Mortgage Lenders Targeted by Lawmakers

Posted on May 30th, 2008 by saman

Lawmakers are looking into allegations that some mortgage companies and lenders that take care of loans are using the bankruptcy system improperly in order to impose fees that are questionable and to put pressure on homeowners who are at risk of losing their homes.

Senator Charles Schumer and a Senate subcommittee heard testimony from an executive of Countrywide Financial Corporation and trustees of the United State that watch over bankruptcy courts. Senator Charles Schumer has stated that the “vulture” mentality may be gaining a hold in some places. These vultures know that some homeowners are too unsophisticated, too poor and too overwhelmed to challenge demands for payment that are fraudulent. Senator Schumer is beginning to consider legislation that will increase governmental oversight of the mortgage industry and increase penalties to bad lenders who go around bankruptcy law.The laws having to do with Bankruptcy are designed to help at risk homeowners retain their homes. What is being called into question are certain fees that push the homeowner toward, not away from, foreclosure in spite of the protection bankruptcy can provide them with.A hearing comes on the cusp of the concern for ever increasing foreclosures. Filings of foreclosure have increased by one hundred and twelve percent during the first few months of this year compared to last year. Makers of policy are concerned that the problem will get worse as one million mortgages get reset this year. There has been troubling testimony as far as mortgage practices have been concerned. Sadly, there have been findings that some of those who service loans may claim that a home owner owes additional money but they do not inform the borrower of the additional costs when they come about. These extra fees will most of the time put a borrower in an even worse financial position and put them even more behind on their home loan payments.

The head of Countrywide’s loan division has said that the claim that lenders are charging high fees and have abused the system is not accurate. He states that Countrywide has a commitment to work with homeowners during the bankruptcy process and work with them to finish a plan approved by the court.

The head of the division has also stated that Countrywide will be taking steps to respond to the criticism it has gotten recently. Countrywide will supposedly independently review its procedures related to how it deals with loans for homeowners that have filed for bankruptcy. The Countrywide official also said that within thirty days, the company will develop a set of the best practices for servicing loans of individuals in bankruptcy. However, critics of Countrywide are skeptical. One official questions the motivation of Countrywide for choosing to make these changes. He states that Countrywide appears to initiate good lending and servicing practices only after their typical practices are called into questions and exposed to the public.

An academic expert on the current foreclosure problem has stated that the research she has done has found that those who service mortgages typically disregard bankruptcy law in about half of all the cases she researched.