State attorneys general are trying to reach an agreement with several mega-servicers on how to fix the loan modification process and end certain practices such as 'dual tracking' that create borrow stress and confusion.
"Our goal is to change the paradigm" and make the current servicing system a "better system," Iowa AG Tom Miller told the Senate Banking Committee late Tuesday.
"We are struggling," he said, to find ways to ensure that borrowers who pass a "strict economic analysis" will get a loan modification.
As part of an agreement, the AGs want servicers to provide one contact person for each customer being considered for a loan modification and to stop dual tracking where borrowers in modifications are also being processed for foreclosure.
Several Democratic senators complained to Bank of America and JPMorgan executives that constituents who are making payments on a loan modification are still receiving foreclosure notices.
"These are people who never missed a payment and they are getting hammered," said Sen. Jon Tester, D-Mont.
"We understand how confusing it is," B of A Home Loans president Barbara Desoer said, but many investors require dual tracking, including the GSEs.
"We are in early discussions with the state attorneys general about seeing if we can use that forum to get investors to the table," Desoer testified.
AG Miller told the senators the multi-state AG investigation into the robo-signings and other improper foreclosure practices should lead to an agreement with the servicers in a few months.
"We need an agreement from the banks and our discussions have been productive," he testified.
Such an agreement may including monitors, he said, and penalties if they don't comply.
Separately, there are news reports that the AGs want the servicers to fund a relief effort for victims who have lost their homes due to improper and shoddy foreclosure processing.
AG Miller did not mention such a fund for foreclosure victims during his testimony.
