Will Foreclosure Abuses Ever End?
New York Times
October 23, 2012
The Consumer Financial Protection Bureau's recent proposal to regulate the foreclosure process is a letdown, according to a New York Times editorial. Since the housing bubble burst, there have been millions of wrongful foreclosures that failed to give borrowers an adequate opportunity to modify their loans and save their homes. Earlier this year, a settlement over foreclosure abuses included curbs on conflicts of interest that caused banks to favor foreclosures and safeguards for borrowers’ legal rights in a foreclosure. While the Obama administration established specific tests for banks to use in evaluating borrowers for loan workouts, the CFPB must write permanent new rules for the whole industry. Although consumer advocates expected the agency to work from the reforms in the foreclosure settlement, the CFPB's new proposal largely fails to do so. It does not impose any meaningful standards for loan modifications except those already required by federal programs, and it allows the highly controversial practice of dual tracking. Rather than concrete standards, the proposal largely involves procedural reforms -- like requiring servicers to establish reasonable policies for managing paperwork, answer phone calls from borrowers, and meet deadlines for responding to borrowers in need. The newspaper says the CFPB needs to set requirements that ensure all troubled borrowers are considered for loan modifications according to specific, publicly available criteria. According to the editors, dual tracking should be prohibited; and, in the event of a foreclosure, servicers must verify with borrowers their legal right to foreclose before starting the process.
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