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State Prosecutors Propose Broad List of New Lending Rules as Robo-Signing Settlement

March 7, 2011

Our Redlands foreclosure defense attorneys have written here many times over the past few months about "robo-signing" and its fallout for homeowners, banks and the courts. Robo-signing is the name given to the practice, uncovered last fall, of banks pushing foreclosures through very quickly by failing to do the required vetting of paperwork before signing it and submitting it to the court. In response, a group of attorneys general in all 50 states began investigating the practice to determine what penalties or compensation for homeowners might be appropriate. As the Wall Street Journal reported March 4, that group has proposed a long list of rules that would change the way lenders service mortgages and pursue foreclosures.

The Journal said the attorneys general sent lenders a 27-page document with details about how they would like to see loans serviced in the future. It includes requirements to consider writing down principal more often; deadlines for acknowledging receipt of documents and responding to requests; and freeze all foreclosure action while the loan modification is being considered. Banks would face fines for violating that last rule, a common cause of complaints, and compliance would be monitored by an independent third party. An anonymous banking industry executive said it resembles a "wish list," and the newspaper said it is likely to be a starting point for negotiations. The proposal is separate from a proposal reported earlier that would use $20 billion in penalties to write down principal for struggling homeowners.

As Dana Point foreclosure defense lawyers, we're delighted by this proposal, even though we're sure it won't survive intact to any final settlement. In particular, we are pleased to see the attorneys general putting "teeth" in their rules by ensuring that there are penalties for noncompliance and an independent monitor to watch the lenders' behavior. This has been a major problem for the Home Affordable Modification Program, or HAMP, which has no enforcement provisions and no oversight of lenders' decisions. We believe this toothlessness has led directly to HAMP's failure to help more than a quarter of applicants. Lenders may feel that the proposal is overly detailed, but their record with HAMP and robo-signing shows that they can't be trusted to treat borrowers fairly on their own.

If you believe you're a victim of this kind of lender indifference, you should call Howard Law PC as soon as possible for a free consultation. We have represented clients seeking loan modifications since the beginning of the housing crisis, so we have extensive experience dealing with the kinds of tricks and corner-cutting lenders use. Currently, many of our clients come to us after being denied a loan modification for no apparent reason or no good reason, including denials of a permanent modification after a trial modification took place with no serious problems. Our Murrieta loan modification attorneys treat this as a type of predatory lending, and we absolutely will sue when necessary to keep our clients' homes out of foreclosure and get them the fair consideration they deserve.

Howard Law offers free, confidential case evaluations, so you risk nothing by speaking to us about your case and your rights. To set up a meeting, send us a message online or call us toll-free at 1-800-872-5925.