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Mike hopes to see the world turned upside down through local communities banding together for social change, especially churches which have recognized the radical calling to be good news to the poor, to set free the prisoners and oppressed, and to become the social embodiment of the reign of God on earth as it is in heaven. He lives with the blessed memory of his wife, in Durham, NC, and has three adult children living in three different states. He also shares his life with the Mt. Level Missionary Baptist Church in Durham, the faculty and students of Shaw University Divinity School in Raleigh, NC, and the faithful fans of Duke and Baylor Basketball in his neighborhood.

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Sunday, February 20, 2011

Foreclosure Fraud 3: Clear and Unequivocal Communication

When a bank working on a possible mortgage modification tells a borrower to stop making payments in order to allow the modification to proceed, usually in another office of the bank a red flag flies up to say that the foreclosure clock must start ticking.  One mouth says stop making payments and become delinquent in order to get paperwork moving.  Another says don't stop payments unless you want another set of paperwork to start moving.  Case after case in the past year has found homeowners receiving notification of a modification offer almost simultaneously with notification of a foreclosure sale.  By now you are all thinking about an old saying having to do with a left hand and a right hand.

This kind of carelessness and lack of concern for customers has characterized the current foreclosure crisis.  Admittedly, banks do not traditionally have enough staff to handle the current volume of potential loan modifications or the current volume of potential foreclosures.  In trying to ramp up while also keeping staffing numbers down, the result has been libraries of lost paperwork, constant restarting of the process, and a different answer from the servicer every time a homeowner makes contact.  Getting the banks to clean this up would seem to be in their interest, but when banks are as large as Wells Fargo and Bank of America, there is also a kind of internal struggle over which departments get to do what they should and which ones just do what they can.  We think that it is more than reasonable for homeowners to expect better.  What follows is a second part of what we are asking the Attorneys General to do.


Problem: Servicers proceed with the foreclosure process at the same time as they are conducting a loss mitigation process. This leads to borrower confusion and further complicates the process and the communication between borrower and servicer. It also leads to unjust foreclosures before due diligence is completed in the loan modification process.

Solution:

Mandatory and Standard Loan Modification Review
Foreclosures should not be initiated until the servicer does a complete review of a borrower's file. If the borrower is already in foreclosure when he or she requests a review, the foreclosure process (and not just the final sale) must be suspended until the review is completed.
a. This review must include the complete payment history; the contact log; and any other relevant information to determine whether the borrower is actually in arrears.
b. This review must include a determination that all loss mitigation requirements (as set out by HAMP, investors, FHA, GSE's, etc.) have been met, and the servicer must disclose to the customer all inputs and calculations done to establish qualification for a loan modification (see NPV transparency above).
c. Servicers must develop a protocol for evaluating Pooling and Servicing Agreements for investor restrictions and must seek a waiver if necessary.

Written Confirmation of Review to Borrower
If a borrower is not offered a loan modification, the servicer must provide a sworn affidavit to the borrower, disclosing the reasons for denial, including
a. any calculations done to determine loan modification eligibility; and
b. if the denial is due to investor-imposed restrictions, the specific language in the PSA prohibiting the modification, instructions on how the borrower can view the full PSA, and a written log of the servicer's efforts to obtain a waiver of this restriction.

Borrower Appeals Process
The denial letter must provide the borrower with an opportunity to appeal this determination to a neutral party. Foreclosure can only be resumed after written denial has been provided and time for an appeal has passed. If an appeal is pending, no foreclosure can be resumed.

No Legal Foreclosure Without Proof of Due Diligence
Servicers should be required to file a certification of loan modification procedures as a precondition to a foreclosure sale. In the case of a non-judicial foreclosure, the government official responsible for recording deeds and other transfers of property in the jurisdiction in which the property is located shall not permit the recordation of a deed transferring title after a foreclosure without certifying that the party conducting the sale has demonstrated that the requirements of this section have been met. A sale of property in violation of this subsection is void.

Consistent Communication with Consistent Staff
Upon contacting the servicer, the borrower must be assigned a case manager that will remain with that borrower throughout their loss mitigation experience. This case manager will have decision-making authority and access to the highest levels of management in the company. It is permissible for additional line staff to assist the case manager, as long as the case manager is always accessible to the borrower.  If a servicer is temporarily incapable of providing this adequate staffing level, the servicer must refer to a licensed special servicer until adequate staffing levels are reached.


The next post will deal with the imbalance of power that leads banks to multiply additional fees and get by with ignoring the law.

2 comments:

pinkeyb.graham@shawbears.edu said...

Sunday, February 20, 2011
Foreclosure Fraud 3: Clear and Unequivocal Communication

The above article is found to be very informative and helpful in recognizing defective elements within the foreclosure process such as mortgage loan modifications and foreclosures running hand-in-hand. In other words, these processes are on the Bank’s relay team; as soon as the paper work begins with the loan modification, the baton is passed to the foreclosure runner. As a result, contradictory statements and/or instructions are given to customers who find themselves in the dilemma of losing their homes. According to the above article, it appears that various departments within the banking system are not on one accord and the customer suffers the consequences. The lack of communication as well as insufficient staff is found to be significant culprits that have triggered the foreclosure crisis. I appreciate the author’s insight related to the rise of homeowners’ foreclosures and his recommendations to clean up the internal banking problems. Such valuable information is helpful to pastors in assisting their local communities and congregants on the pitfalls that could cost them their homes.

pinkeyb.graham@shawbears.com said...

Saturday, May 14, 2011
Witness at Bank of America Shareholders Meeting

The article, “Witness at Bank of America Shareholders Meeting” highlighted some of the main leaders working towards a just resolution in the foreclosure economic crisis. Focusing on “robosigning” it points to an illegal practice within the process and shares with Bank of America its concerns. The more I read, the more I am convinced to began to preach more on financial issues and to bring in more informed individuals to speak with the local congregation. It definitely appears that the various task groups have taken on a complex and difficult task; specifically, knocking on the doors of the political arena and challenging the financial system. I truly appreciated the quote used from Marian Wright Edelman indicating that although we are small in the world’s view, if we pull together a change can be made. Such articles should be circulated to all of the churches around to get more people involved in such a significant and important task.

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