FDIC Issues New Rules for Lenders Abandoning Foreclosures
Although it may not seem like it, banks abandon foreclosures all the time. And to help guide them through this process, the Federal Deposit Insurance Corporation (the FDIC) issued guidelines last week to clarify its expectations for lenders canceling a foreclosure. The FDIC encouraged lenders to work with borrowers to come up with an alternative that would allow borrowers to stay in their homes, which would make it more likely that homes would remain well-maintained and care form. The FDIC stated that when abandoning a foreclosure, banks should:
- Comply with state and local laws.
- Notify state and local governments and other relevant authorities of their decision to abandon the foreclosure.
- Notify the borrower that they are abandoning the foreclosure.
- Notify the borrower that they have the right to remain in the property for the time being, until the property is sold or transferred in some other way.
- Notify the borrower that they are still liable for the balance of the mortgage.
- Notify the borrower that they must continue to maintain the property.
- If the property is vacant, the lender must still use reasonable means to locate the borrower and notify them of items 3-6 above.
- Obtain current market value information prior to starting or stopping a foreclosure.
The FDIC will conduct consumer protection examinations to make sure their rules are being followed!