Bankers Advocate Opposition of Mortgage Servicing Amendment

The American Bankers Association has sent a letter to key lawmakers in the Senate, urging them to reject foreclosure legislation proposed by Sens. Jeff Merkley (D-Oregon) and Olympia Snowe (R-Maine).

Their bill, tagged the Regulation of Mortgage Servicing Act, has been introduced as an amendment to the larger economic development legislation (S. 782) currently making its way through Congress.

It addresses several reforms already included in regulatory consent orders, such as a single point-of-contact for borrowers and ending dual-tracking. It also requires an independent, third-party case review prior to foreclosure. This last point is a major sticking point for the bankers group.

In offering up the amendment, Merkley said, “This economic development bill is designed to help get people back to work, but we won’t get the economy moving again until we deal with the foreclosure crisis.”

He added, “Since foreclosures bring down the prices of surrounding homes, everyone loses when a family is not given a fair chance to refinance. This mortgage servicing amendment will help to keep families in their homes,

Read on.

From S. 967 bill:

For starters:

(5) INDEPENDENT REVIEWER- The term `independent reviewer'--

(A) means an entity that has the expertise and capacity to determine whether a borrower is eligible to participate in a loan modification program; and

(B) includes--

(i) an entity that is not a servicer; and

(ii) a division within a servicer that is independent of, and not under the same immediate supervision as, any division that makes determinations with respect to applications for loan modifications or alternatives to foreclosure.

RETROACTIVE

(b) Suspension of Covered Foreclosure Actions-

(1) IN GENERAL- A servicer shall suspend a covered foreclosure action that was initiated before the date of enactment of this Act until the servicer--

(A) completes a full review of the file of the borrower to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure;

(B) notifies the borrower of the determination under subparagraph (A); and

(C) offers the borrower a loan modification or an alternative to foreclosure, if the borrower is eligible for a loan modification or an alternative to foreclosure.

(2) SUSPENSION- During the period of the suspension under paragraph (1), a servicer may not--

(A) send a notice of foreclosure to a borrower;

(B) conduct or schedule a sale of the real property securing the mortgage of the borrower; or

(C) cause final judgment to be entered against the borrower.