New Rules Aim to Reduce Unnecessary Foreclosures in North Carolina

The ""North Carolina Office of the Commissioner of Banks"":http://www.nccob.org/NCCOB/ (NCCOB) announced Thursday that new mortgage rules aimed at reducing unnecessary foreclosures in North Carolina have been approved by the Rules Review Commission and will take effect for licensed mortgage servicers on June 1, 2010.

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These new rules were first proposed by the NCCOB in November 2009 due to its concerns that homeowners often face foreclosure when alternative solutions exist that would benefit both the homeowner and the mortgage company. The rules were officially adopted by the Commissioner and the State Banking Commission on March 17, and they were approved by the Rules Review Commission on April 16.

Under these new rules, mortgage servicers will be required to stop foreclosure efforts pending the consideration of a request by the homeowner for assistance.

According to the NCCOB, most mortgage servicers currently continue to advance foreclosure proceedings even when they are in the process of modifying delinquent

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loans. This, the NCCOB said, adds significant costs and confusion for homeowners trying to work-out their loan.

In addition to halting foreclosure proceedings, the rules will require mortgage servicers to respond promptly and clearly to homeowner requests for assistance.

Given the unprecedented number of homeowners requesting assistance, some servicers have struggled to qualify them for assistance in a timely fashion. According to the NCCOB, this has caused some homeowners to lose their home when they would have been eligible for existing foreclosure prevention programs. The new rules will provide a timeline for communications to homeowners and specify the required content of communications to increase the reliability, transparency, and efficiency of the foreclosure prevention process.

The final rules will apply to non-bank mortgage servicers regulated by the NCCOB under the North Carolina SAFE Mortgage Licensing Act. While the rules do not apply to bank servicers, NCCOB said it hopes that bank servicers with large numbers of delinquent mortgage loans will consider adopting similar procedures to reduce the potential of unnecessary foreclosure.

The NCCOB, which regulates more than 600 mortgage lenders/servicers/brokers and 6,000 mortgage loan originators, has also been working to help homeowners fight foreclosure through the State Home Foreclosure Prevention Project (SHFPP).

To date, SHFPP has helped more than 4,000 North Carolina Homeowners avoid foreclosure. The NCCOB estimates the impact of avoiding foreclosures on these homes has prevented almost $350 million in neighboring property value declines and financial system losses.