Implementation and Accountability
As policymakers enact promising policies, attention must be paid to implementation and accountability to ensure that the desired results are achieved. Key implementation and accountability strategies for reducing home foreclosures include the following:
-
Support monitoring and enforcement.
Effective restrictions on predatory financial practices are important, but only insofar as government overseers ensure that financial institutions comply. For example, a state can increase their regulation or licensing requirements in an effort to weed out unscrupulous lenders. A number of states have increased consumer protection activities in an effort to respond to claims made by residents against predatory lenders.[i]
-
Ensure loan modifications benefit borrowers.
As borrowers pursue options to restructure the terms of subprime and other loans, it is essential to ensure that new loan terms actually benefit the borrower through lower interest rates, monthly payments, or reduced principal debt. Concerns have been raised by the FDIC that limited data is available on the quality of modified loans, and what information does exist suggests that the quality may be low.[ii]
-
Enact protections against abusive “foreclosure consultants.”
In response to the foreclosure crisis, a number of “foreclosure consultants” have steered borrowers into unfavorable deals, requiring them to relinquish title to their homes, or sell them at below-market prices. In response, states can prohibit foreclosure “rescue” scams, as have 23 states.
[i]
U.S. General Accounting Office, 2004, “Consumer Protetction: Federal and state agencies face challenges in combating predatory lending,” Washington, DC: US GAO
.
[ii]
Stephanie Casey Pierce,
Emerging Trends: State Actions to Tackle the Foreclosure Crisis.
Washington, DC: National Governors Association: February 2009.