There is a new challenge on the horizon for distressed homeowners. Over the past several months the largest loan servicers in the nation have engaged in a massive sell-off of their loan servicing portfolios.
This leads to several potential problems for homeowners:
- There becomes a contestable legal question about whether or not the new servicers of loans sold by the big 5 servicers remain subject to the Attorneys General National Mortgage Settlement. This settlement requires allows an additional review for principal reduction, set limits on duel tracking of loans and standards for how servicers are to respond to homeowners.(I think that there is a strong argument that they are).
- Since most of the new servicers are not National Banks, they are not subject to the Office of Controller of the Currency Settlement terms, as weak and arbitrary as they are.
- Certain homeowners in the midst of a modification review, or even those in trial plans have been forced to start the process all over.
- Many of the acquiring servicers use off-shore employees and employees who are even less well trained than the employees of the big 5 servicers leading to more frustration for homeowners seeking information about or modifications of their loans.
There is a potential silver lining. Lenders are required under TILA an RESPA to notify borrowers of the change of servicing, and of changes in investors in their loans by way of a hello/goodbye letter. Failure to strictly comply with this requirement may open the door to court for a homeowner dissatisfied with the options that a servicer is offering for loss mitigation or loan modifications.