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New foreclosure rules may help struggling New Jersey homeowners

The Consumer Financial Protection Bureau (CFBP) is announcing new rules on foreclosures. These changes may give people considering Chapter 13 bankruptcy some breathing room by forcing banks to take more responsibility for making sure the proper procedures are followed during the bankruptcy process.

First, it requires that banks keep accurate and up-to-date records on mortgages. This may sound like something banks should do as a basic matter of good accounting practices. However, recent settlements that many large banks agreed to after incidents of “foreclosure mills,” firms that specialize in the speedy and generally illegal repossession of homes, tell a different story. Thousands of people lost their homes due to unfair practices. In April of last year, five major banks agreed to pay a $26 billion settlement for cases of foreclosure abuses. At the beginning of 2013, Morgan Stanley and Goldman Sachs joined in by agreeing to a $557 million settlement for the same type of unfair practices.

Second, the foreclosure can’t begin until all possibilities for modifying the loan have been exhausted. Homeowners who fall behind on bills are less likely to open mail from loan servicers and bill collectors, so this rule puts it back on the banks to make sure all the bases have been covered before the foreclosure process begins.

The decision to declare bankruptcy isn’t an easy one. A bankruptcy attorney may be able to offer suggestions on how to structure a Chapter 13 repayment plan that allows the homeowner to catch up on back mortgage payments and remain in the home. The attorney may also explain the process of Chapter 13 bankruptcy, which generally requires the debtor to pay back a percentage of his or her debt to the creditors with the oversight of a trustee.

Source: UPI.com, “New foreclosure rules,” Anthony Hall, Jan. 17, 2013

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