If you have been following the recent hearings to determine lender punishment in the robo-signing scandal, you know that it has been very controversial (if you have not, click here for a good explanation of the issues: http://tinyurl.com/4sqlyo4). Lenders and many government officials are trying to lighten the proposed punishment, arguing that forcing lenders to reduced loans of those unaffected by the robo-signing scandal is not fair punishment. Regardless of the arguments one thing is for sure: future borrowers will come out ahead no matter what the resolution.
Any punishment that is meted out, and they will be, is going to effect all borrower transactions in the future in the following ways:
1. Servicers will be required to provide sufficient staff in their loss mitigation departments to answer all borrower claims relating to loan modifications. Furthermore, they will have to be able to provide proof of ownership of the note on all loans on which they attempt to foreclose. This is a big win-win for borrowers, who will likely see a big difference in loan modification assistance.
2. Servicers will be required to provide the loan modification request customers with a single point of contact–one person who can handle the request. This will eliminate the “he said-she said” conundrum that most borrowers face when trying to get answers about their loan modification application. Now you will know exactly with whom to speak, eliminating headaches, wrong information, missed deadlines and wasted time. This by far is one of the most significant changes to come out of the scandal, and will help not only borrowers but many real estate professionals in their efforts to short sale a home–if the modification is not granted the agents will know who to contact to seek short sale approval.
3. No more dual tracking of modifications and foreclosures. This means that if you are in the process of seeking a modification the foreclosure possibility will be put on the back burner until the modification is denied, if that is the case. The lender will not be allowed to advise non-default borrower to default, and will be prohibited from discouraging borrowers from seeking assistance from counseling organizations.
4. No more insurance profits: servicers will not be allowed to receive kickbacks from insurance providers affiliated with them, nor to force the borrower to take high-premium policies from the same.
All in all, no matter the final outcome of these negotiations, it is clear that borrowers will be much more protected than they have in the past as a result. It is painful out there for many homeowners but this is a big step in the recovery process, and it is one that focuses exclusively on borrower rights. Check back here to keep informed.