(Phoenix, Ariz. - Oct. 15, 2010) Attorney General Terry Goddard today called upon the Arizona Legislature to enact a Borrowers’ Bill of Rights, which would guarantee the rights of homeowners with respect to mortgage servicing and make certain unscrupulous servicing practices unlawful under the Arizona Consumer Fraud Act.

“The foreclosure abuses we have seen have hurt Arizona homeowners and our economy,” Goddard said. “One-sided mortgage contracts and abusive foreclosure practices are unfair to consumers. They tip the balance of power decidedly and inappropriately in favor of lenders and against homeowners. It is time to balance the scales. Borrowers should have rights that can be enforced.”

Under the Bill of Rights, borrowers would have the right to:

• Receive timely and accurate responses to good-faith borrower inquiries;
• Receive clear information on how to avoid foreclosure;
• Pursue loss mitigation or loan modification negotiations whenever possible;
• Not have their home foreclosed during loan modification negotiations; and
• If and when foreclosure becomes necessary, to have such foreclosure based on accurate documents,
verified by someone with personal knowledge of the information contained therein.

The Borrowers’ Bill of Rights would also make any violation of its provisions an unlawful practice subject to investigation and prosecution by the Attorney General under Arizona's Consumer Fraud Act.

Goddard added, “It has become clear we need enforcement power to ensure that servicers live up to their commitment to their customers. The bill I am proposing today would give borrowers these important rights.”

Hundreds of Arizona borrowers have filed complaints with the Arizona Attorney General's Office concerning abusive practices of their mortgage loan servicers. Despite federal efforts to encourage loan servicers to modify loans of borrowers at risk for foreclosure, consumers continue to complain of lenders failing to respond to their requests, misrepresenting the length of time the loan modification process will take and pursuing foreclosure while a loan modification is pending.

Goddard is one of 12 Attorneys General on the Executive Committee of the Multi-State Home Foreclosure Investigation announced on Wednesday. That investigation was prompted in part by disclosures of potentially unlawful robo-signing by loan servicers. “Questionable document signing practices, however, represent only one of many problems that borrowers are facing,” Goddard said.

The Dodd Frank Act, signed July 21, 2010, expanded Arizona's ability to enact consumer protection laws such as this proposed legislation. The Act provides that federal regulations will not preempt state consumer protection laws unless they are inconsistent with federal law, and more strict state laws are not considered to be in conflict.

Because these mortgage-servicing practices have become an industry-wide problem, Goddard's proposal would cover all companies that service mortgage loans in Arizona, from national banks to small mortgage companies. This ensures that every person with a mortgage in Arizona can expect the standards set forth in the Borrowers’ Bill of Rights from whatever company services their loan.

A copy of the Borrowers’ Bill of Rights is attached. For more information, contact Mika Marquart at (602) 542-7714.

Borrowers Bill of Rights 10-15-10.pdf

Audio - Borrowers Rights 10-15-2010.mp3