A National Homeowner Bill of Rights Would Defend the American Dream

With mortgage servicers paying out settlements for discriminatory foreclosure practices and unnecessary foreclosures still occurring nationwide, Representative Michelle Lujan Grisham (D) of New Mexico has introduced a bill (H.R. 4963) to establish a comprehensive National Homeowner Bill of Rights designed to curb dishonest practices in the housing sector.

Homeowner bills of rights have been successfully implemented in states such as California, but Lujan Grisham’s proposal would be the first time such measures were enacted on a national scale. A national law in place means homeowners would gain essential protections against arbitrary abuses and discriminatory conduct from mortgage servicers, which occur in every state.

For homeowners in default, the bill would add a number of critical protections for those facing the threat of foreclosure. It sets limits on when the foreclosure process can be initiated and spells out when it is required to stop.

Under the new bill, mortgage servicers would be required to halt the foreclosure process upon receiving a loan modification request from a homeowner. Once the request is received, the servicer would have to immediately evaluate whether the homeowner is eligible for a loan modification. If the borrower is found to be ineligible, the servicer would be required to first present alternatives to foreclosure, such as short sales and forbearances.

If the borrower is found to be eligible for a modification and in default, underwater homeowners—those who owe more than their home is worth—would be allowed to readjust the value of their mortgages to a level closer to what their home is actually worth today. This principal reduction would represent a major victory for struggling homeowners who received mortgages during the housing bubble. Under the proposed bill, they would no longer be required to make payments tied to highly inflated home values.

If the borrower were not underwater but still in default, the servicer would be required to offer affordable monthly payments to avert needless foreclosures.

In a major win for language access in the housing industry, the proposed bill would require mortgage servicers to translate all documents and provide language interpretation services. Currently, too many Latinos are locked out of adequate customer service due to a lack of language access in the housing sector. By requiring translation services, mortgage servicers could help close the gap between English- and Spanish-speaking homeowners.

Additionally, the bill would add a number of other protections designed to improve the lives of homeowners who have long been forced to deal with the often-opaque mortgage servicing industry. When mortgages are bought and sold from one servicer to another, the homeowner would gain added protections. The dangerous practice of “robo-signing” would be subject to legal penalties, and homeowners would gain tools to learn their rights.

Lastly, the bill would create a new office for a Mortgage Service Ombudsman tasked with assisting low-income homeowners.

While much of Congress remains stalled in partisan gridlock, a National Homeowner Bill of Rights is a commonsense proposal bringing together a set of protections from unscrupulous behavior by dishonest mortgage servicers. Far too many Latino families have already lost their homes—it’s time for practical solutions to protect our nation’s struggling homeowners. The National Homeowner Bill of Rights is the kind of legislation we need to defend the American Dream.