Know Your Rights: No More "Dual Tracking"

What is "dual tracking?"

Dual tracking is an ugly, insidious (and therefore unsurprisingly commonplace) practice where Big Bank X (insert name here) is actively negotiating a loan modification with a homeowner while pursuing a foreclosure against that same homeowner...at the same time.  The glaring inequity to this practice has long been a topic of vociferous objection among foreclosure defense attorneys and consumer rights advocates. Thankfully, corrective legislative protections are on the horizon.

Created by the Dodd-Frank Wall Street Reform and Consumer Protect Act of 2010, the Consumer Financial Protection Bureau (or CFPB for short) will have broad--some say unparalleled--regulatory authority to create rules and enforce consumer protection laws that restrict unfair, deceptive or abusive acts and practices (commonly known as UDAAPs). One UDAAP that the CFPB is seeking to forever eliminate is the practice of dual tracking. Consequently, beginning in January of 2014, new CFPB rules will:

• Require a lender or servicer to establish "live contact" with a delinquent borrower within 5 weeks of delinquency and inform the borrower in writing about available loan modification and other loss mitigation options by the 45th day following delinquency.
• Prevent a lender or servicer from filing for foreclosure unless the borrower is more than 4 months delinquent.  
• Prevent a lender or servicer from beginning a foreclosure once a delinquent homeowner submits a loan modification until after a written denial is sent to the homeowner and a 14-day appeal period has run or an appeal has been denied.  The new rules also require the lender or loan servicer “exercise reasonable diligence in obtaining documents and information to complete a loss mitigation" and for the lender/servicer to give the specific reasons for a denial in the denial notice.
• Allow the homeowner to submit an application for a loan modification or other loss mitigation option at any time after the foreclosure process has commenced up to the 37th day before a scheduled foreclosure sale. Once the application is submitted, the servicer may not go through with a foreclosure sale until: (1) the servicer has notified the homeowner that he, she or they are not eligible for loss mitigation (and any appeal or appeal time has been exhausted); (2) the homeowner has rejected all proposals or offers of loss mitigation; or (3) the homeowner has violated or failed to comply with terms of a loss mitigation option such as making required payments under a trial modification plan.

In sum, these new CFPB rules are designed to ensure that lenders and servicers negotiate in good faith and in a timely manner before commencing a foreclosure action. Will these rules stop foreclosures? No. Will these rules have a positive impact on the number of foreclosures? One would hope so.

If nothing else, these new CFPB rules are certainly a step in the right direction.

For more information, please visit the CFPB website at consumerfinance.gov or visit our dedicated foreclosure defense website at garlandgriffiths.com.
 

Know Your Rights: Oregon's New Foreclosure Mediation Program Goes Live

The new Oregon Foreclosure Avoidance Program (OFAP) officially launched on August 5, 2013. The OFAP is the creation of Senate Bill 558, which overhauled the existing Foreclosure Avoidance Mediation Program (FAMP) in effect since July of 2012. Prior to the enactment of Senate Bill 558, mediation was not required if a lender filed a judicial foreclosure, a gaping loophole that effectively rendered the program meaningless. Why? Because lenders simply stopped using nonjudicial foreclosures (the most common and preferred method of foreclosing on property in Oregon for the past 50+ years) and simply resorted to judicial foreclosures instead.  As a result, less than two dozen mediations convened in the past year; hardly the intent that the Oregon legislature intended. Senate Bill 558 changes all this by eliminating the judicial foreclosure loophole and greatly streamlining the mediation process.

Under the new mediation program, before a lender can foreclose on a home – whether through a judicial (circuit court action) or nonjudicial (trustee sale) process – it must first offer a face-to-face meeting (resolution conference) with the homeowner in an attempt to avoid foreclosure when the instrument securing the loan is a residential trust deed. Homeowners at risk of foreclosure may also request a meeting. Homeowners are at risk when they are more than 30 days in default on their loan payment or when a government-approved housing counselor believes the homeowners have a qualifying financial hardship.

This new program will give most homeowners an opportunity to meet face-to-face with an agent of the lender who will have complete authority to negotiate and commit to a foreclosure avoidance measure. (Lenders who filed less than 175 foreclosures in the past year are exempt from the program). To initiate the process, homeowners must first meet with an approved housing counselor. Housing counselors will not only help homeowners initiate the process, they will also help homeowners evaluate their options and put together the best possible proposal for a foreclosure avoidance measure. There is no charge to the homeowner for working with an approved housing counselor. The homeowners must then pay a $175.00 fee (a fee reduction waiver is available for households making 200% or less of the federal poverty level), submit the documents required by the lender and personally attend the resolution conference.

The resolution conference will be an informal meeting conducted by a mediator, who is a neutral person trained in basic foreclosure issues. The homeowner can bring an attorney, a housing counselor, or both to the meeting. The lender must send an agent in person. If that person does not have complete authority, the lender must have a person with authority available by telephone. If the parties reach an agreement, the agreement will be reduced to writing and signed by both parties before the conference concludes.

For more information about the new mediation program, visit the official program website at www.foreclosuremediationor.org or our dedicated foreclosure defense website at garlandgriffiths.com.

For a list of approved housing counselors, visit www.oregonhomeownersupport.gov

Dealing with Foreclosure in Oregon, Part I

Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997

If you are facing foreclosure of a home or a second residence, you are not alone. Record numbers of people just like you are struggling in this economy with unemployment and declining property values. When you can’t make your house payments, most homeowners will receive a Notice of Default and Election to Sell their home from their lender or servicing agent. When you get this notice, you are officially “in foreclosure” which is a legal process governed by Oregon statutes. When you get this notice, or even before you receive it, you need to know what your rights, obligations, and duties are under the law, and how your can best cope with the situation.

I have found that there are 8 important questions relating to the foreclosure process that Oregonians need to know and understand. Knowing the questions and the answers to them could be the difference between losing your home or saving it, and potentially thousands of dollars in expenses or opportunity costs. Here are the 8 questions in brief.

#1. How does a home loan modification work?
Home loan modification is an agreement between you and you lender whereby your lender agrees to modify some or all of the terms of your loan. Most successful home loan modification agreements involve a reduction in the interest rate or repayment term of the loan. There is currently a confusing mix of private and government programs available to the public. Most of the government programs are new, so few people have any real experience dealing with them. There are both paid and “free” services being marketed to homeowners but very little certainty about what you are getting for the money you might be paying.

Currently I am noting relatively few homeowners having success with home loan modifications. While there are government provided incentives to lenders if they modify certain loans, there are several requirements you must meet in order to be eligible for a modification, and then only if your lender consents to the modification. The important thing to realize is that there are currently no laws that force a lender to modify your home loan. After reviewing a homeowner’s financial situation and the terms of their loan, I can usually make an educated guess as to whether a home loan modification offer will be offered by your bank.

For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you are local to Beaverton, Hillsboro, or Portland Oregon, you can get my telephone number and call in your questions or comments, or just post a comment to this blog.