The Senate Judiciary Committee announced that it will investigate charges of abuses by mortgage servicers.
According to Bright Bankruptcy the committee will examine foreclosure procedures and look into policies regarding filing proofs of claims in bankruptcy courts.
Late last year, state Attorneys General started their own investigations of the foreclosure process and began discussions with representatives of some mortgage servicers.
The draft of a 27-page settlement agreement, created by the state Attorneys General, proposes seven key terms:
- Providing a sworn affidavit as part of the first notice of foreclosure or in bankruptcy proceedings. The affidavit will state the basis of the affiant’s personal knowledge, how the servicer has the right to foreclose, identify the holder, custodian and location of the original note, mortgage and all assignments.
- Maintaining a log that identifies all notarizations executed by each notary.
- Providing training for servicers about how to sign affidavits. Training materials and videotaped copies of training sessions should be made available to state Attorneys General, the new Consumer Financial Protection Bureau or third-party monitors.
- Conducting regular audits.
- Providing loss mitigation options before a foreclosure referral as part of the duties of the servicer. An affidavit must be submitted summarizing all loss mitigation efforts offered and undertaken and results of each effort, including the basis for denying a request for loan modification.
- Not referring the matter to foreclosure until a written denial is sent by registered mail if a Home Affordable Modification Program (HAMP) review or trial modification is in process.
- Providing each borrower with an E-mail address and direct toll-free number for a single point of contact or designated person to discuss loss mitigation options.
The settlement agreement in its current form applies only to the nation’s five largest servicers. However, some mortgage servicers are concerned that the agreement will become an industry standard.
HAMP, a federal voluntary program headed by the Treasury Department, is withholding $24 million in payments due to Bank of America, JPMorgan Chase and Wells Fargo until they fix problems associated with their loan modification practices. Once the issues are resolved, HAMP will make the payments. Bank of America, JPMorgan Chase and Wells Fargo suspended foreclosure sales last year while they reviewed their documents. Foreclosure sales have since resumed.