New York laws beat Feds mortgage modification program

New laws in New York go into effect on October 1^st that set out clear rules for mortgage servicers providing homeowners a modification on their mortgage, and gives the state authority to penalize them.

The New York regulators accomplished what the Treasury Department’s struggling mortgage modification program has so failed to do – it has created clear standards outlining how servicers must deal with homeowners trying to get a modification on their mortgage.  Richard Neiman, the New York Superintendent of Banks, said they will act quickly to bring an enforcement action against those servicers who violate the new rules.  “In fact, we’ll be looking for that case in the event of any wrong doing, because we know the message it will send to the entire industry”, he said.  Mr. Nieman also sits on the Congressional Oversight Panel for TARP and has frequently criticized the administration’s program.

Many mortgage servicers, especially the largest like Bank of America and JP Morgan, have performed poorly, causing struggling homeowners trying to get a modification on their loan to wait months or even years for a resolution.  New York laws regarding mortgage servicers will require the servicer to reply to a homeowner’s application for a modification within 10 days.  The servicer must also tell the applicant what further information is needed at that time.   Thirty days following receipt of the homeowner’s application, the servicer must provide its decision in writing with either an offer or denial.

Rules for the administration’s mortgage modification program are exactly the same, but servicers often do not follow the rules.  Mr. Nieman said some of the New York laws were modeled after the administration’s program but he stressed “These are not guidelines, these are not voluntary programs, these are laws and regulations that are now enforceable by our department, by the state attorney general, and by federal supervisory agencies.”