It's not all about the money. The big mortgage settlement announced Thursday addresses long-standing abuses in the way lenders have treated distressed homeowners.
For instance, the days of customers' phone inquiries being shipped to call centers all over the country could be over. Lenders will have to establish a single point of contact for each homeowner. The same goes for borrowers besieged by collection calls and harassing letters — even after being approved for a loan modification. Right now, the settlement applies only to customers of five big financial institutions: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. But it is expected to be extended to many of the rest.
Here are some of the biggest customer complaints and how the settlement deals with them.
Complaint: I applied for a modification, but never heard from the bank until it filed for foreclosure.
Resolution: If a lender receives a completed loan modification application before a mortgage is delinquent 120 days, the lender must make a determination prior to referring the loan to foreclosure.
Complaint: Homeowners wait three to six months for an answer on a loan modification.
Resolution: Lenders must make a determination on a completed application within 30 days.
Complaint: I received a foreclosure notice, but the bank says it is too late apply for a loan modification.
Resolution: Once a homeowner is notified about a foreclosure, the borrower can submit a loan modification application within 30 days. The lender must not move for a foreclosure judgment or sale until it has ruled on the application.
If the lender offers the borrower a loan modification, it must continue to delay any foreclosure proceeding until the borrower accepts or declines the offer. If the borrower accepts, the foreclosure is suspended unless the borrower fails to make payments. The borrower may accept verbally or in writing or by making the first trial payment.
Complaint: Distressed homeowners seeking information or help from their lenders never get to speak to the same bank representative on the phone. Callers are sent all over the country.
Resolution: Lenders must establish an easily accessible single contact number for each homeowner.
Complaint: The bank won't take a partial payment.
Resolution: Lenders must accept and apply at least two partial payments when the payments come within $50 of the scheduled payment.
Complaint: I made my payment, but it still hasn't posted. The banks says the mortgage is delinquent.
Resolution: Lenders must promptly apply payments so they post within two days.
Complaint: I submitted the loan modification. Why is the bank still making collection calls?
Resolution: The lender must cease all collection efforts while a completed loan modification application is under review or the borrower is making timely payments under a trial modification.
Complaint: The bank is charging hundreds, sometime thousands, of dollars in late fees.
Resolution: If a homeowner is delinquent on two payments and then makes a full payment that is applied to the current payment, the lender cannot charge a late fee on the older delinquent amount.
Lenders shall not collect late fees while a loan modification is being considered or while a borrower is making timely trial payments or while a short sale is being evaluated.
Complaint: I applied for a loan modification and cannot check the status.
Resolution: Borrowers can check online, at no cost, the status of their loan modifications. Banks shall update the status of pending modifications every 10 business days.
Mark Puente can be reached at email@example.com or (727) 893-8459. Follow him at Twitter at twitter.com/markpuente.