Tuesday, March 8, 2011

FYI: AGs' Servicer Reform - The 27 Pages of Proposed Settlement Terms

As widely reported in the media, attached is a copy of the proposed 27-page settlement term sheet, provided to the five largest mortgage servicers by a national coalition of state Attorneys General and reportedly also by federal banking regulators.

The proposed terms touch on a variety of areas, including:

-  Foreclosure and Bankruptcy Information and Documentation, including:  (a) standards for affidavits and sworn statements in foreclosures and bankruptcies;  (b) verification of borrower account information;  (c) documentation of rights to note and chain of title; and  (d) quality assurance systems and audits;

-  Loss Mitigation Requirements, including:  (a) a loss mitigation requirement;  (b) prohibition on "dual tracking;"  (c) requirements for a single point of contact and single electronic record;  (d) outreach efforts for loss mitigation;  (e) independent auditing for SCRA compliance;  (f) loss mitigation "portals" for borrowers and housing counselors;  (g) specific loss mitigation timelines;  (h) independent review of loss mitigation denials;  (i) required support and funding for state-based foreclosure prevention hotlines;  (j) application of the FHA Short Refinance Program to non-FHA loans;  (k) staffing and technology requirements;  (l) standardization and disclosure of proprietary loan mod programs;  (m) principal reductions;  (n) second lien loan modifications;  (o) free document delivery services through national retailers;  (p) consideration of final or "back-end" DTI in loan modification applications;  (q) monetary incentives and other provisions for short sales;  (r) transfer of servicing issues; and  (s) other loss mitigation related matters;

- Restrictions on Servicing Fees, including:  (a) requirements that all such fees and bona fide, reasonable, and disclosed in detail to borrowers;  (b) maintenance of a fee schedule for disclosure to borrowers;  (c) limits on attorneys fees;  (d) prohibition on so-called "pyramiding" of late fees and other late fee restrictions;  (e) limits on third-party fees;  (f) and requirements for lender-placed insurance;

-  General Servicer Duties and Prohibitions, including:  (a) a duty of good faith and fair dealing to borrowers;  (b) a duty to ensure that distressed properties and charged-off loan properties do not become blighted; and (c) a duty not to unreasonably delay foreclosures and transfers of title as to abandoned properties;

-  General Prohibitions, including:  (a) prohibitions on deceptive conduct;  (b) prohibitions on funds payment requirements that are more expensive to consumers than certified checks or attorneys checks;  and (c) requirements to communicate with representatives of the borrower who provide written authorization and other reasonable assurances of authorization;

- Monetary Relief, in an unstated amount; and

-  Compliance Review and Monitoring, including:  (a) data reporting to federal and state regulators as to compliance with the settlement;  (b) third-party review by auditor selected by the Ags and the CFPB, and (c) penalties for non-compliance.


Ralph T. Wutscher
Kahrl Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois  60602
Direct:  (312) 551-9320 
Fax:  (312) 284-4751
Mobile:  (312) 493-0874

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com