Servicers Agree to Streamline Foreclosure Relief Practices
Mortgage servicers who participate in the Hope Now Alliance have agreed to adopt a streamlined approach to foreclosure prevention that advocates say will expedite help for troubled homeowners at risk of losing their homes.
In most cases, lenders would have to provide borrowers with an approval or denial for a loss mitigation application within 45 days, leaders of the alliance said. Currently, many homebuyers and consumer advocates say borrowers have encountered significant delays in getting a decision regarding an application for loss mitigation assistance.
Lenders also agreed to provide borrowers with notice that they've received a foreclosure relief application within five days, a move that should improve communication between borrowers and servicers and make it easier to fill in any information gaps or correct discrepancies that are needed for a loss mitigation package to move forward.
The 27 participating mortgage servicers, a list which includes all of the nation's largest home loan lenders, have agreed to timelines for action when dealing with homeowners who are seeking loan modifications, repayment plans, partial claims, or a temporary suspension of monthly payments.
And unlike other efforts, the new guidelines include procedures for dealing with second liens and short sales. Second liens in particular have been a hindrance in working out first mortgage loans.
In part, servicers will benefit because the uniform approach will help the industry deal with the "great magnitude" of the foreclosure problem, said Jonathan Kempner, president and CEO of the Mortgage Bankers Association.
"Creating these servicing procedures was the right thing to do for both consumers and for the industry," he said on a conference call with reporters.
He said the 45-day time limit for action on most loss mitigation applications would mark a major improvement from the present environment, in which borrowers sometimes encounter lengthy delays.
"There are complaints that people have taken much longer, and we are saying that is not acceptable," Mr. Kempner said.
When a second lien is held by a different lender than the first lien, the 27 servicers involved in Hope Now have agreed to standard procedures for re-subordinating the second lien to a new or modified first lien as long as the workout does not leave the second lien holder worse off than before.
Steve Bartlett, president and CEO of the Financial Services Roundtable, said the goal of the streamlined actions is to expedite delivery of foreclosure relief.
"It's a bold and a dramatic statement that the industry is committed to more transparency and more clarity," he said. "For the first time we made a commitment that second mortgages will not stand in the way of fixing a first mortgage." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/