Tough Settlement Rules Add to Foreclosure Process Delays

The average borrower facing foreclosure didn’t see eviction for 253 days in February 2008.
Four years later, that potentially “rent-free” period for those who stay in their homes is up to 667 days, according to data provider Lender Processing Services.
A landmark $25 billion settlement between federal-state officials and the top five lenders is the largest effort to date to ease the U.S. foreclosure crisis. The settlement could affect as many as 2 million borrowers with favorable new loan terms and other compensation.
But it also mandates strict new guidelines for the lenders to correct improper or sloppy foreclosure documentation of the past, in effect slowing down the road to eviction even further for homeowners who are not part of the settlement.
Under the settlement’s new rules, the lenders have to provide borrowers with the payment history of the mortgage in question, dating back to when the borrower was less than 60 days past due.
The banks also have to provide a copy of the borrower’s note, and in some states, mortgage servicers have to “demonstrate the right to foreclose on the borrower’s note.” If applicable, the name of the investor holding the borrower’s loan has to be provided.
The mortgage settlement evolved primarily out of the careless “robo-signing” of foreclosure affidavits by employees hired by the banks to move thousands of backlogged cases.
According to the settlement agreement filed Feb. 12, lenders also have to ensure that all documents “are accurate and complete and are supported by competent and reliable evidence.”
In all states, lenders have to provide documentation with facts supporting the servicer’s right to foreclosure – and that paperwork has to be approved by a monitoring committee established under the settlement before it is sent to the homeowner.
Mortgage servicers must also train and supervise employees who regularly prepare or execute affidavits, sworn statements or declarations.
Overall, foreclosures have stalled so far this year, with banks initiating the process on 172,502 homeowners in February 2012, down 15 percent from January and 15 percent from a year ago, LPS said.
The average number of days since the last mortgage payment was been made on homes in the foreclosure process increased to 667, up from 660 the previous month and 253 in February 2008.

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