States should close gaps in foreclosure safeguards

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By Consumers Union on Wednesday, April 10th, 2013

On April 9, 2013, Consumers Union and the Center for Responsible Lending issued a new report outlining how state lawmakers can bolster safeguards to prevent unnecessary foreclosures.  Closing the Gaps:  What States Should Do to Protect Homeowner From Foreclosure examines recent developments in the legal and regulatory landscape, discusses the relevant provisions of the CFPB rules, California Homeowner Bill of Rights (HBOR) and other states’ laws, and makes recommendations for states to adopt additional reforms to fill in the consumer protection gaps that remain.

Despite recent advancements including the National Mortgage Settlement (NMS), the California Homeowner Bill of Rights (HBOR), and new mortgage servicing rules from the Consumer Financial Protection Bureau (CFPB) that go into effect in January 2014, millions of families remain poised to lose their homes. However, there is room for states to build on the reforms of the NMS, HBOR and CFPB rules, and help avoid unnecessary foreclosures.

By adopting a Homeowner Bill of Rights to help reduce as many foreclosures as possible, states would stabilize local housing markets and protect homeowners. The Center for Responsible Lending and Consumers Union urge state lawmakers to:

  • Require lenders to engage in loss mitigation activities to prevent avoidable foreclosures.
  • Restrict servicers from pursuing foreclosure while at the same time processing a request for a loan modification—so-called “dual tracking.”
  • Require lenders to establish clear procedures for homeowner outreach, straightforward timelines, detailed denial notices, an affidavit requirement and reasonable rights of appeal to facilitate the loss mitigation requirement.
  • Provide homeowners with the right to halt a foreclosure sale when a servicer breaks the law, and until the servicer complies with the law’s loss mitigation requirements.

For more details, see:  Closing the Gaps:  What States Should Do To Protect Homeowners from Foreclosure

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