Texas Attorney General Abbott Urges Mortgage Lenders to Help Consumers Avoid Foreclosures

18 Oct Texas Attorney General Abbott Urges Mortgage Lenders to Help Consumers Avoid Foreclosures

In a news release on October 11, 2007, Texas Attorney General Greg Abbott proposed a series of foreclosure prevention measures to three of the largest mortgage lending and loan servicing companies – Countrywide Mortgage, Litton Loan Servicing (which is based in Houston) and Dallas-based EMC Mortgage. He urged them to (1) implement several measures designed to preserve homeownership in Texas, (2) improve consumer communication, and (3) resolve complaints.

He outlined five measures that should be implemented:

(1) “Provide long-term solutions for borrowers with adjustable-rate mortgage loans (ARMS). Mortgage companies should consider easing homeowners’ mortgage-related burdens by converting adjustable-rate loans into fixed rate products. Many ARM loans have already adjusted and pushed countless consumers into the foreclosure process. Because of high foreclosure costs, this proposal benefits lenders , loan servicers and homeowners.”

(2) “Mitigage first, collect second. Under the protocols currently used by most lenders, homeowners who have difficulty making payments receive expedited referral to the collection process, which is often antagonistic and intimidating. Attorney General Abbott encouraged companies to engage homeowners before sending a case to collections by reviewing each case in a non-confrontational setting and exploring solutions. By doing so, the servicers increase the chances of debtors repaying their obligations.”

(3) “Create an in-house resolution committee to address consumer complaints. Attorney General Abbott urged today’s participants to dedicate in-house staff to immediately address consumer complaints received by the Texas Office of the Attorney General (OAG) and report promptly to the OAG on the status of those complaints.

(4) “Improve communications with consumers. While many companies have adjusted their protocols and are engaging consumers who face imminent foreclosure, Attorney General Abbott recommended that companies improve their communication efforts. The attorney general also encouraged the companies to contact consumers well before ARMs reset to higher interest rates so that fixed-rate options can be explored.”

(5) “Waive applicable penalties and fees. Attorney General Abbott urged lenders to waive penalties and late fees associated with loans at risk of foreclosure while the companies work with troubled consumers to preserve their loans.”

Attorney General Abbott also requested the participants to follow up with the OAG within 30 days on their implementation of the above listed measures. He specifically requested them to advise him of the percentage of ARMs that were converted to fixed-rate loans and the number of service fees that were waived.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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