Tuesday, March 15, 2016
With Maryland remaining among the top five states in the rate of foreclosures, it is worthwhile to assess emerging foreclosure-related trends that may affect Marylanders in the future. While it is difficult to predict with any certainty what will occur in the homeownership market, the following are a few legal and policy trends related to foreclosures that Civil Justice has observed.
There Is a Growing Problem of Servicers Not Honoring Previous Loan Modifications after a Servicing Transfer, In Violation of the CFPB Rules
As the foreclosure crisis enters a new stage, loans increasingly continue to be transferred from one mortgage servicer to another. Civil Justice is seeing a growing number of homeowners who signed a final loan modification agreement and then subsequently had their loan transferred to a new servicer. Federal law allows for loans to be sold to a new servicer, however the Consumer Financial Protection Bureau (CFPB) rules prohibit new servicers from changing the terms of a loan modification after an agreement has been signed. Marylanders who have signed and submitted permanent loan modification paperwork to the old servicer should not have their payments rejected by the new servicer. Unfortunately, even though the transfer of servicing should not affect the terms and conditions of the loan modification, Civil Justice has seen Marylanders have their payments rejected after a servicing transfer. If a homeowner is facing this issue, it is important that they reach out to the servicer with a “Notice of Error” letter and/or a “Request for Evidence” letter. This will require the new servicer to assess the situation and notify the homeowner as to the status of their case in a timely manner.
Loan Modifications, Short Sales, Deeds In Lieu Of Foreclosure, and Non-Foreclosure Plans Are Available but Too Many Consumers Are Faced With Barriers to Applying Effectively
Loan servicers are still bound by Federal and state laws requiring a full evaluation of all loss mitigation applications in most situations. Servicers must review and respond to a homeowner’s application for a loan modification if it arrives at least 37 days before a scheduled foreclosure sale. However, even when the homeowner is submitting documentation to the servicer in a timely manner, servicers have made the process unnecessarily difficult by assigning different points-of-contact, not reviewing applications in a timely manner, and requesting the same documents repeatedly. This often frustrates and demoralizes the homeowner, leading them to abandon the process even when a loan modification is possible.
On the other hand, some homeowners wait until the last possible moment to consult with an attorney or housing counselor and apply for a loan modification when a sale has already been scheduled. This means that, unless the sale is more than 37 days away, the servicer does not have to review the request for modification even if an affordable payment plan would be possible. It is important that homeowners reach out to legal service organizations and housing counseling agencies as early in the process as possible if they need assistance applying for a modification. Maryland’s Department of Housing and Community Development has a comprehensive list of resources – look here for housing counseling options and look here for legal service provider options.
Consumer Relief Is Still Not Reaching Homeowners As Effectively As Possible
The Wall Street Journal, in an exhaustive analysis of mortgage settlements, concluded that there were $110 billion in settlement proceeds from over 30 mortgage-related settlements secured by the Justice Department, federal agencies and state agencies. However, less than half the money ($44.7 billion) went to direct consumer relief in the form of loan modifications, principal forgiveness, and other non-foreclosure outcomes. The unfortunate reality is that consumer relief for those negatively affected by unaffordable mortgages will continue to be not as comprehensive as it could be. It is possible that there will be more settlements in the coming years, however, and it is important that Maryland consumers file complaints of any loan servicing violations with the appropriate government agencies. Homeowners in Maryland can file complaints with the Consumer Financial Protection Bureau, the Maryland Office of the Attorney General, and the Maryland Office of the Commissioner of Financial Regulation – these agencies may decide to investigate patterns of behavior by noncompliant lenders and it is therefore important to provide them with as much information as possible. The agencies will not, however, represent homeowners in individual foreclosure cases
Homeowners Need To Be Proactive and Reach Out For Help If Undergoing Challenges with their Mortgage
As the housing climate changes, it will remain important for homeowners to get help from a housing counselor and/or attorney as early in the foreclosure process as possible. Pro bono and/or low bono assistance may be available, depending on the homeowner’s situation and income. Contact Civil Justice’s foreclosure intake line at 410-706-0174 for more information.