With federal and state officials still in talks with the top five mortgage servicers over lapses in the foreclosure process, lawmakers from both political parties introduced a bill Thursday that would establish national servicing standards.

Prior to a Senate Banking subcommittee hearing on the issue, Sens. Jeff Merkley, D-Ore., and Olympia Snowe, R-Maine, released legislation that would force lenders to assign a single point of contact for troubled borrowers and prohibit servicers from pursuing a foreclosure and modification at the same time.

"Families are rejected for modification because their payments aren't current after being told to stop making their payments so they will qualify," Merkley said. "Families have to tell their stories again and again to different people at the servicing company. Families get foreclosed upon while they are still negotiating a loan modification. This legislation will put these bad practices to an end."

The bill would also require an independent, third-party review of a foreclosure decision before it became effective.

"I am deeply troubled a myriad of foreclosures nationwide have occurred as a result of confusing communications with loan servicers and misfiled or flawed paperwork," Snowe, who does not sit on the Banking Committee, said in a press release. "What is deeply troubling is a number of homeowners throughout Maine, and across the nation, have gone into foreclosure in spite of their best efforts to obtain loan modifications for which they could be eligible."

But it was unclear whether the legislation would have sufficient support. While the two senators, in announcing the bill, cited eight co-sponsors, Snowe was the only Republican on the list.

During the hearing by the Senate Banking housing subcommittee, Sen. Robert Menendez, D-N.J., said it was clear some kind of mortgage servicing standards are needed.

"There seems to be increasing consensus that at least some kind of national mortgage servicing standards are warranted, and I believe if they are done in the right way, they can actually make mortgage servicers' jobs easier too," he said.

While witnesses at the hearing agreed on the need for more uniform standards, they were farther apart on how to craft them.

David Stevens, the chief executive of the Mortgage Bankers Association (MBA), who formerly led the Federal Housing Administration, said that uniform standards would "be beneficial to streamline and eliminate overlapping requirements."

But he said that policymakers should be mindful of the potential for unintended consequences. The MBA opposes both a single point of contact and eliminating dual-track proceedings, Stevens said.

"In moving toward national servicing standards, policymakers must fully recognize the economics of mortgage servicing and balance laudable public policy goals against business and market realities," Stevens said.

But Diane Thompson, of counsel for the National Consumer Law Center, favored such changes.

During a Senate Banking Committee hearing earlier in the day with the principals at the banking agencies, the regulators, too, said national standards are needed. Federal Deposit Insurance Corp. Chairman Sheila Bair suggested that the Financial Stability Oversight Council study the problems.

"We need to be thinking about simplifying the servicing process, modification process, as well as the relocation process or some borrowers are just not going to make it," Bair said.

But Sen. Jack Reed, D-R.I., a co-sponsor of the Merkley-Snowe bill, speaking at the same hearing, said regulators have had their chance to fix the servicing problems.

"You know, what you've said, and I agree with it, has been said repeatedly for the last two years," Reed said. "And yet all of you, collectively as the federal regulators, had the chance to make these things happen. And essentially what I think you chose to do was to just kick the can down the road a bit further, let the banks appoint an independent evaluator to go in and look again."

Merkley agreed regulators have not done enough.

"There is a link between this and the Financial Stability Oversight Council, and a couple issues that trouble people in our working communities," he said. "One is the ongoing foreclosure crisis. And certainly that is related to financial stability."

Federal Reserve Board Chairman Ben Bernanke agreed that the foreclosure process remains a frustration.

"Attempting to address the foreclosure crisis directly is — you know, there's been a lot of effort and so far only modest success," he said. "It's proven very difficult to find solutions in many cases."

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