WASHINGTON, DC – In a small but critical victory for Rhode Island families, U.S. Senator Jack Reed (D-RI) today announced that the U.S. Treasury Department is fixing a glaring error and adopting new rules to end the industry’s red-tape run-around experienced by too many homeowners facing foreclosure.

Based on the Merkley-Snowe-Reed legislation, the Regulation of Mortgage Servicing Act, this new guidance announced by Treasury today will require that beginning September 1, mortgage servicers will assign a single point of contact to homeowners starting a new evaluation.  Homeowners already being evaluated under the Making Home Affordable Program (Home Affordable Modification Program, Home Affordable Foreclosure Alternatives, and Unemployment Program); or are in a trial HAMP modification; or are participating in an unemployment forbearance program will be assigned a Single Point of Contact no later than November 1.

“This is a positive step that will help hold banks accountable and prevent more consumers from getting the runaround,” said Reed, a senior member of the Banking Committee, which oversees federal housing policy.  “For years, I’ve been telling my colleagues, regulators and the President that the foreclosure process is clearly broken.  Too many families have been misled by servicers, or essentially been put on hold and forced to wait months for loan modification decisions that should have taken far less time.  I hope this new directive will ensure borrowers get to talk to a real live person who is familiar with their case and directly accountable.”

According to Treasury, the single point of contact, referred to as the “relationship manager,” will have the primary responsibility for communicating with the homeowner (or the homeowner’s trusted advisor) about options to avoid foreclosure, his/her status in the process, coordination of receipt of documents, and coordination with other servicer personnel to promote compliance with the Making Home Affordable Program timelines and requirements.

The relationship manager must be an employee of the bank, and the relationship manager’s proactive responsibilities end when a homeowner completes a loan modification or when all loss mitigation actions have been exhausted.

Reed is also the author of the comprehensive Preserving Homes and Communities Act of 2011, which is cosponsored by Senators Dick Durbin (D-IL), Chuck Schumer (D-NY) Patrick Leahy (D-VT), Sheldon Whitehouse (D-RI), Jeff Merkley (D-OR), Al Franken (D-MN), Patty Murray (D-WA), Mark Begich (D-AK), Carl Levin (D-MI), Barbara Mikulski (D-MD), John Kerry (D-MA), Daniel Akaka (D-HI), Bernie Sanders (D-VT), Sherrod Brown (D-OH), and Richard Blumenthal (D-CT).  This legislation improves the loan modification process, increases consumer protection by eliminating “dual track” foreclosures, and ensures a fair playing field for consumers and banks at the negotiating table.

“We are at a very critical moment.  If we don't address the foreclosure crisis, the housing market will continue to be a drag on the overall economic recovery,” concluded Reed.

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