Mortgage servicers said that they anticipate hardships from the $25 billion foreclosure settlement. The main problem for loan servicers is the discrepancy between the tight timeline that Fannie Mae and Freddie Mac set for servicers to foreclose on a loan and the now required additional time to negotiate loan modifications. Moreover, if a servicer doesn’t foreclose within the mandated time frame, Fannie Mae and Freddie Mac can charge penalties that increase every day the loan remains delinquent. For now, the settlement only applies to the five largest mortgage loan servicers. But, the Consumer Financial Protection Bureau is considering holding all mortgage servicers to the same time and penalty guidelines.
The longer it takes to foreclose on a house, the more expenses a loan servicer incurs. Furthermore, servicers have to pay in advance for maintenance and home preservation services to meet the requirements of investors. A growing number of municipalities are making them responsible for the upkeep of abandoned homes. The longer it takes to foreclose, the longer it is for the servicer to get reimbursed by the investors.
The settlement calls for servicers to have a “single point of contact” for homeowners to call. Loan servicers are wondering how much it would cost to keep adequately trained personnel to answer inquiries. Some servicers are already implementing this. Moreover, they have said it has led to a significant increase in work for the same compensation. Under the settlement, servicers would have to improve overall communications with borrowers; by establishing portals and websites and sending letters and notices.
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