(Reuters) - The state attorneys general have presented the five biggest U.S. mortgage servicers with a proposal to settle allegations of widespread wrongdoing in handling millions of foreclosures.
Here are highlights of the proposal:
THE SERVICERS
The proposal is for a settlement between state and federal regulators with the five largest U.S. mortgage loan servicers, Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup, and GMAC/Ally Financial Inc.
MORE LOAN MODIFICATIONS
It calls for a big increase in loan modifications based on "reduction in principal," which means reducing the basic amount owed. Consumer groups and the state AGs strongly favor this, as the best way of enabling homeowners to keep their homes. But banks adamantly oppose it, saying it could be too costly and would invite abuse by homeowners who might deliberately go into default to force a modification.
PROHIBITS FORECLOSURES WHILE MODIFICATION TALKS UNDERWAY
Large numbers of homeowners have complained that banks had accepted applications for loan modifications and instructed them to continue making reduced payments pending final approval of the modification -- and then discovered that the bank without warning had filed to foreclose. The proposal forbids foreclosure actions while modification applications are pending.
SINGLE POINT OF CONTACT
Homeowners now complain that they get a run-around, are directed to different bank employees each time they phone for information, and get conflicting answers. The proposal would require banks to provide homeowner with a direct phone number and e-mail address for employees specifically responsible for dealing with that homeowner's account.
STANDARDS OF CONDUCT FOR LOAN SERVICERS
The proposal contains numerous proposed rules meant to eliminate alleged improper practices by servicers, including "robo-signing" (the mass signing of sworn affidavits by low-level employees who had no knowledge of the facts to which the documents attested), using false documents such as fraudulent mortgage assignments, and false notarizations. Many of the acts that would be prohibited by the proposal, however, already are illegal.
RESTRICTIONS ON FEES
The proposal would limit fees that servicers tack on to the amounts allegedly owed by homeowners in defaults. The proposal would ban false or excessive fees.
(Editing by Gerald E. McCormick)
www.reuters.com/article/2011/03/11/...bo-idUSTRE72A64K20110311