Homeowners facing foreclosure may experience a less confusing process, and could get more help keeping their homes, thanks to a consent decree issued Wednesday to the nation’s 14 largest mortgage loan servicers.
The decree orders servicing companies to assign a single staff person to serve as the sole point of contact for homeowners facing foreclosure, ending the current situation where homeowners often get lost between different workers in different departments, as we described here.
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It also bans the practice of “dual tracking,” in which servicers proceed with foreclosure and modification efforts simultaneously. In some cases, this has led to homeowners receiving foreclosure notices days after being notified that they might yet win changes to their loan that could help them keep their house.
“Examinations of these eight national bank servicers identified significant weaknesses in mortgage servicing and foreclosure governance that resulted in unsafe and unsound practices,” the Office of the Comptroller of the Currency, one of the federal regulators involved, said in a press release. The effort also includes the Federal Reserve and the Office of Thrift Supervision.
The regulators also released an 18-page report detailing problems among the largest servicing companies, which manage loans for investors after the mortgages have been sold by the original lender.
The report found that all 18 of the top companies lacked the policies and procedures necessary to handle the tidal wave of loan documents they received during the housing boom. This resulted in errors and lost paperwork, which sometimes left the servicers unable to prove that they actually owned the loans they claimed to.
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After the boom went bust, the servicers did not have enough staff to handle all the foreclosures and requests for loan modifications.
“(T)he weaknesses at each servicer, individually or collectively, resulted in unsafe and unsound practices and violations of applicable federal and state law and requirements,” the report found.
The consent order does not address any fines the servicers may be forced to pay for violating the law, but it does hold servicers responsible for reimbursing homeowners who may have been harmed by servicers’ mistakes. The decree is separate from the effort by 50 attorneys general and state banking officials to win broader changes by servicers and a hefty fine for breaking housing laws.
Image: Lauren Keith, via Flickr.com