The banking consent agreements signed by some of the nation's largest residential servicers on Wednesday require the firms to stop the practice of "dual tracking" where at risk homeowners start the loan modification process but also are officially put into a parallel foreclosure pipeline.

Moreover, at this time the consent agreements do not immediately impose any financial penalties on servicers or require them to reduce the principal amount owed on any delinquent loans.  

Dual tracking is a practice required by many servicing contracts to make sure the foreclosure process is underway when a borrower re-defaults on a modification.

It can be confusing and upsetting to borrowers because they continue to receive foreclosure and even eviction notices after they have been approved for a permanent modification.

Under the consent agreements drafted by federal banking regulators, the industry's largest servicers, including such firms as Bank of America and Wells Fargo, cannot take any foreclosure actions once the borrower is approved for a trial or permanent modification. 

The servicers also must provide borrowers with an "easily accessible and reliable single-point of contact" during the loan modification process and foreclosure processes. 

These consent agreements require "major reforms in mortgage servicing operations," said acting Comptroller of the Currency John Walsh.

Separately, Rep. Elijah Cummings, D-Md., has introduced a bill that would stop dual tracking once a borrower is considered for a loan modification.  The bill (H.R. 1477) also creates an appeals process for homeowners denied a modification.

"This legislation will increase consumer protection, level the playing field at the bargaining table, and hold banks and servicers accountable for providing relief to qualified homeowners," Rep. Cummings said.

The Maryland congressman is the ranking Democrat on the House Oversight and Government Reform Committee.  The Cummings bill has 23 co-sponsors in the House.  Sen. Jack Reed, D-R.I., has introduced a similar bill in the Senate, which has nine co-sponsors.


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