Brown Pushes Reforms to Slow Foreclosure Process
YOUNGSTOWN, Ohio – U.S. Sen. Sherrod Brown, D-Ohio, says the recent agreement struck between federal regulators and 10 of the largest banks in the nation is a step in the right direction, but more long-term and meaningful reform is needed.
“It’s a small step, and not nearly what it should have been,” Brown told reporters at a press event Wednesday. “These payments will provide some relief, but not come close to the damage that happened.”
Last week federal regulators and 10 of the largest U.S. banks struck an agreement that settled charges these banks engaged in wrongful foreclosures. Under the agreement, the 10 banks would pay a collective $8.5 billion to those affected by unlawful foreclosures.
Some 4,000 homeowners in the Mahoning Valley and 96,000 Ohioans could be eligible for the funds, which average $2,125 per case, the senator said.
“The next step is to urge regulators to use the lessons learned from this foreclosure review process to fix the mortgage broker servicing model,” Brown said.
Brown has sponsored legislation in the Senate -- the Foreclosure Fraud and Homeowner Abuse and Prevention Act – which is intended to prevent foreclosures against homeowners trying to modify or restructure their mortgages.
“Too often, the banks foreclose first and ask questions later,” Brown remarked.
The legislation requires banks to provide meaningful disclosures and protections for borrowers before they near the point of defaulting on their mortgages, participate in loan modifications, stop foreclosure when borrowers are working with banks to pay their loans on time, and hire enough staff to work with homeowners instead of issuing default judgments and foreclosures.
Brown, who sits on the Senate Finance Committee, said that homeowners should not be left holding the bag for mistakes that banks make.
"Banks should not foreclose on people when they are in the midst of working out a loan modification, and the homeowner in good faith is trying to catch up on the mortgage," the senator said. "Especially when the banks have made the mistake."
Joining Brown at the press event were Neil and Kathleen Smith, residents of East Liverpool who lost their house in Medina because of errors their lender made.
"We lost everything," Kathleen Smith said. "We put everything we had in it."
Smith related that she and her husband owned a $250,000 house in Medina and both had good jobs. When she lost hers in 2010, Neil was still working and making more than enough for the two to live on.
However, that year Neil suffered a heart attack, and his disability paid 80% of his base pay. That number was soon cut to 60% and he lost his benefits.
The Smiths then looked into modifying their mortgage through the Making Homes Affordable Program, a federal effort to assist homeowners who could face foreclosure. The couple completed all of the paperwork in a timely manner, and through a service provider, sent the information to their lender, Wells Fargo.
However, Wells Fargo never processed the paperwork, and instead of modifying the loan, a foreclosure notice was issued, Smith said. Later, the couple discovered that paperwork was buried on someone's desk at the bank.
Panicked, the couple decided to list the property for sale. "We didn't know what else to do," she said.
In February 2011, Wells Fargo called and told her that the modification had been approved.
When Smith told the bank that the house was now listed with a realtor, the bank withdrew the modification and forced the house into a short sale for $215,000, well below the asking price and well short of the money invested into the house.
The couple now rents a house in East Liverpool.
"This could happen to anyone," Smith said, who added the couple wouldn't qualify for restitution under the agreement because the foreclosure occurred before the time frame spelled out in the agreement.
The junior senator said it's still too early to gauge what sort of support his legislation will receive in the Senate or House of Representatives, but he believes that people are going to demand action from their lawmakers.
"We've seen countless number of times where the bank, whether it was by robo-signing, clerical error, driven by greed, made a mistake," Brown said. "The homeowner should never have to pay for that mistake by foreclosure."
Copyright 2013 The Business Journal, Youngstown, Ohio.
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