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NC Foreclosure Update: Mortgage Servicers Freeze Foreclosure Efforts during Loss Mitigation Proceedings

Adapted from the Center for Responsible Lending.

Effective June 1, 2010, the NC Commissioner of Banks (NCCOB) now requires that a mortgage servicer stops foreclosure efforts while the homeowner’s request for assistance is under consideration (Rule 703)*. With over 700 active mortgage default and delinquency cases at OnTrack WNC, the new regulations greatly increase housing counselors' ability to effectively serve clients and save homes from foreclosure.

Typically, mortgage servicers have continued with the foreclosure process even if they have a modification application in process.  This adds significant costs and confusion for the homeowner trying to negotiate a work-out plan.  Given the huge number of homeowners requesting assistance, some servicers have fallen behind on providing timely help.  As a result, homeowners have even lost their home to foreclosure when they were eligible for foreclosure prevention programs.

"During the mortgage crisis we have found that the process of obtaining a mortgage modification can take several months. This time delay can be agonizing and stressful for clients.  They are uncertain about whether they will qualify; they are afraid they might lose their homes  --  a fear that is compounded by the flood of foreclosure letters they continue to receive foreclosure letters from their servicer even while they wait on an approval for their modification," commented Celeste Collins, OnTrack WNC Executive Director.

Collins continued, "For consumers whose servicers fall under these new rules* this will not only address the efficiency of the process, but provide great relief to the already distressed homeowner."

The new rules also require that a mortgage servicer respond promptly and clearly to a homeowner’s request for assistance.  Again, mortgage servicers have struggled to respond quickly to borrowers, and to provide concise and clear information about whether they qualify for foreclosure prevention assistance.  Too many homeowners frustrated by the process – sending documents over and over, calling repeatedly with no response – have lost their home unnecessarily. Rule 703 provides a timeline for communicating with homeowners and also makes it clear exactly what information must be provided.

If you or someone you know is late on their mortgage payment or in danger of becoming late on their mortgage payment, call OnTrack WNC at 828-255-5166 for free assistance through the OnTrack WNC Foreclosure Prevention Program.

*These final rules apply to non-bank mortgage servicers regulated by the NCCOB.  The rules do not apply to banks or savings and loans, and the NCCOB also doesn’t regulate federally chartered banks like Bank of America & Wells Fargo.  See Final Rules.

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