Published: April 2014

Strengthening mortgage reform protections

Consumer Action joined coalition advocates in supporting Sen. Brown's amendment to the Housing Finance bill (Johnson-Crapo) that would require servicers to disclose any new fees, the loan's default status and whether a loan modification application has been submitted prior to transferring servicing duties to a new mortgage servicer.

Currently, transferred mortgage loans often include additional fees that appear only after the transfer, without any documentation or justification. These fees impact loan performance and infringe on the ability of homeowner to maximize their financial returns. Senator Brown's (D-OH) section 803 amendment to the Johnson-Crapo housing financial reform bill (S. 1217) ensures that any fees charged must be disclosed to the owner prior to the transfer. The amendment also requires disclosure of the default status of the loan and whether a loss mitigation application is pending upon transfer. Payments made to the transferor servicer during the transfer period also must be properly applied to the loan without penalty.

“This is a win-win proposal,” Brown said. “If mortgage servicers and trustees have a stake in preventing defaults, more Americans will stay in their homes rather than face abuses while trying to modify their mortgages or avoid foreclosure. Meanwhile, investors like pension funds will be protected and we can attract more private capital back into the market.”

The current Johnson-Crapo bill lacks a provision giving a fiduciary responsibility to trustees overseeing mortgage-backed securities. Brown’s amendment would ensure that trustees have a fiduciary responsibility to investors of mortgage-backed securities. This would address the concerns over legal liability for mortgage-backed securities among trustees, servicers, and investors while creating protections that are essential to attracting private capital back into the market.

Lead Organization

National Consumer Law Center (NCLC)

Other Organizations

New Economy Project | Northwest Consumer Law Center | Nueva Esperanza | The Leadership Conference on Civil and Human Rights | The Legal Aid Society of Southwest Ohio | Esperanza | Grow Brooklyn | Housing and Economic Rights Advocates | Justice Protection Project | Legal Services of Central New York | Massachusetts Communities Action Network | MFY Legal Services Inc. | NAACP | Beyond Housing | California Reinvestment Coalition | Center for Responsible Lending | Consumer Action | Center for American Progress | Community Legal Services, Inc. (Philadelphia, PA) (on behalf of its low-income clients) | Connecticut Fair Housing Center | Empire Justice Center | Empowering and Strengthening Ohio's People

More Information

To read the entire letter of support, please click here.

For more information please visit Sen. Brown's website.

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