Indiana Stepping Up Anti-Foreclosure Efforts

Home foreclosures have been an economic disaster since early 2007 and may have peaked. But the threat of losing one's home remains a major problem a growing number of states are now addressing.

In Indiana, state officials have vigorously pursued foreclosure rescue and mortgage modification consultants they said were preying on distressed homeowners. At the same time, the state's Supreme Court has served notice to mortgage lenders that they must follow laws designed to protect consumers' rights.

"The Indiana Supreme Court should be commended for their leadership as a co-equal branch of government in the way they worked with the executive and legislative branches to address the problems in the mortgage foreclosure system," said Indiana Attorney General Greg Zoeller.

"There remain national problems that continue to plague the foreclosure system that require more be done to ensure fairness for those at risk of losing their dream of home ownership, for which my office continues to work toward a fair resolution for everyone."

Mortgage Foreclosure Task Force

Zoeller in particular praised the Court's Mortgage Foreclosure Task Force that developed new guidelines intended to protect homeowners from deter abuses of the mortgage foreclosure process. The task force includes consumer advocates, judges, law professors, creditors' attorneys and the Attorney General's Office. Its recommendations are collectively termed the Mortgage Foreclosure Best Practices.

Under a new state law, distressed borrowers have the right to a settlement conference with their lender, where the two sides can attempt a good faith effort to work out a loan modification. That's meant to address the common homeowner complaint that servicers seem disengaged, and even disinterested, in helping them modify a loan.

The settlement conference is aimed at reducing the number of foreclosures in the state, arranging short sales or deed in lieu of foreclosure so that the homeowner can give up the house and move on without protracted litigation. The new law also allows trial judges to hold lenders accountable through civil penalties and sanctions for violating borrowers' legal rights.

Removing the market for foreclosure rescuers

With the borrower's rights to a settlement conference codified in statute, there is less appeal for foreclosure rescuers or mortgage modification consultants who often collect upfront fees but leave the homeowner in worse condition. The Attorney General's Homeowner Protection Unit (HPU) has filed numerous lawsuits against foreclosure-rescue consultants.

Rather than being scammed by an illegal foreclosure rescue consultant, at-risk homeowners are instead encouraged to contact the Indiana Foreclosure Prevention Network or IFPN. The state-run nonprofit network of housing counselors offers useful advice to homeowners - at no charge - on steps to avoid foreclosure or to mitigate loss.

In addition, Zoeller and the attorneys general of other states are participating in a multi-state investigation of fraudulent and illegal practices in the mortgage-servicing industry. Led by Iowa's attorney general, the ongoing investigation focuses on servicer abuses, including mortgage lenders whose employees signed foreclosure documents and filed them in court without reading or authenticating them - a practice called "robo-signing" that contributed to many errors and faulty or needless foreclosure proceedings.