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Ohio Governor Takes Aim at Subprime Servicers
By Ted Cornwell
Ohio's new Democratic governor, Ted Strickland, has proposed a "compact" between subprime servicers and the state to battle the increasing number of foreclosures.
The proposed compact comes as part of Gov. Strickland's response to the Ohio Foreclosure Prevention Task Force's recommendations, issued in September, the governor's office said.
"I look forward to partnering with the servicers to decrease foreclosures in Ohio and bring stability to the families and communities affected by this crisis," Gov. Strickland said in a news release. "We will continue to talk with servicers and listen to their feedback as we pursue the components of this compact, and it is my hope that they join us in a unified effort to protect Ohio's homeowners."
The compact calls for servicers to increase outreach and education to borrowers, especially in the areas of loan modifications and rate changes. Under the compact, the servicers are asked to take all measures to increase loan workouts including adjusting their staff and resources to accommodate major improvements in preventative efforts and loss mitigation.
Servicers would even be asked to "cram down" the amount of mortgage debt in cases where the existing home value is 10% or more lower than the mortgage amount under the governor's compact. Servicers would also be asked to waive late fees and other default management fees if a successful workout can be negotiated.
Servicers are asked to provide monthly data about subprime loans in their portfolio, foreclosure filings and workouts to the Ohio Department of Commerce under the plan.
Gov. Strickland's compact would also require servicers to have a 24-hour toll-free number available for customers to contact a lender's loss mitigation staff. It also would require servicers to notify borrowers about upward rate adjustments on ARM loans at least six months in advance.
So far, home loan servicers have not embraced the "compact." None have agreed to sign up, and the state's mortgage banking trade group says the compact is "unrealistic," according to The Plain Dealer. During a news conference, the paper said Gov. Strickland called a counter proposal from the Ohio Mortgage Bankers Association was "inadequate."
During the third quarter, Ohio had the fifth highest rate of foreclosure, according to RealtyTrac. Foreclosure filings occurred at a rate of one per every 107 households.
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