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[ATG] AG urges lawmakers to keep mortgage settlement conferences, not repeal them
Start Date: 3/10/2015Start Time: 12:00 AM
End Date: 3/10/2015
Entry Description

FORT WAYNE, Ind. -- Indiana Attorney General Greg Zoeller today warned that an important consumer protection helping distressed homeowners avoid foreclosure – the settlement conference – is in danger of being eliminated because of a proposal moving through the Legislature that to this point received insufficient discussion or debate in committee or floor sessions. Zoeller urged state legislators to remove the proposal before it goes any further in the process so that the foreclosure-preventing settlement conference process that helps homeowners stay in their homes can continue unimpeded.

“After the foreclosure crisis exposed the unethical practices of major mortgage servicers, my office worked extremely hard in our multistate investigation against five major banks to create new consumer protections for distressed homeowners. The right created by law to a court-supervised settlement conference and face-to-face meeting between borrowers and lenders has helped thousands of distressed homeowners work out plans to avoid foreclosures.  We will aggressively oppose any attempt by the bankers’ lobby to roll back the clock and take away this crucial protection,” Zoeller said.

As the state’s consumer protection agency, the Attorney General’s Office in 2010 joined the multistate investigation of the five major mortgage-lending banks and servicing institutions whose foreclosure-document “robosigning” practices contributed to the foreclosure crisis – an investigation that led ultimately in 2012 to the banks agreeing to pay a $25 billion settlement, including $28.8 million to the State of Indiana. The AG’s Office also worked with the Indiana Supreme Court task force in developing the Mortgage Foreclosure Best Practices in 2010-2011, which helped bring the court-supervised settlement conference procedure into widespread use. Settlement conferences were needed due to complaints that distressed borrowers could not meet in person with mortgage servicers; and the reforms allowed homeowners to obtain face-to-face meetings in an attempt to work out loan modifications or short sales, and possibly avoid foreclosures and forced relocations.  Later the settlement conferences were codified into state law through a bill Zoeller recommended that passed, Senate Enrolled Act 582 of 2011.


According to statistics from the Indiana Supreme Court’s Mortgage Foreclosure Trial Court Assistance Project (MFTCAP), between April 2010 and January 2015 a total of 13,341 settlement conferences were held, and 7,002 of those conferences ended in mutually-agreeable settlements or “workouts” of the delinquent mortgage payments. Of those settlements, 6,174 allowed the homeowners to stay in their homes.  Another 5,989 settlement conferences still ended in foreclosures, but the MFTCAP estimated that each prevented foreclosure saves local communities and stakeholders between $40,000 and $80,000 in expenses that otherwise would occur if the borrower lost the house. In addition, the Attorney General’s Office has been able to work with 125 homeowners on some form of loss-mitigation assistance – such as loan modification or short sale – between January 2013 and July 2014.

But Zoeller warned those efforts are jeopardized because of wording that was added to the bill without sufficient public discussion or debate during Senate committee consideration of Senate Bill 415 in late January.  SB 415 is an otherwise unrelated bill involving the tax sale process for vacant and abandoned homes and keeping a registry of persons who abuse the tax sale process in relation to vacant, abandoned properties, a bill intended to help municipalities address blighted neighborhoods. By definition, such dilapidated vacant properties are not owner-occupied.

The objectionable amendment to SB 415 would delete the important 2011 reforms to state law, and remove the right of distressed borrowers to a court-supervised settlement conference.  SB 415 passed the Indiana Senate and now is before the Indiana House of Representatives, where it is assigned to the House Local Government Committee. Zoeller said he has no objection to the underlying bill dealing with the tax sale process and a vacant abandoned properties registry, but he strenuously objects to the recently-added amendment to SB 415 that would take away settlement conferences he sought in 2011.  Zoeller urged legislators to eliminate this amendment from the bill.

Proponents of the measure to eliminate settlement conferences claim that they are duplicative and unnecessarily time consuming, now that certain loss-mitigation efforts are required of lenders under the federal Dodd Frank Act.  However, these loss mitigation efforts happen prior to foreclosure, and the amendment would erase the last, and often best, opportunity for the homeowner to save their home.  Additionally, rates for obtaining workout agreements using settlement conferences are higher as compared to other loss-mitigation options.

Despite improvements in the foreclosure picture based on the multistate settlement and statutory and administrative changes, the AG’s Office continues to see significant numbers of consumer complaints regarding mortgage loan servicing.  Since 2012 the AG’s Homeowner Protection Unit has consistently received on average approximately 500 consumer complaints each year involving this issue, a strong indicator that the effective settlement conference option is still a vital tool that should be maintained.

“The worst of the foreclosures may be behind us, but that’s no reason to grow complacent and take away this procedure that provides a measure of fairness for distressed homeowners in dire financial situations. It is imperative that lawmakers act in the best interest of their homeowner-constituents and do the right thing to preserve this important and effective tool for homeowners. Lawmakers should remove this offensive amendment from the bill and shelve the amendment permanently, and allow settlement conferences to continue,” Zoeller said.


NOTE: Background information on the Attorney General’s Office’s work in the multistate investigation of five major banks’ mortgage foreclosure practices is here: 
http://bit.ly/1wU9kcx.   Background information on the Mortgage Foreclosure Best Practices in the Indiana Supreme Court that helped initiate the court-supervised settlement conferences for distressed borrowers is here:  http://bit.ly/1NB1yt6.


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Location Information:
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Contact Information:
Name: Bryan Corbin
Phone: 317.233.3970
Email: Bryan.Corbin@atg.in.gov
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