The way lenders process foreclosed homes and condominiums for sale in the U.S. remains under discussion as attorneys general from various states reportedly failed to agree on what provisions should be included in the proposed settlement with major banks. Reports reveal that a consensus has been missing among state AGs on what settlement terms should include.
According to reports, Oklahoma Attorney General Scott Pruitt was one of the AGs who do not completely support the current form of the settlement meant to address procedures used by lenders in working on Oklahoma City foreclosures and foreclosed properties in other parts of the state. Several AGs were allegedly uncomfortable over the federal-state agreement in its current shape, with several provisions deemed more harmful than good for the country’s housing industry.
The nationwide probe on the way foreclosures in Oklahoma and in the rest of the U.S. have been handled led to a proposed settlement that would have set new standards on foreclosure processing. However, several states are said to be reluctant to support the proposal. Requiring mortgage principal reductions is not the answer since it will force mortgage loan servicers to violate obligations specified in their contracts with mortgage investors.
The fact is that the nationwide probe was meant to address practices that are harmful to owners of residential properties and condominiums for sale, but it eventually became a move to restructure the loan servicing industry. The proposal, in its current status, entails changes in procedures which include preventing lenders from launching foreclosure actions against property owners while a mortgage modification application is ongoing.
The proposal also provides owners of homes in foreclosure with a single contact point and also requires lenders and servicers to inform borrowers in writing that their modification applications have been denied. The proposed settlement also called for a permanent modification for borrowers enrolled in a federal trial modification program and who have been able to make three timely loan payments. Several states have allegedly opposed the settlement on the basis that documentation requirements imposed on banks under the proposal go beyond specific state laws.
Meanwhile, some AGs have stated that government-sponsored enterprises Freddie Mac and Fannie Mae should be part of the discussion. They argued that the mortgage giants have huge portfolios of foreclosed homes and condominiums for sale and should be part of the negotiation. The fact that no specific amount has been set for monetary relief was also a point of contention among AGs.