States Should Close Gaps in Foreclosure Safeguards


Center for Responsible Lending
April 9, 2013

Two consumer advocacy groups today outlined how state lawmakers can bolster safeguards to prevent unnecessary foreclosures. The recommendations by the Center for Responsible Lending and Consumers Union would close gaps left by new federal mortgage servicing rules and by last year’s settlement among 49 state attorneys general, federal officials and the five biggest mortgage servicers. To read the policy paper, go to http://rspnsb.li/ZwS1xu.

Despite these recent advances, millions of families remain poised to lose their homes.  There is room for states to build on these reforms and help avoid unnecessary foreclosures.  Over the last several years, some of the most significant problems have included the failure to review homeowners for a loan modification and foreclosing on borrowers even as the servicer is considering an application for a modification.  

By adopting a Homeowner Bill of Rights to help reduce as many foreclosures as possible, states would stabilize local housing markets and protect homeowners. The Center for Responsible Lending and Consumers Union urge state lawmakers to:

  • Require lenders to engage in loss mitigation activities to prevent avoidable foreclosures.  
  • Restrict servicers from pursuing foreclosure while at the same time processing a request for a loan modification—so-called “dual tracking.”
  • Require lenders to establish clear procedures for homeowner outreach, straightforward timelines, detailed denial notices that provide full information with affidavits, and reasonable rights of appeal to facilitate the loss mitigation requirement. 
  • Provide homeowners with the right to halt a foreclosure sale when a servicer breaks the law, and until the servicer complies with the law’s loss mitigation requirements.  

For more information, contact Michael McCauley (Consumers Union) at mmccauley@consumer.org or 415-431-6747, ext 126; or Kathleen Day (CRL) at kathleen.day responsiblelending.org or 202-349-1871

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About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.