Although all 50 state attorneys general originally started out to investigate the robo-signer problem on a comprehensive scale, while they are at it they’re tackling loan modifications as well. As part of the probe, the AGs now want banks to “revamp their procedures and stop foreclosure proceedings on homeowners seeking loan modifications”[1]. The group, led by Iowa GA Tom Miller, testified last week before the Senate Banking Committee that “servicers have to make better decisions [and] pour more resources into the process.” They believe that “a lot more modifications should be being made that aren’t being made.”
For starters, the AGs want foreclosures stopped on all properties in the loan modification pipeline. Since currently banks cannot sell the home until they have determined that the homeowner is not eligible for modification, the AGs believe that this change will eliminate a lot of confusion and help more homeowners stay in their homes. Additionally, the group has determined that each case should get an individual supervisor to make the process “smoother,” and that an oversight system is needed to assign penalties when servicers do not comply.
After Miller’s testimony, Senate Banking Committee Chairman Chris Dodd addressed the issues that the group had presented. He used strong language, saying that “America’s biggest banks do not know how to lend” and that the current “focus on the robo-signing problem is too limited”[2]. He believes that lenders have outright failed in administering HAMP (Home Affordable Modification Program).
As a result of the probe, Bank of America is, once again, considering “halting the foreclosure process completely,” reported its head of home loan division, Barbara Desoer[3]. She says that BofA supports the changes recommended by the AG committee and that they are already developing checklists to help homeowners stay clear about where they are in the foreclosure process, initiating “Housing Rescue Fairs” to educate people on how to save their homes and working with charities to help families transition to new housing. According to Desoer, BofA will “double its outreach staff next year.”
Do you think that another foreclosure halt – comprehensive or partial – is the best way to resolve this problem? Do you think banks and lenders, the federal government, consumers or some combination of the three should be in charge of lender-supervision?
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[1] http://money.cnn.com/2010/11/16/real_estate/attorney_general_probe/
[2]http://nationalmortgageprofessional.com/news21931/dodd-demands-answers-servicers-modification-flaws
[3]http://www.bizjournals.com/charlotte/blog/bank_notes/2010/11/how-bank-of-americas-barbara-desoer.html
