While mortgage delinquencies have fallen from their peak two years ago, they remain extremely high
By Alan Zibel
The Wall Street Journal
Rules proposed for the mortgage-servicing industry, coming after a $25 billion legal settlement, could further erode the profits banks make from the business of collecting loan payments, pushing the job to more specialized firms.
A federal consumer regulator is expected to propose Friday the first set of national standards for the mortgage-servicing industry, which has been riddled with problems in the wake of the housing bust.
Under the Consumer Financial Protection Bureau’s proposal, loan servicers would be required to evaluate homeowners’ applications for loan-assistance within 30 days of receiving an application and would be barred from going ahead with a foreclosure until a final decision has been reached on a borrower’s application for help.
The mortgage-servicing industry currently is dominated by the five largest banks, but has become far less profitable amid a deluge of foreclosures. Mortgage servicers have been widely criticized for being ill-prepared for a massive surge in defaults, for not responding adequately to distressed consumers, hitting them with excessive fees and violating state laws for documenting foreclosures.