledging the operational complexity of overseeing institutions shaped by years of mergers and acquisitions. In hindsight, Smith views the Settlement as a pragmatic intervention that helped restore order to a chaotic system, even as it fell short of satisfying public demands for accountability. The article closes with a measured reflection: the evolution of banking over these thirty years produced both growth and instability, and the task of balancing innovation, regulation, and public trust remains unfinished.
Commentary
1. An Unmentioned Legacy: North Carolina’s Foreclosure, Servicing, and Exemption Reforms
What is largely unmentioned in Smith’s memoir—but critical to understanding his full impact—is the extent to which his tenure as North Carolina Commissioner of Banks coincided with, and helped implement, some of the country's most foresighted mortgage and foreclosure legislation.
During this period, North Carolina enacted a series of statutory reforms under N.C. Gen. Stat. Chapter 45 that directly addressed mortgage servicing conduct and foreclosure prevention. These included the Mortgage Debt Collection and Servicing provisions and the Emergency Program at N.C.G.S. § 45-90 et seq., which imposed early notice requirements and created meaningful opportunities for loss mitigation well before foreclosure. Notably, these protections predated and predicted—and in several respects exceeded—the later federal framework embodied in Bankruptcy Rule 3002.1, particularly in their emphasis on transparency, timely communication, and borrower protections.
In addition, the Emergency Program to Reduce Home Foreclosures at N.C.G.S. § 45-100 et seq. established a coordinated statewide infrastructure for foreclosure prevention, including counseling, data tracking, and structured intervention. These efforts were complemented by H.B. 1817 (2007), North Carolina’s Predatory Lending Law, which strengthened safeguards against abusive lending practices when many jurisdictions had yet to act.
Between 2007 and 2012, the North Carolina Commissioner of Banks (NCCOB) functioned as the primary state regulator for mortgage lenders, brokers, and servicers—overseeing compliance, implementing these statutory protections, and administering programs such as the State Home Foreclosure Prevention Project (2008). In that role, Smith and NCCOB were not merely responding to crisis conditions; they actively shaped a regulatory and consumer protection framework that mitigated harm and preserved homeownership across the state.
Equally significant—and often overlooked—this period also marked the last time the North Carolina General Assembly, with the support of the Commissioner of Banks, meaningfully updated the State’s homestead exemption, increasing it from $18,500 to $35,000. At the time, that adjustment reflected then-current housing values and provided a modest but meaningful protection for homeowners in bankruptcy.
But that was more than a decade ago. With the dramatic escalation in housing prices across North Carolina, the current $35,000 homestead exemption is increasingly disconnected from economic reality. A revision to approximately $100,000 would more accurately reflect present-day housing values and restore the exemption’s intended function—preserving a meaningful stake in a debtor’s home. Critically, such reform should not require another systemic collapse like the Housing Crisis to prompt legislative action. North Carolina has already experienced—and continues to face—serious economic disruptions, yet the exemption remains stagnant.
The contrast is striking: while the National Mortgage Settlement sought to impose uniform national standards after the crisis had already unfolded, North Carolina—under Smith’s leadership—had already begun constructing a proactive, statutory architecture to regulate servicing practices, prevent avoidable foreclosures, and protect homeowner equity. Though understated in the memoir, that contribution represents another central pillar of Smith’s legacy.
2. The Missing Piece: Bankruptcy Integration
Here is a revised version with two prefatory paragraphs that set up your critique while maintaining the ncbankruptcyexpert tone and integrating the additional points:
1. The Missing Piece: Bankruptcy Integration
Before turning to the bankruptcy-specific shortcomings of the National Mortgage Settlement (“NMS”), it is important to recognize that many of its limitations were neither accidental nor entirely avoidable. As Joe Smith candidly acknowledges, the Settlement was the product of political compromise, legal uncertainty, and the practical constraints of coordinating federal and state actors with divergent priorities. Enforcement authority was inherently limited: the Monitor’s office relied on sampling methodologies, banks were permitted an error tolerance (often cited around 5%), and only a fraction of loan files were actually reviewed. At the same time, while the headline numbers suggested massive borrower relief, much of that “relief” came in the form of short sales and loan modifications—outcomes that frequently aligned with servicer balance-sheet objectives as much as, if not more than, homeowner recovery, rather than direct compensation to borrowers who had been harmed.
Nor did the Settlement fully eliminate the very practices it sought to curb. “Dual-tracking”—the simultaneous pursuit of foreclosure while negotiating loan modifications—persisted in various forms despite being formally prohibited. The broader foreclosure crisis continued largely unabated for many families, and the Settlement was widely criticized for placing only a modest financial cost on systemic misconduct, including the “robo-signing” and document fabrication scandals that had undermined the integrity of foreclosure proceedings. In that sense, the NMS was best understood not as a comprehensive fix, but as a stabilizing intervention—one that imposed some discipline and delivered some relief, but left deeper structural issues unresolved.
Against that backdrop, one of the most consequential—and least discussed—limitations of the NMS was its failure to adequately consider and integrate with the consumer bankruptcy system, even as bankruptcy courts were serving as the primary forum for homeowners attempting to save their homes.
The NMS operated as if loss mitigation existed in parallel to bankruptcy, rather than within it. That was a fundamental miscalculation.
By 2009–2012, tens of thousands of homeowners were filing Chapter 13 precisely to:
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Stop foreclosure sales, and
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Create a structured environment to cure arrears and negotiate with servicers.
But the NMS did not meaningfully require servicers to engage with those cases in a bankruptcy-aware manner. It could—and should—have required:
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Systematic amendment of Proofs of Claim when loan modifications were granted;
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Proactive outreach to Chapter 13 debtors, rather than waiting for borrowers (or their counsel) to navigate opaque servicing channels, would have recognized the reality that many bankruptcy courts—indeed, all three districts in North Carolina—were forced to develop their own loan modification or loss mitigation programs to administer and efficiently process mortgage modification applications within pending cases. Those court-created systems were, in many respects, highly effective but necessarily fragmented, varying by district and dependent on local rules, portals, and judicial oversight. The National Mortgage Settlement could—and should—have built on that groundwork by establishing a uniform, systematized loss mitigation framework applicable across all bankruptcy courts (and even adaptable to state court foreclosure proceedings). This framework would reduce inconsistency, eliminate duplicative infrastructure, and ensure that similarly situated homeowners nationwide had equal and streamlined access to mortgage relief.
Instead, consumer attorneys were left to bridge the gap—often through litigation under Rule 3002.1 or contested matters that should never have been necessary.
3. Loss Mitigation: Passive vs. Proactive
The NMS required servicers to offer relief—but in practice, it often functioned as a reactive system:
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Borrowers had to apply;
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Documentation hurdles persisted;
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Bankruptcy status frequently complicated or delayed review.
This stands in sharp contrast to what was needed in Chapter 13 cases:
a proactive, system-driven identification of eligible borrowers, especially those already under court supervision and making plan payments.
As later experience with programs like HAMP, HHF, and HAF demonstrates, servicers can engage borrowers in bankruptcy without violating the automatic stay—they simply need to be required to do so.
4. The Cash Payment Problem: A Missed Opportunity
One of the more glaring omissions in the NMS was its treatment of cash payments to borrowers.
Approximately 400,000 homeowners received modest checks—typically between $1,480 and $2,000. These payments were:
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Symbolically important, but
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Practically vulnerable in bankruptcy.
The NMS could—and should—have:
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Explicitly exempted these funds from administration in bankruptcy cases; or
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At minimum, required servicers to notify Chapter 13 Trustees and debtor’s counsel of such payments.
Instead, these funds were left in a gray area—creating the risk that trustees might seek turnover, despite the payments being remedial in nature.
Notably, this lesson was eventually learned. During the COVID-era relief programs, the U.S. Trustee Program signaled that it would look dimly on efforts to capture modest relief payments for creditors—an approach that could have, and should have, been adopted during the NMS era.
5. HAF: Repeating (and Slowly Correcting) the Same Mistake
The subsequent Homeowner Assistance Fund (HAF) initially repeated this same structural oversight.
Treasury guidance only “discouraged” states from excluding borrowers based on bankruptcy status, rather than mandating inclusion.
Predictably, many states—including North Carolina—initially excluded or limited access for debtors in active bankruptcy cases, forcing course corrections only after:
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Advocacy, and
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The looming threat of litigation under 11 U.S.C. § 525 (prohibiting discrimination based on bankruptcy).
As contemporaneous policy analysis made clear, excluding debtors in bankruptcy was both counterproductive and legally dubious:
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Many homeowners file bankruptcy precisely to preserve their homes while seeking relief;
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Assistance programs function best when integrated with Chapter 13 plan structures.
Ultimately, HAF programs evolved to better accommodate bankruptcy—but only after repeating the same initial mistake seen in the NMS.
6. The Practical Reality: Bankruptcy as the Front Line
Smith’s narrative underscores a broader point that the NMS only partially grasped:
Consumer bankruptcy—especially Chapter 13—is the primary operational forum for saving homes in times of systemic mortgage distress.
Any large-scale mortgage relief program that fails to integrate with that system will:
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Underperform,
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Create unnecessary friction, and
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Shift the burden onto debtor’s counsel and bankruptcy courts.
Bottom Line:
Joe Smith’s work on the National Mortgage Settlement was substantial, serious, and—on its own terms—successful. It imposed discipline on servicers, delivered meaningful relief, and helped stabilize a collapsing system. And, as underscored by the publication of his memoir in the North Carolina Banking Institute Journal, Smith’s career reflects a remarkable breadth of service—placing him squarely among the giants of North Carolina banking AND mortgage regulation.
But from the perspective of consumer bankruptcy practice, the NMS reveals a critical lesson:
Relief programs that ignore bankruptcy do so at their peril—and at the expense of the very homeowners they are meant to help.
The next generation of interventions—whether legislative, regulatory, or settlement-based—must do better:
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Integrate with Chapter 13 from the outset;
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Protect relief payments from creditor capture; and
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Require servicers to engage proactively with debtors already under court supervision.
Otherwise, we will continue to relearn the same lesson—one foreclosure, one contested claim, and one avoidable motion at a time.
To read a copy of the transcript, please see:
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