State and federal regulators are considering whether or not to impose additional restrictions on the mortgage practices of five of the nation’s largest banks. State attorneys and the U.S. Department of Housing and Urban Development have already discussed with two big banks about further restrictions, and these discussions are the result of “complaints related to provisions in last year’s multi-state mortgage robo-signing settlement between dozens of government agencies and Bank of America, J.P. Morgan Chase, Wells Fargo, and Citigroup and Ally Financial”. This settlement has delivered tens of billions of dollars in mortgage aid, and while the companies have made strides in reforming servicing practices, much more improvement is still needed. The fact is, the relief is having no effect on keeping most distressed homeowners in their homes.

Officials claim that they are considering a change in the current policy — they want banks to “halt foreclosure proceedings when borrowers first apply for loan modifications and provide basic information”. With this halt, officials hope to speed decisions on loan modifications and limit the amount of fees imposed on distressed borrowers. While it is important for borrowers to get an answer on their loan, and whether the answer is “yes or no”, the borrower should feel relieved to escape the months-long limbo that often accompanies the request for a loan modification. One official has even said that “delays in processing mortgage modification requests are the number one problem in the servicing today”.

In the new policy, Joseph Smith, the head of the Office of Mortgage Settlement Oversight and his team hope to implement up to four new tests that would grade the banks’ compliance. Two of these tests would “test the effectiveness of banks’ implementation of a requirement to provide a ‘single point of contact’ for distressed borrowers looking to avert foreclosure” (Huffington Post, 1). The third test involves modification requests and the fourth grades how well the banks upgrade borrowers’ account information. It is a tall order, in our view, to get the big banks to get anything done quickly.

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