Transcript: Helping Homeowners Avoid Foreclosure

Helping Homeowners Avoid Foreclosure (Part 1)

Source: Consumer Action | Featured Speakers: Andrea Bopp Stark (NCLC), Stacey Tutt (NHLP), Araceli Jimenez (HUD Counselor)

1. Introduction and Housekeeping

[0:00 - 0:05:12]

  • [Visual]: The screen shows a title slide: "Helping Homeowners Avoid Foreclosure." To the left is the Consumer Action logo. At the bottom, text reads: "Presented by Consumer Action in partnership with the Federal Home Loan Bank of San Francisco."
  • [Audio - Host]: "Good afternoon, everyone. Thank you for joining Consumer Action’s train-the-trainer webinar, 'Helping Homeowners Avoid Foreclosure.' My name is [Host Name] and I'll be your moderator. Today, we are very lucky to have a panel of experts to walk us through the complex landscape of mortgage servicing and foreclosure prevention."
  • [Visual]: Slide transitions to "Agenda." Bullet points include: Foreclosure Basics, Federal Law Protections, Loss Mitigation Options, and Avoiding Scams.
  • [Audio - Host]: "Before we begin, a few housekeeping items. This session is being recorded. All participants are in listen-only mode. You can submit questions via the Q&A box at any time, and we will address them during the final portion of the webinar. Now, I’ll turn it over to Andrea Bopp Stark from the National Consumer Law Center."

2. Foreclosure Basics and "The Players"

[0:05:13 - 0:15:30]

  • [Visual]: Slide titled "Who Is Who in Mortgage Servicing?" featuring a diagram of three figures: The Homeowner, the Servicer, and the Investor.
  • [Audio - Andrea Bopp Stark]: "Thanks so much for having me. It’s important to start with the basics because homeowners are often confused about who they are actually dealing with. You have the Homeowner, that's you. You have the Investor, which is the entity that actually owns the loan—think Fannie Mae, Freddie Mac, or a private trust. And then you have the Servicer. The servicer is the company you send your check to every month. They don't own your loan; they manage it for the investor. When you’re in trouble, you’re talking to the servicer, but they have to follow the rules set by the investor."
  • [Visual]: Slide changes to "Delinquency vs. Foreclosure." A timeline shows Day 1 (First missed payment) to Day 121 (Earliest a foreclosure can be filed).
  • [Audio - Andrea Bopp Stark]: "Under federal law, specifically Regulation X, a servicer generally cannot make the first legal filing for foreclosure until a homeowner is more than 120 days delinquent. This is a critical protection. It’s designed to give you time to work out a 'loss mitigation' plan. If they file on Day 90, they are in violation of federal law."

3. Federal Law: QWR, RFI, and Notice of Error (NOE)

[0:15:31 - 0:28:45]

  • [Visual]: Slide titled "Your Rights Under RESPA." It lists "Qualified Written Request (QWR)" with two categories: "Request for Information (RFI)" and "Notice of Error (NOE)."
  • [Audio - Stacey Tutt]: "This is one of those letters under federal law—QWR, RFI, or NOE. If your letter fits the elements of these, the servicer must respond. They have to acknowledge that they got your letter within five business days of receiving it. And then they have to conduct a reasonable investigation and respond back to you within thirty business days. They can ask for an extension, but in general, you’re going to get an answer within thirty business days. This is really important—it’s not going to be this never-ending chase for an answer or just waiting and waiting. They have to respond or they are in violation of the statute."
  • [Visual]: Slide titled "Request for Information (RFI)."
  • [Audio - Stacey Tutt]: "Specifically, for an RFI, you can ask for information relating to the servicing of the mortgage loan. This is very broad. You can ask, 'Who is the owner of this loan?' You can ask for a payment history. You can ask, 'How much did you pay to the town for my property taxes?' or 'How were my escrow payments applied?' They have to provide that or explain why they aren't within that thirty-day window."

4. Loss Mitigation: The "Menu" of Options

[0:28:46 - 0:40:12]

  • [Visual]: A slide titled "Loss Mitigation: Retention Options" appears. It shows a list of four main categories with icons next to each:
    1. Forbearance (Icon of a pause button)
    2. Repayment Plan (Icon of a calendar)
    3. Loan Modification (Icon of a wrench and a house)
    4. Deferral/Partial Claim (Icon of an arrow pointing to the future)
  • [Audio - Stacey Tutt]: "When we talk about 'loss mitigation,' we’re really just talking about a menu of options to avoid foreclosure. The first and most common during the pandemic was Forbearance. This is just a temporary pause or reduction in your payments. It doesn't mean the money is forgiven; it just means you don't have to pay it right now. Then you have Repayment Plans. This is where you take whatever you missed and you spread it out over, say, six or twelve months on top of your regular payment. That's usually only for people who had a very short-term hardship."
  • [Visual]: The slide transitions to a more complex graphic titled "The Loan Modification 'Waterfall'." It shows a series of steps moving downward: Reduce Interest Rate -> Extend Term -> Forbear Principal.
  • [Audio - Andrea Bopp Stark]: "The 'Waterfall' is the term we use for how a servicer calculates a Loan Modification. Their goal is to get your monthly payment down to an affordable percentage of your gross monthly income—usually around 31%. They start by stretching the loan out to 40 years. If that doesn't get the payment low enough, they lower the interest rate. If that still doesn't work, they might 'forbear' or set aside some of the principal to be paid later without interest. It’s a mathematical formula they are required to follow based on the investor's rules."

5. The Application Process and "Completeness"

[0:40:13 - 0:52:30]

  • [Visual]: Slide titled "The Loss Mitigation Application (LMA)." It features a checklist:
    • Uniform Borrower Assistance Form (Form 710)
    • Proof of Income (Paystubs/Award Letters)
    • Tax Returns (Last 2 years)
    • Hardship Affidavit
    • Bank Statements (Last 2 months)
  • [Audio - Araceli Jimenez]: "As a housing counselor, this is where most of my work happens. The servicer will tell you the application is 'incomplete' if even one page is missing or if a signature isn't dated correctly. Under the RESPA rules Stacey mentioned earlier, once you submit a 'complete' application—meaning you’ve given them everything they asked for—the servicer must evaluate you for all available options. They have 30 days to give you a written decision. If they deny you for a modification, they have to tell you exactly why, and you have the right to appeal that decision within 14 days."
  • [Visual]: A small "Pro-Tip" box appears at the bottom of the slide: "Keep a log of every call, the name of the person you spoke with, and the date."
  • [Audio - Araceli Jimenez]: "I cannot stress this enough: Keep a 'Foreclosure Log.' Every time you send a document, get a fax confirmation or use certified mail. If the servicer claims they never got your paystubs, you need that proof to show the CFPB or a judge. We see 'lost' paperwork all the time, and having your own paper trail is the only way to hold them accountable to these federal timelines."

6. The Legal Foreclosure Process: Judicial vs. Non-Judicial

[0:52:31 - 0:58:15]

  • [Visual]: A slide titled "Two Paths: Judicial vs. Non-Judicial Foreclosure" appears. It features a map of the United States with states shaded in two colors: blue for judicial and orange for non-judicial.
    • Judicial (Blue): Involves a lawsuit and a judge (e.g., New York, Florida, Illinois).
    • Non-Judicial (Orange): No court; uses a "Power of Sale" clause (e.g., California, Texas, Georgia).
  • [Audio - Andrea Bopp Stark]: "It is vital to know which state you are in because the timelines are very different. In a Judicial state, the servicer has to file a lawsuit against you. You get a summons, you file an answer, and you see a judge. This process can take months or even years. However, in a Non-Judicial state, the servicer just has to send you a 'Notice of Default' and then a 'Notice of Sale.' There is no judge checking their work unless you sue them to stop the sale. In these states, a home can be sold in as little as 90 to 120 days after the first legal notice."

7. Avoiding Foreclosure "Rescue" Scams

[0:58:16 - 1:04:40]

  • [Visual]: A slide titled "Warning: Foreclosure Rescue Scams" is displayed. A large yellow warning icon is centered. Bullet points in bold red text include:
    • Upfront Fees.
    • Guarantees to stop foreclosure.
    • Requests to sign over your deed.
    • Instructions to stop communicating with your lender.
  • [Audio - Host]: "We see this all the time. Scammers buy 'Notice of Default' lists and target homeowners when they are most vulnerable. They might call themselves 'forensic auditors' or 'mortgage consultants.' They will ask for a few thousand dollars upfront and tell you to stop talking to your bank. Do not do this. If they ask for money before they do any work, it is a scam. HUD-approved housing counseling—like the services Araceli provides—is always free. There is never a charge for help with a loan modification."

8. Final Q&A Session

[1:04:41 - 1:12:30]

  • [Visual]: A slide titled "Questions & Answers" with an image of a person raising their hand.
  • [Audio - Host]: "We have a question from the chat. 'Can the bank reject a partial payment?'"
  • [Audio - Stacey Tutt]: "Yes, they can. Most mortgage contracts say that if you send less than the full amount due, the servicer can put that money in a 'suspense account' until you send enough to make a full payment. They don't have to apply it to your balance right away. This is why it’s so important to get a formal 'repayment plan' in writing before you start sending partial amounts."
  • [Audio - Host]: "Another question: 'What if I have a second mortgage or a HELOC?'"
  • [Audio - Andrea Bopp Stark]: "That’s a great question. You have to deal with both. Even if you modify your first mortgage, the second mortgage holder can still foreclose if you are delinquent with them. You often have to do two separate loss mitigation applications. Do not ignore the second mortgage just because it's a smaller amount."

9. Closing Remarks and Resources

[1:12:31 - 1:15:00]

  • [Visual]: The final slide titled "Key Resources for Homeowners" appears. It lists the following:
    • HUD Counselor Locator: hud.gov/offices/hsg/sfh/hcc/hcs.cfm
    • Consumer Action: consumer-action.org
    • Homeowner Hope Hotline: 1-888-995-HOPE (4673)
    • NCLC (National Consumer Law Center): nclc.org
  • [Audio - Host]: "We want to thank our panel—Andrea, Stacey, and Araceli—for their incredible expertise today. To our attendees, remember: the earlier you act, the more options you have. Open your mail, call a counselor, and know your rights under federal law. Thank you for joining Consumer Action’s webinar. Have a great afternoon."
  • [Visual]: The screen fades to white with the Consumer Action logo and website URL. The music fades out.