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Foreclosure counseling — it’s the law

By: 2 July 2011 One Comment

The Columbus Dispatch in Ohio had a fascinating article in late June about home owners not responding to offers of pre-foreclosure counseling from lenders.

It seems that trend is common throughout the nation – banks will attempt to reach home owners and work out ways to keep their loans current prior to starting foreclosure actions and quite often don’t get a response. Both JP Morgan Chase & Co. and Wells Fargo have reported that getting in touch with home owners who are in default and visiting with them about counseling has proven difficult in a number of cases.

That’s a shame as federal law mandates that all lenders servicing mortgages that are not insured by the federal government must offer counseling to defaulting home owners within 45 days of default. In other words, a lender must try to work out a way to make loans current before it can initiate foreclosure proceedings.

In April last year, Legal Aid of Arkansas held a preventing foreclosure seminar in Fayetteville and attendees learned that one of the complaints against servicers is that they weren’t offering that counseling. The alleged failure on the part of lenders to follow federal law was raised as a successful defense in some foreclosure cases, attorneys presenting the seminar said.

The defense fails, of course, if a lender attempts to work out arrangements to bring a mortgage current but the borrower simply won’t participate in the process. That requirement to offer counseling was put in place by the federal government to protect the rights of consumers. That being the case, borrowers facing the prospect of losing their homes may want to consider taking advantage of counseling.

Here’s the thing about foreclosures – banks aren’t in the business of listing and selling property and, most of the time, would prefer a scenario in which the borrower remains in the home. Lenders often lose money when they take back a home and put it on the market and, therefore, have a vested interest in working out something to make sure the mortgage is current and the borrower stays in the house.

Of course, it won’t always be possible to work out arrangements that are agreeable to both the borrower and the lender. Some homes will still fall in foreclosure regardless of how well intentioned the home owner and the mortgage company are. The economy is still struggling and budgets are tight across the nation.

Still, a borrower won’t know if keeping the home is possible without accepting the lender’s offer of counseling. The aforementioned article went on to say that some borrowers simply throw in the towel when they get too far behind on their mortgages as they see bringing those loans current as a major obstacle that can’t be overcome.

In some cases, it might be impossible for a home owner to keep a house when the mortgage is in default. However, the borrower won’t know that for sure until he accepts an offer of counseling from the lender and tries to work out a solution that works out for all parties involved.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =

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