My Take: The government continues to push banks to explore foreclosure alternatives. Their motives are generally selfish in nature (popularity with the people), but the result is a positive one for the distressed homeowner. This article discusses loan modifications, but it also applies to short sales. The government wants loan servicers (i.e. B of A, Wells Fargo, Chase, Citimortgage, etc.) to exhaust all options before foreclosing on a borrower. For those who handle a lot of short sale transactions like we do, you can tell which servicers are embracing this movement and which ones are not.
AGs Threaten Lawsuits If Servicers Don't Make Fundamental Changes
03/21/2011 By: Carrie Bay
State attorneys general say they are willing to work with mortgage servicers to reach a settlement deal that would resolve the joint investigation of industry practices that led to last fall's robo-signing scandal and widespread foreclosure moratoriums.
But no slap on the wrist will do. The group wants to see "fundamental changes" to the way servicers run their business when it comes to handling delinquent borrowers or they'll turn to the courts for resolution, Iowa Attorney General Tom Miller told the Wall Street Journal.
Miller is spearheading the cooperative effort of attorneys general from all 50 states and the District of Columbia. He told the Journal that while a blanket settlement resolution is "more likely than not," it's "definitely not certain."
The attorneys general, in collaboration with several federal banking regulators, sent a 27-page document to the five largest mortgage servicers earlier this month outlining their proposed terms for a settlement.
While investigators say they have found no indications of unlawful foreclosures by the servicers, they have suggested that there is ample evidence of critical breakdowns in foreclosure procedures and deep-seated flaws in the practices followed by the mortgage servicing industry.
The lion's share of the settlement proposal addresses the complaints that attorneys general say they've been hearing from homeowners in their states, such as ensuring borrowers have a single point of contact throughout loss mitigation talks and eliminating the common practice of dual-tracking foreclosures at the same time a loan modification is in the works.
One particularly controversial point of the settlement proposal is the inclusion of mandatory principal writedowns for underwater homeowners. It's been reported that even some attorneys general are opposed to the idea.
Servicing executives are expected to step up to the negotiating table within the coming weeks. State and federal officials have indicated that they hope to finalize a settlement within the next couple of months.