Texas Attorney General Asks Lenders to Prevent Foreclosures
Texas Attorney General Greg Abbott has asked three of the state’s top lenders to implement foreclosure prevention measures to help borrowers thwart the threat of default when $600-billion worth of subprime adjustable-rate mortgages hit rate resets in Texas next year.
In his statement Friday, Abbott appealed directly to Countrywide Mortgage, Houston-based Litton Loan Servicing and Dallas-based EMC Mortgage Corp.
“Mortgage lenders, loan servicers, and public officials must work cooperatively on behalf of Texas homeowners who are affected by the looming housing crisis,” said Abbott. “Because of the housing industry’s tremendous economic impact, resolving this issue is important to the Texas economy’s continued growth and expansion. We believe that the proposals laid out in today’s meeting offer real solutions that will help keep Texans in their homes.”
The loan prevention measures laid out by Abbott’s office include:
- Providing long-term solutions for borrowers with adjustable-rate mortgage loans (ARMs). Mortgage companies should consider easing homeowners’ mortgage-related burdens by converting adjustable-rate loans into fixed-rate products. Many ARM loans have already adjusted and pushed countless consumers into the foreclosure process. Because of high foreclosure costs, this proposal benefits lenders, loan servicers and homeowners.
- Mitigating first, collecting second. Under the protocols currently used by most lenders, homeowners who have difficulty making payments receive expedited referral to the collection process, which is often antagonistic and intimidating. Attorney General Abbott encouraged companies to engage homeowners before sending a case to collections by reviewing each case in a non-confrontational setting and exploring solutions. By doing so, the servicers increase the chances of debtors repaying their obligations.
- Creating an in-house resolution committee to address consumer complaints. Attorney General Abbott urged today’s participants to dedicate in-house staff to immediately address consumer complaints received by the Texas Office of the Attorney General (OAG) and report promptly to the OAG on the status of those complaints.
- Improving communication with consumers. While many companies have adjusted their protocols and are engaging consumers who face imminent foreclosure, Attorney General Abbott recommended that companies improve their communication efforts. The attorney general also encouraged the companies to contact consumers well before ARMs reset to higher interest rates so that fixed-rate options can be explored.
- Waiving applicable penalties and fees. Attorney General Abbott urged lenders and loan servicers to waive penalties and late fees associated with loans at risk of foreclosure while the companies work with troubled consumers to preserve their loans.