Homeowners who have been abused or ignored in the process of seeking a Loan Modification, Short Sale or other loss mitigation remedy now have the right to take their loan servicer to court under regulations that took effect on January 10, 2014. Regulations X and Z promulgated by the new Consumer Finance Protection Bureau, created under the Dodd-Frank Act in 2010 establishes standards by which requires lenders to review home owners facing financial difficulty in good faith for modifications of their home loans BEFORE they are allowed to file for foreclosure.
Anyone who has suffered temporary unemployment, or a medical catastrophe or other financial problem and has sought temporary or permanent relief from their home lender can tell you horror stories about being ignored or abused by their loan servicer like being asked for the same documents and forms dozens of times or being forced to deal with a different person every time they call.
The new rules create a private right of action when a lender fails to invite distressed homeowners into the process of being reviewed for a modification of their loan or fails to review documents and forms that are submitted by homeowners in an timely fashion. It also requires that all loan servicers establish a single point of contact for distressed homeowners and creates a right to appeal an unfavorable decision, to a separate team of underwriters when a homeowner is turned down for a loan modification or a short sale.
If the loan servicer fails to approach a loan modification of short sale in good faith, then a homeowner has a right to sue to recover actual damages, statutory penalties and their attorney’s fees.
The rules also require loan servicers, most of whom do not own the loans they service to share information with homeowners and their lawyers about who the actual owner of their loan is, information about how payments are (or are not being applied), copies of inspection reports and appraisals of a property that will give a homeowner and their lawyers much more of the information necessary.
And, if they don’t give a homeowner the information requested, once again the new rules allow that homeowner the right to sue the loan servicer to force them to do so.
This information will allow lawyers for distressed homeowners to negotiate much better solutions.
The rules also prohibit a foreclosure filing until a homeowner is more than 120 days in default and prevents “dual tracking” a practice by which lenders promise to consider a loan modification while moving forward to takes someone’s home by foreclosure at the same time. This will allow much more time before a foreclosure is filed to work out a solution.
What this means for homeowners who are in financial distress or who anticipate that they might be is that they should retain a lawyer as soon as possible in the process.
While the new regulations are extremely consumer friendly, they are also fairly complicated and require that the requests for modification or information being put forward in a highly technical and specific way to make sure that one’s right to sue and seek injunctions are protected.
Because of the new protections a homeowner facing a possible foreclosure should retain a lawyer who understands the new regulations as early as possible in the process.
Dan Solar a colleague from the Dann Law Firm and I attended a seminar this weekend that brought together some of the best minds in the country on these new regulations including Max Gardner, who is the nation’s preeminent expert in defending homeowners facing foreclosure, a lawyer from the Consumer Finance Protection Bureau, a former General Counsel for a Large Loan Servicer, and Jay Patterson who is a recognized expert in abuses in the loan servicing industry.
We have returned enthusiastic about putting these new rules to work to protect homeowners and consumers in Ohio.