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A new bill before Congress is aimed at keeping homeowners in their homes longer and focuses on helping banks with their at-risk mortgages — thus strengthening the economy for future growth.
Democratic U.S. Sen. Sherrod Brown recently introduced the Foreclosure Fraud and Homeowner Abuse Prevention Act in an attempt to keep people from losing their homes and to help stabilize the housing market in an effort to right the sputtering U.S. economy.
“We know one of the best ways to get our economy on track is to address the housing crisis,” Brown said Wednesday in a media teleconference. “To rebuild our economy, it is about manufacturing and about housing — manufacturing has been faring much better after 10 years of job losses, we have seen two years of manufacturing job gains every month.
“Housing is still another story,” the first-term senator said. “Too many homeowners cannot afford their mortgage costs, are behind in their payments or owe more than their house is worth.”
While the housing crisis in Ohio was caused less by speculation and more by job losses, housing problems have been exacerbated by banks and mortgage servicers ignoring their customers’ calls for assistance and seeking foreclosures over modification of the home loans.
The director of the Coalition on Homelessness and Housing in Ohio (COOHIO), who has been dealing with the foreclosure crisis for many years and after 15 years of record levels of foreclosures, said he finally saw a decline in the number of foreclosures in the past year.
COOHIO Director Bill Faith said the decline may have been short-lived because the biggest mortgage servicers were being sued at the federal level, but he has noticed an increase in the past several months since the case has been settled.
Faith said he believes Brown’s bill is worth backing.
“This bill is important to us because servicers are simply not regulated,” Faith said. “People would think with names like Wells, Bank of America, Chase, Citi, that these companies would be regulated, but the servicing arms of these companies are not sufficiently regulated. There are only a few states with laws and regulations in place to control some of the abuses that Brown talks about and Ohio is not one of those states.
“It is very important that there be some types of controls on servicers,” he said. “It is not just to protect the homeowners, which is our primary concern, but servicers only work in the best interest of servicers. They get paid to collect payments and to foreclose on the homeowner and that is not always in the best interest of the investors. I think Senator Brown’s bill tries to strike a balance, to be true to those that will lose — which includes both investors and homeowners.”
Brown compared the current practices used by banks to the unethical predatory practices that led to the sub-prime crisis in the past decade.
Some of the current practices include servicers proceeding to foreclosure without considering modification of the loan. Servicers also have been known to file for, or continue, foreclosures against homeowners participating in the modification process.
Two other practices resulting in problems are inadequate staffing and resources and lost and missing paperwork.
“Big banks tell us that their mistakes are isolated and are harmless, but these problems are not new,” Brown said. “They are well documented and part of a long-standing, ugly pattern of homeowner abuse and that is why I introduced the Foreclosure Fraud and Homeowner Abuse Prevention Act which would address some of the most common problems with the servicing industry.”
Some of the fixes were included in a previous bill which passed, but this bill would make those requirements permanent.
The bill requires servicers to participate in sustainable loan modifications when it is in the investors’ best interest and the homeowner’s best interest and not the servicers’ procedural step to seek a foreclosure.
The bill bars “dual track” while a homeowner is participating in a modification process. Servicers are permitted to proceed with foreclosures only after working with borrowers on a modification.
The bill also requires more appropriate levels of staffing and additional training. It also requires a single electronic record for each borrower, the designation of a single contact for each stage of the mortgage process from loan servicing to loan modification and bankruptcy.
“Servicers claim that homeowners don’t meet their legal obligation so they don’t deserve to stay in their homes, they claim homeowners lack personal responsibility,” Brown said, “we think there is some institutional responsibility that should be in play here to hold them to the same standards they hold homeowners.”