Proposed Regulatory Changes Would Reduce Foreclosure Threats
On behalf of Debt Advisors, S.C.
The attorneys general of all 50 states and the heads of five federal agencies are united in support of a series of reforms of the mortgage industry. A 27-page document sent to the five largest home mortgage firms in the U.S. in March provides details about how to reduce the frequency of one of the most drastic consequences of financial distress: foreclosure of a mortgaged home and displacement of the owners and their families.
The basic idea behind the document is that mortgage servicers have profited from the fees generated by foreclosures amidst a collapsing housing market that has adversely affected both investors and homeowners. At the center of the controversy: abusive practices used to ram foreclosures through when better solutions exist. Ally Financial, Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, the five mortgage servicers in question, handle about 60 percent of American home loans.
Proposed changes to the way foreclosures are handled include:
- Requiring actual signatures on all foreclosure documents, rather than electronic signatures or stamps, to avoid future robo-signing scandals
- Ensuring that mortgage servicers can produce original loan documents if they seek to repossess a home
- Mandating that servicers create separate units to mediate homeowner complaints, subject to independent audits
- Creating new incentives to encourage loan modifications over home foreclosure
- Requiring servicers to take into account a homeowner’s overall debt picture when restructuring a first mortgage
The ultimate goals will be met if borrowers who take out mortgages and those who invest in that debt are brought closer together to find common ground. Minimizing foreclosures is good for communities and the economy, and diminishing the power of the middle men who profit from debtors’ distress is an urgent necessity. Notably, one of the five federal agencies to support the proposal is the newest: the Bureau of Consumer Financial Protection.