The Obama administration is soon expected to unveil additional protections to ensure homeowners are treated fairly and consistently under its mortgage relief program.
The policies, outlined in a draft Treasury Department document would address long-standing complaints from housing counselors. They have cited cases of lenders continuing with foreclosures while homeowners were being evaluated for help. That practice would be banned under the new rules.
Government officials acknowledge treatment of homeowners has been a problem under the $75 billion mortgage relief effort.
Some lenders, for example, continue foreclosure proceedings while evaluating a borrower for help under the program. Under the new policies, mortgage companies would have to stop all legal action once a borrower enrolls in the program.
Borrowers rejected from the program would also have 30 days to appeal the decision. In that time, lenders could schedule a foreclosure sale but not conduct it.
And mortgage companies would be required to consider applications from homeowners in bankruptcy. That's optional under the current rules.
Treasury spokeswoman Meg Reilly confirmed the document was authentic, but wrote in an e-mail that it "has not been approved and there are no immediate planned announcements on the issue."
The $75 billion program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years.
To complete the process, homeowners need to make three payments and provide proof of their income, plus a letter documenting their financial hardship.
But experts warn that hundreds of thousands of borrowers will not be eligible or will not complete the process. So far, only 116,300 borrowers out 1 million enrolled have had the terms of their mortgages changed permanently.