State and Federal regulators want lasting changes in the way that banks and mortgage-service companies handle our mortgages. Alleluia!!! In a 27 page proposal sent last week, regulators outline in detail mortgage-servicing practices that they want put in place. Albeit still a proposal, it is described by some as a type of "wish list" of changes and reform. The goal of the proposal is to impose stricter regulations in order to help struggling homeowners and those facing foreclosure. This would make it easier for those in financial trouble to potentially renegotiate the amount they owe. The current process in place is apparently so cumbersome that borrowers and housing counselors cannot navigate through the confusing process. And for those who are savvy enough to handling sifting through the process, such as foreclosure-defense attorneys, they are regularly coming across flaws in the way that banks track and record ownership detail.
Seems like the regulators are waking up as this proposal is above and beyond that of the financial penalties that companies will need to pay to settle abuses from last year's mortgage robo-signing scandal. This settlement alone may require that banks write down more than $20 billion in loan balances for already troubled mortgages.
According to a credit.com article some of the highlights of the 27 page proposal are:
• A push for loan servicers to modify more mortgages. This, for some, had been a huge part of the problem as the loan servicing companies refused to budge even after learning that homeowners were having trouble paying bills. Investors, on the other hand, would have rather have had a smaller payment than no payment at all.
• Loan servicers would have to outline their formulas for "net present value" so it can be more fairly determined whether in fact a homeowner is truly eligible for a loan modification. Currently there is no standard formula used industry wide.
• Advanced technology and improved record-keeping practices so as to better (in some instances at all) track the true owner of the mortgage.
• More stringent disclosure and appeal procedures so all those involved in the process, most importantly those involved in a loan modification appeal, can track and understand the process.
As more about this proposal and above referenced settlement comes online, we'll try to keep you abreast of changes. These are relevant issues to ALL homeowners even those who at this time are making their mortgage payments.
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