HUD secretary focus on ending banks' dual track system and early foreclosure process

Shaun Donovan, secretary of Housing and Urban Development spoke with Darren Gersh of Nightly Business Report about the talks of the state Attorney Generals with the banks.

NBR:

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Those talks are taking place, the settlement talks are taking place just a few blocks from here. So first of all, just what do you expect from those talks today?


DONOVAN: Well, we`re - what I expect is that we`re going to be working closely with the state attorneys general to hold these servicers accountable. There is no question that there were serious mistakes made. We`ve seen that our efforts to keep people out of foreclosure have helped hundreds of thousands of families, but not as many as we would have liked and a lot of that is a result of poor servicing practices.

GERSH: One thing that`s at issue in these talks apparently is that when you go in and you say hey, I want to modify my mortgage, the lender says OK, we`ll work with you but we`re going to keep the clock ticking on the foreclosure. It`s called dual track. So if you don`t get a modification, your foreclosure is pretty close. Will the talks end this dual track system so if you go in the talks about a modification and it doesn`t work out, then the foreclosure clock --

DONOVAN: That is absolutely one of the issues that we`re focused on, not the only issue. We`ve seen many other practices, frankly, that are outrageous. And --

GERSH: Like what?

DONOVAN: We`ve seen not only examples of foreclosures happening without a signature, without the right documents, but what I`m particularly focused on is early on in the process when somebody gets behind by 30 or 60 days, but it`s somebody who may have lost a job temporarily, may have lost income, that`s somebody who can continue to be a successful homeowner. And yet not only did that person not get help, they think they`re going to get help, they submit paperwork, that paperwork is lost. Those kinds of steps hurt everyone. So we have to fix that process.

GERSH: In the talks, one of the issues is how you handle second loans, not the first mortgage, but a second mortgage, home equity loan. How will the talks address that?

DONOVAN: Well, we`re clearly looking at the ability to reduce some of those mortgages. Part of the problem with the second liens is that they stand in the way of being able to resolve the first mortgage as well. And we think that if we can reduce some of those, allow people to stay in their homes, allow resolution of their first mortgages, that will help significantly.