Banks and other lenders have taken a page from the car dealer's book, and they must have entire departments devoted to thinking up charges and fees with fancy and official-sounding names. With the passage of reforms for the credit card business and other consumer credit, these fee inventors have redoubled their efforts to replace outlaws charges with new ones.
If there is any fairness in the consumer credit industry, then this ability to arbitrarily and independently add fees and charges has to be reigned in. Borrowers need to be able to enter discussions on modifications with at least the presumption that the process has their interest as a concern along with the lender's interest. We want the attorneys general to enforce procedures which help maintain a balance of power in the loan modification and foreclosure process.
Problem: Servicers take unfair advantage of borrowers in default by charging multiple fees, sometimes for services that are unnecessary, and sometimes for costs that are disproportionate to the service being performed (in some cases by affiliated companies).
All Fees Must Be Reasonable and TransparentAll servicer fees must be bona fide and reasonable and fully disclosed to the borrower. Lender attorneys fees charged to borrowers may not exceed bona fide and reasonable fees for work. Fees may only be collected for services actually rendered or for work actually performed.
Forced-place Insurance Severely LimitedThe use afforce-placed insurance must be limited to reasonable application, affordable payments and only after other options, including borrower's option to purchase on open market, have been exhausted.
Problem: For any requirements (including those already in place), adequate enforcement provisions and staff must be put in place so servicers are not able to ignore the requirements with impunity.
- Each settlement should contain the creation of an ombuds-office under the AG that will investigate violations of the agreement. Fines should be imposed for violations of the agreement if servicer refuses to cure. Also, the AGs should have the right to issue a "cease and desist" letter to halt foreclosure activity during the investigation.
- A portion of any monetary funds from the settlement should be directed to legal aid and housing counseling groups to assist with modifications and enforcement of agreement including foreclosure prevention litigation.
- In addition to assigning each borrower a single case manager, a single team should be created in house at each servicer as part of the settlement to oversee loan modification activity under the settlement.
The next post will deal with which people should have relief and recourse in dealing with foreclosure fairness and foreclosure fraud.