Federal Government Considering Additional Protection for Troubled Homeowners

The Obama administration has continually made great efforts to assist troubled homeowners during the most-recent economic downturn that particularly affected the housing market. While constantly reevaluating their efforts, the federal government is again mulling another change to the mortgage relief program that will ensure homeowners are dealt with fairly and equitably.

The Associated Press obtained a draft of the new policy from the Treasury Department. A summary of the draft outlined a number of ongoing criticisms by housing counselors concerning the treatment of homeowners who were already in the process of being considered for help. Housing counselors have pointed out numerous instances in which some lenders have actually continued with the foreclosure process with the knowledge that the homeowners were already in the midst of being evaluated for mortgage assistance. The new policy specifically targets and bans this action by lenders. Although the document obtained by the Associated Press “has not been approved and there are no immediate planned announcements on the issue,” Meg Reilly of the Treasury Department’s Public Affairs office did confirm its authenticity.

Contained within the new policy will be strict enforcement of mortgage lenders halting the foreclosure process once a borrower is enrolled in the mortgage relief program. If a homeowner is eliminated from consideration from the mortgage relief program, they will be given a 30-day period in which they can appeal the decision. During the appeal process, mortgage lenders would not be allowed to resume legal action. However, they would be permitted to arrange a foreclosure sale, but would not be permitted to carry it out until the appeal process is complete.

In addition, mortgage lenders would be obligated to review applications from borrowers who are in bankruptcy. Previously, lenders were not required to do so as it was optional for such borrowers. Under the $75 billion Home Affordable Modification Program, borrowers whose mortgage loans were owned by either Fannie Mae or Freddie Mac had an opportunity to take advantage of the historically low current mortgage rates. Unfortunately, there are still nearly one million homeowners who are either not eligible for the program or simply did not complete the process of enrolling. Of the approximately one million homeowners who are eligible, only approximately 116,000 have been able to benefit from the program.

–Robert Hyder