New York regulators have crafted new laws to give the state authority to punish mortgage servicers -- something the Treasury Department, in administering its struggling mortgage modification program [1], has so far failed to do. The new rules set clear standards for how servicers must handle homeowners seeking a modification.
"We will not hesitate to bring an enforcement action or to refer an enforcement action," said Richard Neiman, the New York superintendent of banks. "In fact, we'll be looking for that case in the event of any wrongdoing, because we know the message it will send to the entire industry."
The delays that hundreds of thousands of homeowners have encountered [2] in the administration's mortgage modification program have highlighted the poor performance by many mortgage servicers -- the companies that process mortgage payments and foreclosures -- particularly the largest: Bank of America, JPMorgan Chase, Wells Fargo and Citigroup. Struggling homeowners seeking a modification frequently wait months, even years, for an answer.
The New York laws [3], which go into effect Oct. 1, lay out how servicers should handle homeowners in danger of foreclosure. Within 10 days of a homeowner's applying for a modification, for example, the servicer is required to acknowledge the request and specify what additional information is needed. Within 30 days of receiving all of the required information, the servicer is required to render its decision and respond with either a written offer or a denial in writing.
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