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Foreclosure Battle: DeLauro Pitches Reform

The congresswoman wants to enact new national guidelines for lenders.

In an effort to curb the rate of foreclosed homes, new legislation proposed by Congresswoman Rosa DeLauro aims to make good communication between distressed homeowners and lenders the law.

Under the Democrat's proposal, if lenders don’t follow the proposed laws, then homeowners can sue and use the violations in defense of keeping their homes.

At the headquarters of , DeLauro criticized banks for being sloppy due to poor communication, lost paperwork and sometimes foreclosing on homes they don’t even have the title for.

“It’s chaos and it's trauma [and you lose] something you spent your entire life working for,” she said.

According to figures provided by DeLauro’s office, one in every 10 homeowners in the greater New Haven area is either in foreclosure or delinquent on their mortgages. DeLauro herself says she has heard from 450 constituents concerned about losing their homes and that her “office sees more home foreclosures than ever."

RealtyTrac, a commercial foreclosure listing service, reports that there were 9 homes in various stages of foreclosure in in December (see the graph posted above). That's one in every 1,395 homes here. The state average for December was one foreclosure for every 1,145 homes.

The Regulation of Mortgage Servicing Act has four key components that, if passed, would be used as national requirements for lenders dealing with foreclosures.

A ‘Case Manager’

Both DeLauro and Connecticut Attorney General George Jepsen told the crowd of Realtors, reporters and community leaders that homeowners often have to repeat their circumstances many times to employees who have no information about prior calls. DeLauro’s legislation would require that lenders create a “single point of contact for borrowers.”

Foreclosing or Negotiation: One or the Other

The second part of the bill would forbid the so-called “dual track process” that allows lenders to continue the process of foreclosing while at the same time negotiating with the homeowner on a modified loan. The purpose of this is to encourage lenders to discuss all possible options that could keep the person in the home.

A Third-Party Review

The final part of the bill would require a third-party review of modified loans and alternatives to foreclosures before beginning the foreclosure process. When asked who the third party would be, DeLauro said it was conceivable that another department of the company could be the third party, but she said that is not preferable. She defined third party as “an entity that is not a servicer” for the loan.

Relief on the Horizon?

Jepsen said that Connecticut and approximately 40 other states are close to finalizing a settlement with lenders that he said acted recklessly leading up to the burst of the housing bubble. The settlement, which he hopes to wrap up next week, will include 40 pages of new standards that lenders have to adhere to, in addition to money for refinancing, loan modifications and consulting with homeowners.

DonnaR February 04, 2012 at 06:23 PM
This problem is much greater than anyone can imagine. Last year with the help of Rosa's office I was able to assist a friend to resolve a loan modificaiton issue. It was not easy and it took many phone calls and faxes to get to the point where the servicer told me that to have a case Escalated it would take a request from either, the president, a Senator or Congresswoman. Rosa office did infact get our case escalated and we were able to resolve the issues. What many do not know is that most mortgages are handled by servicers, who have not insentive to come to an agreement. Servicers are paid by the banks and in many cases the Government, on a monthly basis to manage (and I use that term lightly) at risk mortgages. In our case it was found out that even though the servicer had been in touch with the homeonwer, was in fact still recieving payments, the servicer billed the homeowner monthly for photos taken to assure the house was still occupied. The entire system is not working and I am very much afraid that more legislation, no matter how well intended, is not the answer. Some changes I would like to see is to give home owners access to the many tools that already exist at HUD, Fannie mortgage monitoring sites. Currently only servicers have the authority to access these sites. Per HUD regs, servicers do not have to interact with anyone BUT a HUD CERTIFIED specialist. And the only what to get certified is through a NON PROFIT.

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