Federal officials hoping to protect consumers from home foreclosures created new rules this past Thursday for mortgage lenders. Consumer protection groups have welcomed the new rules but maintain that they do not go far enough in preventing people from needlessly losing their home to foreclosure.
The new rules have been prompted by findings within the Consumer Financial Protections Bureau that mortgage servicers have been largely unprepared to handle the torrent of delinquent loans.
According to CFPB director Richard Cordray, “In too many cases, it has led to unnecessary foreclosures.” He continues, “Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.”
One of the new rules being set forth aims to help prevent foreclosures while homeowners look to lower their mortgage payments with loan modifications. Mortgage servicers would also be required to look for alternatives to foreclosure before taking back possession of the house. Another rule would force mortgage servicers to offer early warnings when the interest rate on adjustable rate mortgages will affect payments.
Still, some consumer advocates feel that the new rules do not sufficiently help prevent foreclosures.
“While the establishment of industry-wide standards is important, the failure to require meaningful loan modification protections is a retreat from current safeguards under the soon-to-expire HAMP loan modification program,” the consumer rights organization said.
During the height of the housing crash in 2008, foreclosures increased by 81 percent over the previous year. And though much has improved in the housing market since then, home buyers aren’t out of the woods just yet. The foreclosure rate in 2012 was actually 2 percent higher than it was in 2011.
It’s perfectly normal for homeowners who are no longer able to keep up with their mortgage payments to be constantly worried about the prospect of being evicted. But the reality is the foreclosure process is actually quite lengthy and it can take as long as 12 months before you receive eviction papers.
4 Ways Homeowners Can Become Current on Their Mortgage
The second option you may wish to look into is forbearance. Forbearance allows you to stay in your home while the lender temporarily suspends your mortgage payments. This can be an excellent option if you just lost your job and are looking to get your finances back in order.
The third option available is a repayment plan. A repayment plan allows you to pay your past due balance over time. Effectively, this makes your mortgage slightly more expensive until you pay back what was owed.
The fourth option won’t help you prevent foreclosure or even help you forestall it, but it will help you from the damaging effects of a traditional foreclosure on your credit score. If you feel that a foreclosure is inevitable and you’ve run out of options, you may be a good candidate for a deed-in-lieu of foreclosure. Under this procedure, you voluntarily relinquish ownership of the home to the lender. You will no longer be obligated to make payments on the mortgage and will be able to repair the damage to your credit more quickly than going through a regular foreclosure.
