Monday, April 11, 2011

New Rules for Mortgage Servicers Face Early Criticism

Federal banking regulators have not officially imposed their new rules for the top mortgage servicers, but a wide coalition of consumer and housing groups is denouncing the legal agreements, which are likely to be published within a few days, the New York Times reported today. The new rules require the servicers to improve their processing systems, to stop foreclosing while negotiating to modify the loan and to give borrowers a single direct means of contact. Servicers will be required to bring in a consultant to investigate complaints by homeowners who lost money because of foreclosure processing errors in 2009 and 2010. The problem, said Alys Cohen of the National Consumer Law Center, is the agreements "do not in any way require the servicers to stop avoidable foreclosures, and that is what we need." At the heart of the complaints by Cohen and others is whether the servicers, which are arms of the biggest banks, may be compelled to give households fighting foreclosure a better shot at renegotiating their loans and staying in their properties