Mortgage Servicers' Loan Modification Screw-Ups Drive Homeowners To Court Seeking Redress

The Wall Street Journal reports:

• Some struggling homeowners are turning to the courts in a bid to force mortgage servicers to consider them for the Obama administration's foreclosure-rescue program, arguing they are eligible for help but haven't received it. The suits are the latest sign of difficulties some borrowers are having with the program, which has helped more than 500,000 people begin trial loan modifications since it was announced in February.

• The program requires mortgage servicers to screen borrowers for eligibility for modifications before completing a foreclosure. But a growing number of borrowers say this isn't happening, or that their requests for help are improperly rejected by the servicers, which collect loan payments and work with delinquent borrowers.

• "People are unbelievably frustrated with the way [the modification program] is working because it is so nontransparent, and because there is such a basic distrust of servicers," said Ira Rheingold, executive director of the National Association of Consumer Advocates, a group of attorneys and consumer advocates who work with homeowners facing foreclosure.

For more, see Strapped Borrowers Head to Court (Homeowners Press Mortgage Servicers to Rule They Are Eligible for Loan Modifications) (paid Wall Street Journal subscription required; if no subscription, try here, then click link for the story).

(1) Acording to the story, statistics aren't available, but attorneys say legal action tied to the rescue program is being taken in states including California, Florida, Ohio and Pennsylvania. A lawsuit seeking class-action status in U.S. District Court in Minnesota (go here for press release) wants to halt foreclosures on homeowners eligible for the rescue program until the administration puts in place certain procedural safeguards, such as creating a formal appeals process, the story states [see Advocacy Group Files Federal Suit Seeking To Halt Home Foreclosures In Minnesota; Says New Law Lacks Proper Notice & Appeal Provisions]. South Carolina Supreme Court Chief Justice Jean Toal in May reportedly issued an order requiring that all complaints seeking foreclosure state whether the loan is subject to the rescue program and, if so, why the borrower doesn't have a loan modification.