Mortgage Modification Overhaul Sought by States

By NELSON D. SCHWARTZ and DAVID STREITFELD
NYT

State attorneys general have presented the nation’s five biggest banks with a list of demands that could drastically alter the foreclosure process and give the government sweeping authority over how mortgage servicers deal with millions of Americans in danger of losing their homes.

Under the blueprint, banks would be prohibited from starting foreclosure proceedings while a borrower was actively trying to lower the interest rate or ease other terms of the home loan, a process known as a mortgage modification.

Any borrower who successfully made three payments in a trial modification would be given a permanent modification. When a modification was denied, it would be automatically reviewed by an ombudsman or independent review panel.

The proposed changes, which will be discussed by the attorneys general when they meet in Washington early next week, would compel the banks to treat each borrower in default individually.

(More here.)