Obama Considering New National Foreclosure Rule

President Obama is floating an idea to prohibit lenders from foreclosing on a home unless the borrower has been considered for the government’s Home Affordable Modification Program (HAMP). The proposal would require servicers to initiate contact with all borrowers who are 60 or more days behind on their mortgage payments and offer them access to the federal modification program. Only after the homeowner has been screened under the HAMP guidelines and it is

determined that the loan cannot be saved, could foreclosure proceedings commence. The proposal would also halt any foreclosures already in process once a borrower has been accepted into the trial phase of the program.

The proposal was reviewed by lenders during a teleconference last week.

In addition to preventing new foreclosures, the plan would also require lenders to stop foreclosure proceedings once you enter into the HAMP trial period.  They’re not currently required to do that! Right now, the processes can run concurrently so it’s possible (although fairly unlikely) that you could have your house sold at auction while you’re in the trial period…crazy, huh?

To be “somewhat” fair, though, there are lenders that already consider you for HAMP before they begin the foreclosure process…so it won’t be a change for them.

The Treasury proposal would require all borrowers who are 60 or more days delinquent on their mortgage to be sought out for participation in HAMP. Mortgage companies would need to try to contact the borrower at least four times by phone and twice by certified mail over 30 or more days before going to foreclosure.

Now...If you assume that the lenders aren’t doing anywhere near what they could be doing to try to modify mortgages, then this could help. The proposal would make them incapable of selling the home at a foreclosure sale until it has been appropriately considered under HAMP. If you think the lenders (in most cases) are evaluating cases and the reason more loans haven’t been modified is because it makes no financial sense to modify them, then this won’t help. It will just delay the inevitable.

The truth is probably in the middle somewhere. Just like with everything else concerning foreclosure.