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PDFFrom DSNews:
Obama’s proposal calls for early intervention by servicers to contact every homeowner who has demonstrated hardship or fallen behind on their payments, and provide them with a comprehensive set of options to avoid foreclosure. The president’s directive states that every distressed homeowner must be given “a reasonable time” to apply for a modification.
It also requires servicers to provide all homeowners who have requested assistance of become delinquent with access to a customer service employee who has 1) a complete record of previous communications; 2) access to all documentation and payments submitted by the homeowner; and 3) access to personnel with decision-making authority on loss mitigation options.
The new servicing standards would prohibit servicers from initiating a foreclosure action unless they are unable to establish contact with the homeowner after reasonable efforts, or the homeowner has shown a clear inability or lack of interest in pursuing alternatives to foreclosure.
Any foreclosure action already under way must stop prior to sale once the servicer has received the required documentation and cannot be restarted unless the homeowner fails to complete a mod application within a reasonable period, is denied a modification after evaluation, or fails to comply with the terms of the modification received.
The Bill of Rights also establishes protections for homeowners against wrongful foreclosures. Servicers must explain to all homeowners any decision to take action based on their failure to meet payment obligations, and provide the homeowner with the opportunity to appeal that decision in a formal review process.
In addition, prior to a foreclosure sale, servicers must certify in writing to the foreclosure attorney or trustee that appropriate loss mitigation alternatives have been considered and that proceeding to foreclosure sale is consistent with applicable law. A copy of this certification must be provided to the borrower.
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