2024 HUD Counseling Exam - Module 5 Avoiding Foreclosure

what is a servicer? - ANSWER a company that handles all the administrative aspects of a loan from the closing to mortgage payoff, including handling all payments, escrow, and all documentation for records when was the most recent foreclosure crisis? - ANSWER 2007 what caused the most recent foreclosure process? - ANSWER 1. negative amortization 2. aggressive marketing of HELOC loans 3. subprime lending 4. qualifying borrowers based on teaser rates 5. qualifying borrowers based on introductory rates what is negative amortization? - ANSWER an increase in the principal balance of a loan caused by monthly payments that do not cover the interest due; the unpaid interest is added to the unpaid principal balance, causing the loan to grow over time what is a situation where negative amortization can occur? - ANSWER when an ARM has a payment cap that results in monthly payments that are not high enough to cover the interest due what does CFPB stand for? - ANSWER consumer finance protection bureau when was the CFPB established and why? - ANSWER established by congress as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to address failures of consumer protections what does CFPB do? - ANSWER 1. protects consumers by carrying out federal consumer financial laws 2. supervises companies and restricts unfair, deceptive, or abusive acts or practices 3. takes consumer complaints 4. promotes financial education 5. monitors financial markets for new risks to consumers what year did the CFPB issue a host of rules that govern mortgages and mortgage servicing? - ANSWER 2013 when were the CFPB rules of 2013 put into effect? - ANSWER January 10, 2014 what did the 2013 CFPB rules do to govern mortgages and mortgage servicing? - ANSWER 1. strengthen protections for struggling borrowers by restricting dual tracking 2. prohibiting foreclosure until after all other alternatives are considered 3. protect consumers by requiring lenders to make a good-faith determination that the consumer can actually afford the mortgage 4. make it easier for borrowers to understand the terms of their loans 5. expand the types of mortgage loans subject to HOEPA protections and impose additional restrictions on mortgages covered by HOEPA to further clarify industry obligations and expand protections to struggling borrowers, CFPB amended its mortgage servicing rules on [what day] - ANSWER August 4, 2016 what did the 2016 amendments to CFPB's mortgage servicing rules do? - ANSWER 1. requires servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan 2. improves policies and procedures on early intervention for struggling borrowers and clarifies loss mitigation requirements 3. clarifies borrower protections when the servicing of the loan is transferred and provides important loan information to borrowers in bankruptcy 4. ensures that surviving family members and others who inherit or receive property generally have the same mortgage servicing protections as the original borrower what is dual tracking? - ANSWER a process that occurs when the servicer moves forward with foreclosure while simultaneously working with the borrower to avoid foreclosure; restricted by the CFPB what is robo-signing? - ANSWER the process in which important documents that require careful review are signed automatically by someone who does not follow appropriate procedures or verify information what is the servicemembers civil relief act? - ANSWER an act that protects military personnel and their dependents in issues related to housing, including certain protections against default judgments, foreclosure, and eviction what does NMS stand for? - ANSWER national mortgage settlement of 2012 who was involved in reaching NMS of 2012? - ANSWER attorney generals of 49 states and five servicers that were involved in deceptive lending and foreclosure practices who were the five servicers involved in reaching the NMS of 2012? - ANSWER 1. Ally (formerly GMAC) 2. Bank of America 3. Citi 4. JPMorgan Chase 5. Wells Fargo 6. settlements were reached at later dates for SunTrust, Ocwen, and HSBC what did NMS of 2012 require from servicers? - ANSWER 1. appoint a single point of contact for loss mitigation efforts 2. have adequate trained staff 3. honor modification agreements made by a prior servicers 4. maintain better communication with borrowers 5. comply with the servicemembers civil relief act 6. improve standards for executing foreclosure documents 7. remove improper fees 8. end dual tracking how much did NMS of 2012 provide to signing states, the federal government, and borrowers? - ANSWER $50 billion in direct payments what did NMS of 2012 result in? - ANSWER loan modifications for struggling homeowners, refinancing for underwater homeowners, and payouts for homeowners who lost their homes when is a borrower delinquent on their mortgage? - ANSWER when all or part of a monthly payment is unpaid after the due date; remains delinquent as long as the payment remains due but unpaid when is a borrower in default on their mortgage? - ANSWER a conventional loan is considered in default after 60-90 days; an FHA loan is considered in default after 30 days what are the mortgage service guidelines under CFPB for servicer contact and personnel? - ANSWER 1. servicer must make efforts to contact the borrower after 36 days of delinquency 2. servicer must send borrower written notice to contact the servicer before 45 days of delinquency and provide information about housing counselors 3. servicers must assign personnel to be available to help delinquent borrowers 4. servicers must notify borrowers promptly and in writing that a loss mitigation application is complete what are the foreclosure timeline restrictions under the CFPB's mortgage service guidelines? - ANSWER 1. servicers cannot make a first notice of filing for foreclosure until the borrower is more than 120 days delinquent 2. after 120 days, servicers cannot begin the foreclosure process while a borrower is being evaluated for a loss mitigation plan what are servicer requirements under the CFPB's mortgage service guidelines? - ANSWER 1. must be able to tell homeowners the circumstances under which the servicer may make a referral to foreclosure 2. must evaluate the borrower for all the foreclosure avoidance options for which the borrower may qualify 3. must give specific reasons for denying a loan modification option which state agencies typically govern foreclosures? - ANSWER 1. state's housing finance agency tment of community affairs 3. housing department 4. attorney general's office what are the most common reasons homeowners face foreclosure? - ANSWER reduced or lost income (45%) what is a conventional mortgage? - ANSWER a private sector loan typically issued to borrowers with high credit ratings; excludes subprime loans or mortgages insured by the US government T or F: counselors must check each client's mortgage to see if it owned by Fannie Mae or Freddie Mac to fully understand the available foreclosure options - ANSWER true what is Fannie Mae's website? - ANSWER what is Freddie Mac's website? - ANSWER