State attorneys general are trying to change the foreclosure process among the nationâ€™s five largest banks by giving the government more authority over how mortgage servicers handle foreclosures, The New York Times reports.
The state attorneys general proposal, which is still in draft form, would prohibit banks from starting foreclosure proceedings while a borrower is seeking to modify a loan, such as by trying to lower the interest rate or change loan terms.
Under the proposal, if borrowers successfully made three payments in the trial modification, they would then be granted a permanent mortgage modification. If a mortgage modification was denied, the borrowersâ€™ situation would automatically be reviewed by an ombudsman or independent review panel.
The proposed changes will be discussed more by the attorneys general when they meet in Washington this week and would require negotiations with bank officials.
Source: “Mortgage Modification Overhaul Sought by States,” The New York Time (March 5, 2011)