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New foreclosure rules stress mortgage advocacy over animus

The federal government is looking to promote a kinder, gentler mortgage environment for homeowners. In the wake of the recent housing bubble burst and the damaging recession that left so many people in Dallas and across Texas scrambling through foreclosures and bankruptcies to keep their financial heads above water, this could be good news.

The emphasis seems to be on advocacy over antagonism. Under the rules laid out by the Consumer Financial Protection Bureau today, the onus is put on mortgage service firms to be more transparent in their activities and more helpful to their customers.

Some might argue that these are codes that would be dictated by simple good business practice, but officials note that mortgage servicers get their business not by shopping themselves around, but by buying the collection rights from the original lenders. Market forces being less at play means that servicers have little incentive to actually serve.

Specifically, companies will be obliged to issue mortgage holders clear monthly statements that spell out what they're paying for. They must also give homeowners a heads up when interest rates are due for a change. Perhaps most significantly, mortgage servicers are being told they must work to help borrowers avoid foreclosures.

Dual-tracking is destined for expiration. This is the practice that many service companies follow in which they pursue foreclosures against consumers, even as they are negotiating with them to modify mortgages to make them more manageable. If the talks are under way, the foreclosure is supposed to wait.

The purpose for all of this, of course, is that there's a need for the system to be fairer and more effective. These efforts, however well intentioned, still reflect a process that can be complicated and confusing. To untangle the web and know your rights, the best thing to do is to work with an experienced attorney.

Source: The Washington Post, "Consumer finance agency finalizes rules to protect mortgage borrowers from runarounds, fees," Daniel Wagner, Associated Press, Jan. 16, 2013

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