Mortgage Lender Sets New Standards on Delinquencies

June 07, 2011

Things are tightening up in the mortgage industry.

Fannie Mae, the largest mortgage lender in the country, has unveiled new rules for mortgage servicers in regards to managing delinquent loans.

The new standards, which will be reinforced by incentives and compensatory fees, require servicers to take a more consistent approach with homeowners facing foreclosure.

They are the first step in Fannie Mae’s implementation of the Federal Housing Finance Agency’s Servicing Alignment Initiative and are meant to clean up the foreclosure process.

nice house with crooked foreclosure sign in front.The new rules are also a response to the robo-signing controversy, in which thousands of homes were seized without servicers taking the time to read the paperwork. The rules stress communication with homeowners in trouble.

“These new standards give homeowners facing difficulty making their mortgage payments a clear, consistent process,” said Jeff Hayward, Senior Vice President of Fannie Mae’s National Servicing Organization. “We want homeowners to be able to understand their options when facing foreclosure, and we want servicers to reach homeowners early in the process, communicate frequently and clearly, and help homeowners avoid foreclosure.”

Under the new rules:

*Mortgage loan servicers must build a strong relationship with delinquent homeowners and be in contact with them for the first 120 days of delinquency to find out why they are behind on their mortgage, access their ability to pay and educate them on their foreclosure prevention options. Servicers will be charged compensatory fees if they fail to do this.

*There will now be clear timelines for referring loans to foreclosure; once 120 days of delinquency have passed, the foreclosure process will begin. Servicers that miss that timeline would face compensatory fees.

*Servicers will receive incentives from Fannie Mae if they complete loan workouts earlier in a homeowner’s delinquency than required.

“We hope this step will encourage any homeowner who has not yet acted to work with the servicer to pursue all options to avoid foreclosure,” said Hayward.

“But even in situations where foreclosure can’t be avoided, we believe this process and this timetable will help motivate all participants toward resolutions that will ultimately stabilize neighborhoods as quickly as possible.”

Categories: Economy, Mortgages

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