The Center for Responsible Lending and the Consumers Union, two consumer advocacy organizations, are calling on national lawmakers to create a Homeowner Bill of Rights in order to prevent “unnecessary foreclosures.”
The two groups pointed out in a recent policy brief that most states continue to experience serious delinquencies at a rate of between 1 in 10 and 1 in 20 homeowners.
Additionally, “[t]he foreclosure pipeline remains significant and continues to threaten a substantial number of homeowners with the loss of their homes,” the groups said.
The Consumer Financial Protection Bureau (CFPB) has developed rules requiring loss mitigation outreach, restricting dual tracking, and specifying appeal procedures for when a homeowner’s loss mitigation application is denied.
However, the groups see a few holes in the CFPB’s rules, and they are calling on lawmakers to establish new rules regarding foreclosure and loss mitigation.
The two consumer groups set forth four rules they believe are essential to protecting homeowners.
First, “[p]olicymakers should require an explicit duty to engage in loss mitigation analysis before the foreclosure process is commenced,” the groups said. So far, the CFPBhas established rules surrounding the loss mitigation process but has not set forth an “explicit duty” to offer loss mitigation to all homeowners facing foreclosure.
Second, the groups call on lawmakers to outlaw “dual-tracking,” in which servicers continue working through the foreclosure process while a homeowner is applying for loss mitigation.
The third piece of the groups’ Homeowner Bill of Rights would force lenders to “establish clear procedures” for outreach to struggling homeowners and timelines for loss mitigation. The rule would also require lenders to provide homeowners with detailed information regarding the procedures and appeal process.
Lastly, “[m]ost importantly, states should add private enforcement that gives homeowners a means to pause the foreclosure process while the servicer corrects violations of the law and encourages servicers to consider loss mitigation alternatives,” the groups said.