Indiana Attorney General Greg Zoeller is trying to stop legislation that would eliminate a consumer protection known as the "settlement conference," which is a homeowner's final recourse before their home goes to foreclosure, according to an announcement on Zoeller's website.
So far, the proposal has not received sufficient discussion or debate in committee or floor sessions, according to Zoeller. He urged Indiana lawmakers to stop the proposal before it gets any further in order to keep the settlement conference intact as a consumer option to avoid foreclosure and help them stay in their homes.
"After the foreclosure crisis exposed the unethical practices of major mortgage servicers, my office worked extremely hard in our multistate investigation against five major banks to create new consumer protections for distressed homeowners," Zoeller said. "The right created by law to a court-supervised settlement conference and face-to-face meeting between borrowers and lenders has helped thousands of distressed homeowners work out plans to avoid foreclosures. We will aggressively oppose any attempt by the bankers’ lobby to roll back the clock and take away this crucial protection."
The Indiana AG's office has long been involved in protecting the state's consumers when it comes to foreclosures and foreclosure prevention. participated in the multi-state investigation of five major financial institutions in 2010 over "robo-signing" practices on foreclosure documents that in part precipitated the foreclosure crisis. Those five servicers reached a settlement worth $25 billion in 2012, and the state of Indiana received $28.8 million from that settlement. The AG's Office also helped bring the settlement conference in to widespread use in 2010-11 as a result of teaming with the Indiana Supreme Court task force to develop the Mortgage Foreclosure Best Practices.
Under the current format of the settlement conference, distressed borrowers meet face-to-face with mortgagees, supervised by the court, in an attempt to work out some type of foreclosure alternative such as a loan modification or short sale. According to Zoeller, the Indiana Supreme Court's Mortgage Foreclosure Trial Court reported a total of 13,341 settlement conferences during a nearly five-year period between April 2010 and January 2015. According to the court, 7,002 of those conferences (more than half) resulted in a "workout" of delinquent mortgage payments or some type of mutually agreeable settlement, and out of those settlements, the borrowers were able to stay in their homes in 6,174 of them. The AG's Office also helped 125 homeowners achieve loss mitigation such as a load mod or short sale in a year and a half period between January 2013 and July 2014.
Zoeller said the settlement conference is being eliminated because of a proposed amendment that was added to a Senate bill in January that requires municipalities to keep a registry of persons who abuse the tax process in relation to vacant, abandoned, and often blighted properties. Zoeller said he does not object to the bill itself, which would help municipalities eliminate blight, but he is opposed to the amendment, which would remove the 2011 reforms that put the settlement conference in place and would eliminate a distressed homeowner's right to have such a conference with the mortgagee to avoid foreclosure. Zoeller has been urging lawmakers not to include this amendment to the Senate bill, his press release said.
Those in favor of the amendment say that settlement conferences are "duplicative" and "unnecessarily time consuming," since lenders are required by the Dodd-Frank Act to administrate loss mitigation efforts. Zoeller argues that removing the settlement conference would take away the homeowner's last resort before foreclosure, and also that settlement conferences tend to have higher rates of success for keeping borrowers in their homes than other loss mitigation attempts. He said his office still receives about 500 complaints per year on average with regards to mortgage servicing, so he still believes that the settlement conference should be maintained.
"The worst of the foreclosures may be behind us, but that’s no reason to grow complacent and take away this procedure that provides a measure of fairness for distressed homeowners in dire financial situations," Zoeller said. "It is imperative that lawmakers act in the best interest of their homeowner-constituents and do the right thing to preserve this important and effective tool for homeowners. Lawmakers should remove this offensive amendment from the bill and shelve the amendment permanently, and allow settlement conferences to continue."