New guidelines for mortgage servicers could be good news for struggling borrowers
Mortgage servicers have been roundly criticized for their efforts -- or lack thereof -- to help delinquent homeowners avoid foreclosure. More than 2 million of the delinquent mortgages they're servicing are owned or guaranteed by Fannie Mae and Freddie Mac.
You can see how they could make a difference.
Their regulator, the Federal Housing Finance Agency, said yesterday that the mortgage giants will issue new rules for servicing troubled mortgages in hopes of doing just that. Servicers will get incentives for working with borrowers more quickly -- "earlier contact, more frequent communication, and prompt decisions" is how the agency's director puts it -- and will be hit with penalties if they don't perform well.
For instance: no more starting foreclosure proceedings while a borrower is working with the servicer on an alternative.
"The updated guidelines ... address the so-called 'dual track' by requiring servicers to contact borrowers as soon as they become delinquent and focus solely on remediating that delinquency," the agency said. "The foreclosure process may not commence if the borrower and servicer are engaged in a good-faith effort to resolve the delinquency. The servicer must conduct a formal review of each case to ensure a borrower has been considered for foreclosure alternatives before the loan is referred for foreclosure. Even after foreclosure processing begins, financial incentives are provided to encourage servicers to continue to help borrowers pursue a foreclosure alternative."
Full guidelines are expected later this spring or over the summer, but there's a link to Fannie and Freddie's own announcements from the FHFA release.
Anne Balcer Norton, the state's deputy commissioner of financial regulation, said by email that it looks like a good start to fixing "misaligned compensation incentives" that make servicers treat foreclosure as the best option.
"There is a great deal of blame by the foreclosure bar and the servicers on Fannie and Freddie requiring that they move ahead with foreclosure proceedings within a given window," said Norton, who headed foreclosure-prevention efforts at a housing counseling group before coming to the state Department of Labor, Licensing and Regulation. "Ideally, through these guidelines, some of that blame is less credible."
She added, "It also sounds like these changes are in-line with the Enforcement Orders of the federal regulators in response to robo-signing. We're still far from national standards and fixing the problem but after 4 years, it looks like the industry is starting to head in the right direction."
Categories: Foreclosure help, The foreclosure mess
Sign up for the At Home newsletter 
Comments
How about requiring the mortgage servicer provide proper documentation showing that they own the note and are lawfully able to foreclose?
Posted by: WC, Baltimore MD | April 29, 2011 7:20 AM
will fannie and freddie start to finally participate in the fha short refi program so that those of us who live in areas that have been decimated by foreclosures and are hundreds of thousands of dollars underwater can have our loans rewritten to the current market value, saving tax payers money instead of allowing us to just walk away?
Posted by: CAS | April 29, 2011 12:53 PM
Good question, CAS -- I don't know the answer.
Anyone here do?
Posted by: Jamie Smith Hopkins | April 29, 2011 12:55 PM
Finally, the truth is being reported. It is not the "greedy" banks, as the media and blogs have been saying, but the federal government (Fannie Mae and Freddie Mac) who are requiring dual track, and pushing the banks to foreclose!
Posted by: Mark | April 29, 2011 1:01 PM
There's plenty of blame to go around, Mark! But as most mortgage experts have pointed out, the government's own record has not been stellar.
Posted by: Jamie Smith Hopkins | April 29, 2011 1:41 PM
Regarding the short refi question,
"False hope" is the key word on all these programs.
Like so many of these programs that look so helpful at first glance, but fail to offer anything more than political cover for the guys who bailed out the banks, Fannie and Freddie does have its own programs. Both will allow a refinance up to 125% of the home's value. Good luck on it actually helping anyone though after factoring in the various cost premiums charged with it.
Consider that even FHA's short-refi program forces the bank to eat the entire loss all the way down to 97% of what FHA thinks the value is, AND requires the borrower to be making payments on time before this happens. Explain to me why a bank would do this?
The entire mortgage banking world of the last 10 years should be enshrined under an encyclopedic accounting titled "A Case Study of Unintended Consequences."
Posted by: Josh Dowlut | April 29, 2011 4:01 PM
Re: Mark's comment -- are the FMs "pushing" foreclosures, or merely making them too attractive with their full insurance payouts?
Posted by: ho.co.po | April 30, 2011 4:56 AM
CAS- If Fannie agrees to do this for you, will you agree to forgoe any future appreciation on the property? Or is this a heads you win tails the tax payer loses proposition you are requesting?
What about my stock losses? I am upside down on a few stocks should i sell right now. Should someone give me money because my portfolio was decimated when my choices didnt work out?
Posted by: elweedz | May 1, 2011 10:11 AM
This is a great article, thank god we in Canada did not have to go through this same process. In the Greater Toronto Area prices still going up by average 5%. Thanks for the insight
Posted by: Mortgage | May 1, 2011 12:59 PM
Enjoyed reading this post.
Dan Statlander
http://www.statelandbrown.com
(Real estate experts in Boca Raton Florida)
Posted by: Dan Statlander | May 1, 2011 1:11 PM