Foreclosures
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Foreclosures proceed during mortgage modifications

by Broderick Perkins

(12/21/2010) It's not only the robo-signing foreclosure fiasco that should force regulators to take a hard look at lenders' foreclosure practices.

Some lenders are using a two-track system to process foreclosures even as they evaluate home owners for loan modifications.

State laws and federal regulations, including "Helping Families Save Their Homes Act of 2009" generally forbid foreclosures during foreclosure mitigation efforts like mortgage modifications, short sales and other measures that could help a home owner avoid foreclosure.

Otherwise, what's the point of mitigation efforts?

• Virtually all, 99 percent, of 96 consumer attorneys surveyed from 34 states, represent 2,500 home owners placed in foreclosure while awaiting a loan modification, according to a recent the National Association of Consumer Advocates (NACA) and the National Consumer Law Center (NCLC).

• More than 15 percent of the attorneys represent more than 100 household in this situation.

• More than 65 percent represent more than 10 households in this situation.

• More than 47 percent represent more than 20 households in this situation.

It's not just the modification process that's overlooked as a foreclosure barrier.

The survey also found abusive fees and improper payment processing that improperly triggered foreclosures.

• More than half of attorneys surveyed represent home owners placed into foreclosure due to misapplication of payments.

• More than half of those surveyed represent home owners placed into foreclosure for late fees, broker-price opinions, inspection fees, attorney's fees and others.

• More than half of those surveyed represent homeowners placed into foreclosure due to force-placed insurance.

• More than 87 percent of those surveyed represented home owners placed into foreclosure because the servicer did not properly accept home owner payments.

• Nearly 90 percent of those surveyed represented homeowners facing foreclosure even after complying with previously agreed upon mortgage payments.

NACA and the NCLC wants to see government put an end to the practices.

"Too many families have lost their homes due to servicer misconduct. We must eliminate the two-track system in which banks proceed with foreclosures while evaluating borrowers for a loan modification. Servicers must not be allowed to profit from improper fees and unnecessary foreclosure initiation," the report says.