Kentucky Foreclosure Bill Removed From Consideration
On February 26, the Lexington Herald-Leader released an article titled Sponsor yanks bill that critics said favored banks over homeowners in foreclosure.
Sponsor yanks bill that critics said favored banks over homeowners in foreclosure
FRANKFORT — A state lawmaker said Thursday that he would withdraw one of his own bills after critics said it would unfairly favor banks over homeowners in the foreclosure process.
“It’s dead,” said House Banking and Insurance chairman Jeff Greer, D-Brandenburg.
Greer’s House Bill 470 would have established the Kentucky Nonjudicial Foreclosure Act. The 32-page bill would have allowed for faster, streamlined mortgage foreclosures outside of the usual legal process.
Critics, including the Lexington-based Kentucky Equal Justice Center, said the bill would have shifted the burden from banks to home owners, including proof of the right to foreclose, proper notice to all parties, and appeals. Homeowners no longer would have been able to recover their property by paying what they owed within six months of a sale, and they would have had to file lawsuits — at their own expense — to stop a wrongful foreclosure, critics said.
Greer said he filed the bill at the request of the Kentucky Bankers Association. He put it on the agenda of his House committee several times this week, but he kept yanking it because of concerns over “unintended consequences,” he said.
Through a parliamentary maneuver, the bill already had received its necessary readings on the House floor, so it was set to get a vote on the House floor as soon as Greer’s committee approved it.
“My intention was to give some relief to the banking industry, but I had no intention to hurt anybody,” Greer said. “I worked with everybody to try and fix this, but in the end, it just couldn’t be done in a short session. We couldn’t get this written in a way I liked. That’s what you get for trying to rush a bill through.”
Greer took at least $9,400 in political donations last year from Kentucky’s banking industry, including political action committees and individuals.
Debra Stamper, general counsel for the Kentucky Bankers Association, said her group drafted the original language for HB 470 last fall. It was meant to “expedite the process in cases where everyone wanted things taken care of quickly,” such as borrowers who are hopelessly behind on their mortgages and who plan to walk away from their homes.
The nonjudicial system for foreclosures would have been voluntary, Stamper said, and borrowers in default could have requested a transfer to the usual legal process at any point until shortly before the final sale. Also, the bill would not have allowed anyone to start a nonjudicial foreclosure unless they were named as the lender on loan documents, to prevent outside investors who bought mortgage-backed securities from interceding, she said.”
There was a lot of misinformation going on about this bill,” Stamper said. “We just didn’t have the time, because of the short session, to clarify. I hate to use the term misinformation, but to sit down and talk it out with everyone.”
The association will pursue a similar bill in the 2016 General Assembly, she said.
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