Housing and Urban Development Secretary Shaun Donovan said “helping struggling borrowers avoid default is not only good for those borrowers, it is good for the economy.” Therefore the Obama administration will allow unemployed homeowners miss a year of mortgage payments while they are looking for a job. The expanded period is three times the previous limit of 4 months for government-insured mortgages.

This is yet another move from the administration since 2009 to aid homeowners struggling with their mortgage payments. The missed payments will be added to the overall loan amount or forgiven at the lender’s discretion.

Lender Processing Services (LPS), a company that handles loans in default for more than 50% of mortgages in the United States and contracts 80 major lenders, is under investigation for so-called robo-signing.

Robo-signing is a process where employees were signing documents used in foreclosures.  R0bo-signing has mostly occured in states where foreclosures are handled in courts. California foreclosures happen largely outside the court, that’s why  State Attorney General, Kamela Harris has included this process in her investigation of fraudulent lending procedures. In her statement she has warned that the risks of robo-signing in nonjudicial foreclosures are “particularly dangerous” because of the lack of judicial oversight.

California Attorney General Kamala Harris has created a task force of 17 lawyers and eight special agents from the Department of Justice to target mortgage fraud. The team will pursue three major areas: Corporate Fraud, Scams and Fraudulent lending practices. It will investigate small operations as well as large lenders that sold risky loans as safe investments.

Bundled mortgages sold as securities to the state and its pension funds under false pretenses, instances were lawyers charges clients fees to modify their loans and didn’t deliver, deceptive marketing and failure to full disclosure of loan terms are all under investigation along with other suspicious practices.

The Consumer Financial Protection Bureau, the newly created federal agency, made a major first move by releasing two prototypes of disclosure forms that lenders must give home buyers who apply for mortgage loans.

The prototypes have a simpler language and provide precise key details about the loan that help the consumer better understand the terms of the mortgage and compare them with the terms from other providers. 

Over the next four months the agency will test the forms in Los Angeles, Chicago, Baltimore, Albuquerque, Birmingham, Alabama and Springfield, Massachusett. It solicits the public’s feedback through its website, consumerfinance.gov. and will interview consumers and industry representative to release the final simplified form.