In 2012, Eagle County had 466 foreclosures filed, and in 2013 there were about 240, a rate only slightly higher than 2006 when there were 212 foreclosures. This dramatic drop would seem to indicate that the worst of the foreclosure crisis is finished, although one must remember that in 2005 there were only 74 foreclosures, so we still have a ways to go.
While the worst of the foreclosure crisis is behind us there is some kind of good news for those who are still facing financial problems and are in default or about to be in default on their home mortgages. The Consumer Finance Protection Bureau has formulated new guidelines for mortgage loan servicers to implement this year that will increase the opportunity for homeowners to have every opportunity to keep their homes.
Previously, there was a patchwork of state laws and federal regulations governing foreclosure proceedings, but much of it was left to individual lenders. In general, most lenders would start foreclosure proceedings on the 91st day of delinquency and initiating contact with the borrower prior to that was up to the lender. In addition, there were few requirements for the lender to act to try and work out the loan prior to that. Some lenders were better than others at initiating contact and a major problem was if a borrower responded and tried in good faith to work something out they would often fail to do so because there often was no one really in charge of the borrower’s file at the lender, or if there was that individual was assigned hundreds of files and could not possibly respond in a timely manner.
Now, lenders must follow a strict protocol. They must initiate contact with the borrower on the 31st day of delinquency and follow through at specific intervals. The lender may not initiate foreclosure proceedings before the 120th day of delinquency. They must also respond in a timely manner to efforts by the borrower to resolve the issue and cannot blindly proceed with the foreclosure if they have not had time to respond. In addition, the lender must have an appeals process for borrowers who feel they were not treated fairly or not offered a reasonable work out option.
Of course all this is great for consumers, in theory, if it works. There are true horror stories from the foreclosure crisis of borrowers spending literally dozens of hours on the phone trying to get their situations sorted out and some structure was needed to address these problems.
With foreclosures dropping drastically lenders at least have more time and fewer cases to deal with, and hopefully will be able to make an honest effort. The fact that the Consumer Finance Protection bureau has some pretty substantial enforcement powers and seems out to make a name for itself in enforcing their rules is clearly putting many loan servicers on edge to comply with these rules or face some harsh consequences.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at www.mtnmortgageguy.com.