Government Settlement forces Big 5 to change Mortgage Servicing Practices

Changes in Mortgage Servicing Practices took effect on October 2, 2012

The $25 billion government settlement with the big five mortgage companies- Bank of America, Citigroup, Ally Financial, Wells Fargo and JPMorgan Chase, have instituted more than 300 changes in the way they service mortgages.  The changes took effect on Tuesday, October 2nd.  Here are some highlights of  the critical changes:

  • No more “robo-signing” – not having a real person look and sign the documents in order to start the foreclosure process.
  • No more “dual tracking” – where mortgage companies were continuing with the foreclosure while also working on a loan modification with the borrower.
  • Borrowers will have their own point of contact – one person that is handling the borrower’s account.
  • Mortgage companies must treat foreclosure as the last option and must consider other options prior to a foreclosure.
This is a great win for consumers who are struggling to make their mortgage payments. Although, it appears that these terms only apply to the big five companies at this moment.

 

What about Mortgage Assistance relief services?

This is a good time to talk about all those companies (mortgage assistance relief services) that claim to help you with a loan modification.  DON’T PAY THEM! The Code of Federal Regulations prohibits the collection of advance payments and requires certain disclosures by those companies. See the code section below.  Attorneys may be exempt from these requirements.

 
§ 1015.5   Prohibition on collection of advance payments and related disclosures.

It is a violation of this rule for any mortgage assistance relief service provider to:

(a) Request or receive payment of any fee or other consideration until the consumer has executed a written agreement between the consumer and the consumer’s dwelling loan holder or servicer incorporating the offer of mortgage assistance relief the provider obtained from the consumer’s dwelling loan holder or servicer;

(b) Fail to disclose, at the time the mortgage assistance relief service provider furnishes the consumer with the written agreement specified in paragraph (a) of this section, the following information: “This is an offer of mortgage assistance we obtained from your lender [or servicer]. You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed pursuant to §1015.4(b)(1)] for our services.” The disclosure required by this paragraph must be made in a clear and prominent manner, on a separate written page, and preceded by the heading: “IMPORTANT NOTICE: Before buying this service, consider the following information.” The heading must be in bold face font that is two point-type larger than the font size of the required disclosure; or

(c)(1) Fail to provide, at the time the mortgage assistance relief service provider furnishes the consumer with the written agreement specified in paragraph (a) of this section, a notice from the consumer’s dwelling loan holder or servicer that describes all material differences between the terms, conditions, and limitations associated with the consumer’s current mortgage loan and the terms, conditions, and limitations associated with the consumer’s mortgage loan if he or she accepts the dwelling loan holder’s or servicer’s offer, including but not limited to differences in the loan’s:

(i) Principal balance;

(ii) Contract interest rate, including the maximum rate and any adjustable rates, if applicable;

(iii) Amount and number of the consumer’s scheduled periodic payments on the loan;

(iv) Monthly amounts owed for principal, interest, taxes, and any mortgage insurance on the loan;

(v) Amount of any delinquent payments owing or outstanding;

(vi) Assessed fees or penalties; and

(vii) Term.

(2) The notice must be made in a clear and prominent manner, on a separate written page, and preceded by heading: “IMPORTANT INFORMATION FROM YOUR [name of lender or servicer] ABOUT THIS OFFER.” The heading must be in bold face font that is two-point-type larger than the font size of the required disclosure.

(d) Fail to disclose in the notice specified in paragraph (c) of this section, in cases where the offer of mortgage assistance relief the provider obtained from the consumer’s dwelling loan holder or servicer is a trial mortgage loan modification, the terms, conditions, and limitations of this offer, including but not limited to:

(1) The fact that the consumer may not qualify for a permanent mortgage loan modification; and

(2) The likely amount of the scheduled periodic payments and any arrears, payments, or fees that the consumer would owe in failing to qualify.

 

The bottom line.

So if they ask you for money up front, then they probably aren’t going to be able to help you.  They could just take your money, then when the sale date is set, they could call you to say, “You should probably file bankruptcy to save your house.”  Don’t worry though, there are places that can help you.

Look to SC HELP (South Carolina Homeownership and Employment Lending Program).  This is a service that is provided by the South Carolina State Housing Finance and Development Authority and the purpose is to help you stay in your home. Best of all, you don’t have to pay them to help. So remember, beware of mortgage assistance companies that require an upfront fee to help you.

In the case that you need to discuss bankruptcy as an option to stop foreclosure, please don’t forget that I offer a free initial consultation, flexible payment terms and after hours or weekend appointments so you don’t have to miss work.  Call my Columbia office today at 803-403-1955 or use the contact form on this site.