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New Legislation Aims to Curb Mortgage Servicer Abuses

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Over one million homes were foreclosed upon last year, and an estimated 8-10 million homes still face foreclosure. As things stand now, homeowners who try to work with their lenders to modify their loans will often find themselves facing a nightmare of lost paperwork, conflicting advice, and delays that ultimately cost them their homes. U.S. Senators Jeff Merkley (D-OR) and Olympia Snowe (R-ME) hope to help change that. They have introduced legislation to “encourage good behavior” by servicers.

The Regulation of Mortgage Servicing Act will:

  • Require lenders to create a single point of contact for borrowers.
  • End the dual track process of foreclosing while negotiating a modification.
  • Provide a third-party review before sending a family to foreclosure.

Loan servicing horror stories have become common since the collapse of the housing market. Homeowners have reported sending reams of requested documentation to their servicers, only to be told it’s been lost. Or they have been told to stop paying their mortgage in order to be considered for relief, only to discover that foreclosure proceedings were started as a result of the missed payments.

[Related Article: JP Morgan Chief Admits Foreclosure Process Is a Mess]

Holding servicers’ feet to the fire will no doubt help some homeowners save their homes. But will it be enough? With an estimated 28% of homes underwater, better behavior from servicers may not go far enough. CNN reports that in a town hall that aired this morning, President Obama named “housing ‘the biggest headwind on the economy right now,’ (and) broached two relatively new ideas for the White House: Longer-term mortgage modifications and principal reductions ‘in some cases.'”

Reducing the principal balance for homeowners who owe more than their homes are worth was one of the approaches the President advocated during his campaign, but has not emphasized since. It’s more complicated than most people realize, in part because most mortgages have been securitized and sold to investors. Still, advocates of this approach believe it’s the only way to stabilize the housing market, which is estimated to drop another 8% this year, according to the real estate information firm Zillow.

[Related Article: Solving the Foreclosure Mess: Let’s Get Serious]

The Regulation of Mortgage Servicing Act is a no brainer, and should be enacted quickly. But Congress shouldn’t stop there. It needs to do whatever it takes to stop the downward spiral of the housing market—and the strain it places on our economy—and keep responsible homeowners in their homes.

Image: Nick Bastian, via Flickr.com

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  • Felipe Gonzalez

    Please be advised that I am contacting you in hopes of informing you of the abusive practices of JP Morgan Chase regarding home foreclosures. My family and I are from Van Nuys, CA and going to a wrongful foreclosure eviction. When I applied for my home loan with JP Morgan Chase I had a good faith estimate payment of $2100 and later it was switched to $3200.00 interest only payment. My loan officer she was going to fix it withing 15 days which she never did. I filed complaints with Real Estate Department, Department of Coorportation, Diane Fienstien’s office, HUD I have exhuasted all my resources to no avial. I was on a Trial Modification Payment Plan and while making the payments my property was foreclosed. I tried every thing I could to keep my home however, JP Morgan Chase staff have simply been unwilling to assist us in anyway. JP Morgan Chase has utilized callus, malicious, unprofessional, condescending, argumentative, and insulting practices to avoid helping us. My loan was a predatory loan, biat and switch. While on loan modifaction trial payment the my income was income i was recieving from my Disabilty. About a month ago I went to court and in front the the Judge the Counsel stated “how can he pay the property if the income he recieves is for Disability? JP Morgan Chase has discriminated against me based on my Disability and my ethnicity. Due to the banks abusive and misleading informaiton now we are recieving a notice to Vacate. Banks were bailed out with TAXPAYERS money and to help taxpayers keep our homes. Governement official should step up and advocate for the People not for the Banks.

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