Ohio Agrees to Terms of a New "Compact"
With Nine Loan Servicers

April 7, 2008

Return to Predatory Lending: Developments and Pending Litigation

Governor Strickland and Kimberly Zurz of the Ohio Department of commerce announced on April 7, 2008 the “Compact to Help Ohioans Preserve Homeownership” signed by the State and nine national mortgage loan servicers. The goal of the new compact is to help Ohioans facing foreclosure to stay in their homes. Each servicer negotiated an individual compact with the state, but all agreed to adhere to the six “Fundamental Principles.” These nonbinding agreements were signed and made effective between April 3, 2008 and April 7, 2008 and all expire on June 30, 2009.

The six uniform principles agreed to are:

Principle One
Willingness to engage in a substantial and largescale loan modification effort for ARM resets and subprime mortgages.

Principle Two
Willingness to identify, evaluate and make good faith attempts to contact at-risk or defaulting borrowers as soon as possible.

Principle Three
Willingness to modify loans to the extent permissible within existing fiduciary, contractual or other legal obligations and in accordance with prudent mortgage lending and servicing practices.

Principle Four
Willingness to create incentives for staff and foreclosure counsel to modify loans rather than foreclosure.

Principle Five
Willingness to report progress to the Department of Commerce.

Principle Six
Willingness to enter into a non-binding agreement with the State for some defined period of time.

The deal comes about six months after Strickland introduced a more encompassing voluntary compact aimed at 20 major mortgage servicers in the state.

The compact is one component of the State's "Save the Dream" initiative, an effort initiated by the State of Ohio in March, 2008 to help homeowners receive assistance through the foreclosure process from counselors and other volunteers. The State recently announced the addition of pro bono legal assistance from 1,100 volunteer lawyers to the Save the Dream initiative. More information is available on the Save The Dream website.