State regulators ruled yesterday that once a homeowner asks for a loan modification, any foreclosure actions must be halted. Now, lenders pursue foreclosures at the same time they’re working with homeowners to make their loan payments more manageable. That puts homeowners up against the clock.
“We believe that the mortgage industry has failed to prevent as many foreclosures as they could have, and that there are some significant flaws in the system,” said Mark Pearce, deputy commissioner of banks. “We think the new rules that we adopted … will help homeowners have a better chance of avoiding foreclosure when they have the ability to stay in the home.”
The second new regulation requires mortgage servicers to respond clearly and promptly when homeowners ask for mortgage assistance. A breakdown in communication can lead to foreclosure.
The regulations take effect June 1. They apply to mortgage brokers and other lenders that account for about three-quarters of the mortgages in the state.
The rules do not apply to banks or savings and loans.