STATE OF IDAHO A T T OR NE Y G E NE R A L L A W R E NC E W A SDE N Summary of the National Mortgage Settlement Loan Servicing Standards Accurate Loan Servicing Records • Prohibits robosigning (i.e., signing affidavits filed with the court without personal knowledge). • Requires a pre-foreclosure referral notice to the borrower. • Includes new protections to ensure the accuracy of borrower’s account information. • Requires the participating mortgage loan servicers (“servicers”) to adopt policies and procedures to oversee foreclosure trustees, independent contractors, and other agents, including foreclosure firms, sub-servicers, agents, subsidiaries and affiliates. Enhanced Loss Mitigation Protection for the Borrower • Requires notice to the homeowner of all loss mitigation options prior to referral to foreclosure. • Requires decisions on modification applications within 30 days of receiving the completed application • Requires servicers to offer a loan modification if the net present value of the modification is positive. Restrictions on Foreclosure Referrals during Modification Reviews (“Dual Track”) • If the servicer receives a substantially complete loan modification application within the first 120 days of a loan delinquency, the servicer must determine a borrower’s loan modification eligibility before referring the loan to foreclosure. • If the borrower submits a complete loan modification application within 30 days after a foreclosure letter is sent to the borrower, the servicer may not continue with the foreclosure sale until it reviews and determines the borrower’s eligibility. • If the borrower submits a complete loan modification application at any time after 30 days following the mailing of the attorney letter but prior to 37 days before a scheduled foreclosure sale, the servicer must complete its review of the application prior to going to foreclosure sale. • If the borrower submits a complete loan modification application 37 to 15 days before a scheduled foreclosure sale, the servicer shall conduct an expedited review of the application. Improved Communication of the Borrower’s Status • Requires the assignment of an easily accessible single point of contact for each borrower who reaches out to the servicer due to difficulty making their loan payments. • Requires servicers to communicate all loss mitigation options to borrowers within the set timelines. • Requires servicers to communicate with the borrower’s authorized representative, including the Attorney General’s Office or the Idaho Department of Finance when they are acting on a written complaint submitted by a borrower and forwarded to the servicer. Enhanced Protections for Military Personnel • Requires compliance with Service Members Civil Relief Act and similar state laws. Servicers must engage independent consultants to review foreclosures from January 1, 2009, to December 31, 2010, for compliance with SCRA. • Requires the assignment of a single point of contact who is knowledgeable about the SCRA. • Requires servicers to go beyond the standard requirements of the SCRA and assess if a borrower is SCRA eligible in additional situations where the borrower is facing foreclosure. • Requires notice to borrowers who are 45-60 days delinquent that they may be entitled to certain protections under the SCRA and to counseling. • For active duty service members in combat areas, the servicers may not sell or foreclose on homes absent investor limitations. • Prohibits servicers from requiring a service member to be delinquent to qualify for a short sale, loan modification or other loss mitigation relief if the service member is suffering from a financial hardship and is eligible for loss mitigation. • Prohibits servicers from making inaccurate reports to credit reporting agencies when a service member who has not defaulted before relocating obtains a short sale, loan modification or other loss mitigation. Improved Application Denial Notices • Requires servicers to state the reasons for denying a modification application and to inform borrowers they have 30 days to rebut the denial. Sustainable and Affordable Proprietary Modifications • Requires servicers to design proprietary loan programs that produce sustainable modifications and affordable payments. Development of Short Sale Process • Requires servicers to develop a short sale process that allows borrowers to obtain a short sale evaluation before putting the home on the market. • Requires servicers to confirm in writing that a request for short sale has been received and notify the borrower within 30 days of any missing documents. . Continuation of Modifications upon Servicing Transfers • Requires the servicer to inform the new servicer if a loan modification is pending. • Requires the new servicer to accept and continue processing any pending loan modification requests and honor trial and permanent loan modification agreements. Loss Mitigation during Bankruptcy • Prohibits servicers from denying loss mitigation to a borrower on the basis that a borrower is a debtor in bankruptcy. Restrictions on Default and Foreclosure Fees • Requires servicers to document and disclose all fees. • Prohibits servicers from collecting unreasonable and undisclosed fees. • Prohibits servicers from charging attorneys’ fees for work that is not performed. • Prohibits servicers from collecting late fees: (1) while a loan modification is being considered; (2) while borrowers are making timely trial payments; and (3) while a short sale is being evaluated. • Prohibits unnecessary or duplicative property inspection, property preservation or valuation fees on the homeowner. Restrictions on Force-Placed Insurance • Prohibits force-placed insurance unless there is a reasonable cause to believe a borrower has not paid for property insurance. • Requires servicers to continue making insurance payments if there is a lapse in payment and the payments are escrowed. • Requires servicers to purchase force-placed insurance for a commercially reasonable price. Enforcement of Tenants’ Rights • Requires servicers to comply with applicable state and federal laws governing the rights of tenants living in foreclosed residential properties. Homeowner Relief Programs Amount Allocated to Programs • Servicers have committed $74,686,493 million to fund programs for Idaho homeowners. First and Second Lien Modifications • The eligible borrower’s payment of principal and interest must be reduced by at least 10%. • If the loan-to-value ratio exceeds 120% at a debt-to-income ratio 31%, the principal must be reduced to a loan-to-value of 120% subject to a minimum debt-to-income ratio of 25%. • If the eligible borrower has a second lien that is owned by a participating servicer, the second lien must be modified in some way. • Servicers may forgive, reduce, or modify second-lien loans. Principal Forgiveness and Forbearances for Unemployed Borrowers • Servicers may forgive principal for eligible unemployed borrowers. • Servicers may allow forbearances of principal payments to keep eligible unemployed borrowers in their homes until borrowers can resume payments. Deficiency Judgment Waivers • Servicers may waive valid claims for deficiency judgments. Short Sale Assistance • Servicers may extinguish second-lien loans to facilitate short sales. Homeowner Transition Payments • Servicers may offer cash payments to eligible borrowers to assist them in transitioning to a new residence following a short sale or deed-in-lieu of foreclosure. Special Options for Eligible Service Members • Servicers must comply with special requirements for eligible service members pursuing a short sale. • If the eligible service member’s home is sold via a short sale, in case of an owned portfolio first lien, the servicer must waive a deficiency amount of less than $250K. Homeowner Refinancing Program Amount Allocated to Program • Servicers have committed $15,172,779 million to fund the program for Idaho homeowners. Monthly Payment Reductions • If the eligible borrower’s interest rate is above 5.25%, the interest rate may be reduced for 5 years. • After 5 years, the new interest rate will be tied to Freddie Mac’s Primary Mortgage Market Survey Rate or 5.25%, whichever is greater during the initial rate reduction. Fees and Expenses Limited • All imposed fees and expenses cannot exceed the amounts charged under the Making Home Affordable’s Home Affordable Refinancing Program’s guidelines. Foreclosure Restitution Fund Amount Allocated to Fund • Servicers have committed $9,998,041 million to the fund for eligible Idahoans who lost their homes to foreclosure, a short sale, or a deed-in-lieu of foreclosure between January 1, 2008, and December 31, 2011, while attempting to negotiate a modification or because of some other loan servicing mistake. • Eligible borrowers will receive cash payments of up to $2,000. Borrower’s Rights Are Preserved • Eligible borrowers do not need to release their rights to receive payment. • Eligible borrowers may participate in the OCC look-back process. Release Provisions Claims Released under the Settlement • Releases all claims the Attorney General could bring against the servicers on behalf of the State of Idaho regarding mortgage origination, servicing, or foreclosure. Claims Not Release under the Settlement • Does not release private claims by individuals, impact any class action claims or prevent a borrower’s participation in the OCC’s look-back process. • Does not release any criminal liability or grant criminal immunity. • Does not release claims related to the securitization of mortgage backed securities. • Does not release claims against Mortgage Electronic Registration Systems (MERS) or MERSCORP. • Does not end attorneys general investigations of the servicing industry, financial fraud or the financial crisis. • Does not affect states cases against the rating agencies or cases related to bid-rigging or the municipal bond market.
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