Servicers Continue to Wrongfully Initiate Foreclosures: All Types of Loans Affected

Yesterday, NACA, along with the National Consumer Law Center (NCLC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) released results of a nationwide survey that reveals mortgage servicers continue to initiate foreclosure proceedings improperly, either while a homeowner is awaiting a loan modification or due to improper fees or payment processing.   We surveyed 260 consumer attorneys in 45 states who reported that thousands of homeowners were improperly foreclosed on within the last year. 

The survey results clearly demonstrate that strong national mortgage servicing standards are urgently needed to prevent these improper and unlawful foreclosures from continuing.   And an important element to any national servicing standards is stopping the two-track system in which banks proceed with foreclosures while evaluating borrowers for a loan modification (otherwise known as dual track). The recent state Attorneys General mortgage settlement (while it still has not been filed) is expected to establish mortgage servicing standards, including requiring a loan modification application review prior to initiation of any foreclosure as well as setting limitations on abusive fees and charges, such as late fees and forceplaced insurance.  This is a start.  However there still remains a need for national servicing standards by the federal government with a complete coverage of the market.  We hope the Consumer Financial Protection Bureau will act quickly to build on the standards of the state Attorneys General settlement to provide relief to all struggling homeowners.