AGs' Servicer Reform - The 27 Pages of Proposed Settlement Terms

The proposed 27-page settlement term sheet, provided to the five largest mortgage servicers by a national coalition of state Attorneys General and reportedly also by federal banking regulators.


The proposed terms touch on a variety of areas, including:

- Foreclosure and Bankruptcy Information and Documentation, including: (a) standards for affidavits and sworn statements in foreclosures and bankruptcies; (b) verification of borrower account information; (c) documentation of rights to note and chain of title; and (d) quality assurance systems and audits;

- Loss Mitigation Requirements, including: (a) a loss mitigation requirement; (b) prohibition on "dual tracking;" (c) requirements for a single point of contact and single electronic record; (d) outreach efforts for loss mitigation; (e) independent auditing for SCRA compliance; (f) loss mitigation "portals" for borrowers and housing counselors; (g) specific loss mitigation timelines; (h) independent review of loss mitigation denials; (i) required support and funding for state-based foreclosure prevention hotlines; (j) application of the FHA Short Refinance Program to non-FHA loans; (k) staffing and technology requirements; (l) standardization and disclosure of proprietary loan mod programs; (m) principal reductions; (n) second lien loan modifications; (o) free document delivery services through national retailers; (p) consideration of final or "back-end" DTI in loan modification applications; (q) monetary incentives and other provisions for short sales; (r) transfer of servicing issues; and (s) other loss mitigation related matters;

- Restrictions on Servicing Fees, including: (a) requirements that all such fees and bona fide, reasonable, and disclosed in detail to borrowers; (b) maintenance of a fee schedule for disclosure to borrowers; (c) limits on attorneys fees; (d) prohibition on so-called "pyramiding" of late fees and other late fee restrictions; (e) limits on third-party fees; (f) and requirements for lender-placed insurance;

- General Servicer Duties and Prohibitions, including: (a) a duty of good faith and fair dealing to borrowers; (b) a duty to ensure that distressed properties and charged-off loan properties do not become blighted; and (c) a duty not to unreasonably delay foreclosures and transfers of title as to abandoned properties;

- General Prohibitions, including: (a) prohibitions on deceptive conduct; (b) prohibitions on funds payment requirements that are more expensive to consumers than certified checks or attorneys checks; and (c) requirements to communicate with representatives of the borrower who provide written authorization and other reasonable assurances of authorization;

- Monetary Relief, in an unstated amount; and

- Compliance Review and Monitoring, including: (a) data reporting to federal and state regulators as to compliance with the settlement; (b) third-party review by auditor selected by the Ags and the CFPB, and (c) penalties for non-compliance.