- Encourage homeowners to utilize the skills of housing counselors;
- Create a framework for homeowners and lenders to communication with each other;
- Provide a process for mediation when recommended.
The 3 main parts of the new legislation are:
- Opportunity for borrower to request a "face to face" meeting with lender;
- Opportunity for mediation with a neutral third party;
- $250 filing fee for Lender's Notice of Default.
One important change for the homeowner is that if the homeowner responds to the initial contact by the lender within 30 days, the bill provides the homeowner an additional 60 days to attempt a work out solution with the lender, before a Notice of Default can be filed. During this period the homeowner can request a "face to face meeting" with the lender and at this "meeting", a representative of the lender must be in person. TIP: I would definitely be recording this conversation!
It is important to note that the borrower must contact an approved housing counselor or attorney to protect their right to mediation, as mediation can only be requested by an approved housing counselor or attorney.
"The subsequent meeting scheduled to assess the borrower's financial ability to repay the debt and discuss options to avoid foreclosure must be in person, unless the requirement to meet in person is waived in writing by the borrower or the borrower's representative"
This must be done before issuance of a Notice of Trustee Sale. Once a referral to mediation has been made, a mediation session must occur within 45 days, or can be extended by agreement of all parties. This mediation could be a very powerful and effective tool for homeowners who are having difficulty with loan modification efforts with their lender. WHY? Because at this mediation session the lender must "lay all their cards on the table". Information that may have been withheld from the borrower will be disclosed including:
"A Net Present Value (NPV) of receiving payments pursuant to a modified mortgage loan as compared to the anticipated net recovery following foreclosure."
Sound confusing? You bet. This is a formulated spreadsheet that the lender uses with undisclosed numbers to determine if they will come out ahead better through modification or foreclosure! Also, the lender will not disclose this information to you if you are attempting to modify your loan yourself. Additional documentation must also be provided, such as:
- An accurate statement containing the balance of the loan;
- Copies of the Note and Deed of Trust;
- Proof the Lender is the owner of the Note;
- An itemized statement of arrearages;
- An itemized list of fees and charges;
- Payment history for last 12 month or since default, whichever is longer;
- All borrower-related and mortgage-related input data used in any net present value analysis;
- An explanation regarding any denial for a loan modification or alternative;
- The most recently available appraisal or broker price opinion;
- The excerpt of the pooling and servicing agreement AND documentation or a statement detailing the efforts of the beneficiary to obtain a waiver of the pooling and servicing agreement.
This item requires the lender to disclose any efforts that have made with the investors to try to get them to negotiate a modification on your mortgage, unless there is already language in the agreement that prohibits modifications.
There are many other condition and time lines contained in the bill and we highly encourage homeowners that are suffering financial hardship to seek professional guidance through these issues.
This new bill will result in the State having to set up programs for homeowners that are not now in place. This will include forms, websites, lists of approved housing counselors, attorneys and mediators for the homeowners to access, along with training for all those involved. There is also a $400 cap on the mediation session up to 3 hours. This charge is split 50/50 between the homeowner and lender and must be paid 7 days before mediation.
TIP: Mediation is only for owner-occupied residential properties. Do not abandon your home and mortgage if you wish to have access to mediated loan modifications.
It may be the best $200.00 a distressed homeowner can spend!
Although this legislation is a step in the right direction, the success of the program will be dependant on getting the word out to consumers. I didn't see anywhere in their program regarding any PR or advertising costs.
Also, as is with all rules, there are exceptions. Lenders who file less than 250 foreclosures per year are not held to the mediation rules. If the consumer is not opening their mail from the mortgage lender because "they know it's just another late notice", they may not see the information included that explains these new rules and their rights to request a "face to face" meetings and mediation possibilities.
Second, I feel that the consumer is in need of a "Home Owner's Bill of Rights".
How is it that someone who makes timely mortgage payments for 10-20 years and suffers a temporary financial hardship or loss of income can lose their home to foreclosure in 120 days? There is something fundamentally wrong with this scenario. We are well versed on foreclosures, short sales and loan modifications. If you or anyone you know need some help or direction, please call us. We are here to help and there is never any charge or Fee. Please use us as a resource to help during these difficult times.
AND never pay anyone for a loan modification - If someone wants to charge you a fee up front - run in the opposite direction because it's a scam.
Disclosure: This bill has not been finalized and is subject to change. Nothing in this article should be construed as legal advice and homeowners are always encouraged to consult with an attorney for legal interpretation of the bill, as there are many other requirements and timelines that must be met that are not covered in this article. The full House Bill 1362 can be read here: HB1362