New government help for struggling homeowners facing foreclosure.

NEW Foreclosure Protections for Homeowners (to become effective in 1/2014): The Consumer Financial Protection Bureau  has issued new rules to protect homeowners who are having difficulty in making their mortgage payments.  The goal is to prevent homeowners from being surprised by costs or hurt by the operations of their mortgage servicers. 

I. Restriction on Dual Tracking-where the mortgage servicer is working with the borrower to restructure their obligations while at the same time commencing a foreclosure proceeding. Servicers will not be able to begin a foreclosure proceeding if an application is pending for a loan modification or other workout solution.  They will also not be able to proceed with a sale if the borrower has entered into a loan modification agreement and is performing under the agreement

II.. Monthly Mortgage Billing Statement to Notify of Default: Once a borrower misses two consecutive monthly mortgage payments, the servicer must include the information about the default in the next monthly mortgage billing statement: (a) date of default, (b) amount required to bring default current and (c) the risks to borrower for failure to do so (e.g. foreclosure)

III. Notifications to Borrowers of Loss Mitigation Options  Must be sent to any borrower who misses two consecutive payments within 15 days of the second missed mortgage This “Loss Mitigation Notice must include (i) information about housing counselors and (ii) detail options available to borrowers

IV. Continuity of Contact:  A major issue for borrowers in trying to work out a solution to their mortgage problems was the lack of access to a particular person or group within a servicer with whom they could speak. The CFPB has now mandated that for any borrower who is two or more month’s delinquent, that policies need to be put into place by the servicer to provide these borrowers with easy, ongoing support.

V. Modification Application Process: Servicers will be only allowed to have the borrower submit one application for all available loan modification programs. The single application will require the servicer to list all available options for modifications and the borrower will need to be considered for all options at once

VI. Alternatives to Foreclosure To Be Explored First:  Before commencing a foreclosure sale, a servicer must evaluate a borrower’s application for a loan modification first so long as it was submitted at least 37 days before the foreclosure sale was scheduled.  Before continuing with the foreclosure sale, one of the following must have occurred: (i) the servicer informed a borrower that they are not eligible for a loan modification (ii). the borrower rejected all loan modification options offered to them or (iii). the borrower failed to comply with the terms of the loan modification agreement

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