Page 481 – Safeguard Properties

Legislation in Montana Aimed at Reducing Banks? Liability in Loss Mitigation

Posted on September 13, 2018October 29, 2018 by Safeguard

On March 13, DS News released an article discussing the state of Montana’s SB 280 and SB 281.

Legislation in Montana Aimed at Reducing Banks’ Liability in Loss Mitigation

Lawmakers, particularly Republicans, who are especially concerned with the mortgage finance industry have been seeking regulatory relief for banks ever since the Consumer Financial Protection Bureau was created in 2011.

The same thing is happening at the state level now in Montana, where two bills that were recently heard in the state’s House of Representatives were aimed at reducing the amount of liability for banks in lending and other mortgage practices such as loss mitigation.

The two bills were introduced on December 5, 2014, by Montana Republican State Senator Eric Moore. Under SB 280, which “generally revises the loan agreement statute of frauds laws,” a borrower would be allowed to sue a lender over contract fraud only if the alleged violation is in writing, thus reversing a ruling from the Montana Supreme Court last year that permitted the use of verbal discussions between a borrower and a mortgagee as evidence of fraud in court. SB 281, the stated purpose of which is to “generally revise consumer protection damage laws,” would disallow the awarding of punitive damages when a borrower sues a lender for breach of contract.

SB 280 was tabled in committee Friday and SB 281 passed out of committee, according to a source familiar with the matter. The two bills had passed in the Montana State Senate on February 23.

“SB 281 only limits damages in Consumer Protection Act claims, not in tort claims,” Al Smith, Executive Director of the Montana Trial Lawyers Association, said in an email to DS News. “We hope that the full House will reject the bill so that consumers will be able to obtain full justice when banks fraudulently and negligently misrepresent the ‘help’ they offer consumers.”

Distressed and at-risk Montana homeowners spoke out against the two bills in the state’s House Business and Labor Committee on Thursday, claiming that their respective mortgagees had misled them verbally with regards to loss mitigation practices. The borrowers said they would have had no legal claim against those mortgagees if these bills had been in enacted before they filed their respective lawsuits against their lenders.

According to one media report, bankers in Montana have been advised not to talk to borrowers about distressed loans since last year’s Montana Supreme Court ruling, because what the bankers say can be used against them in court. Moore, the bills’ sponsor, told the committee that the bills were “commonsense” and that such legislation was needed to protect banks and other financial institutions from frivolous lawsuits, saying they need to be able to inform borrowers of their options regarding delinquent loans without the worry of getting sued.

Foreclosures and seriously delinquent mortgage loans typically occur much less frequently in Montana than in other states. Montana consistently ranks near the bottom among states when it comes to foreclosure statistics – the latest CoreLogic data shows that only three states had fewer foreclosures than Montana’s total of 832 for the 12-month period from February 2014 to January 2015. Montana’s serious delinquency rate of 1.7 percent for January was less than half of the national average of 4 percent for the month.

Please click here to view the article online.

About Safeguard
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow. Website: www.safeguardproperties.com.

Kentucky Foreclosure Bill Removed From Consideration

Posted on September 13, 2018September 13, 2018 by Safeguard

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.

Please click here to view the article online.

Indiana AG Urges Lawmakers Not to Eliminate Foreclosure Settlement Conferences

Posted on September 13, 2018October 29, 2018 by Safeguard

On March 10, DS News released an article discussing Indiana Attorney General Greg Zoeller’s efforts to stop legislation that would eliminate a homeowner’s final alternative before foreclosure.

Indiana AG Urges Lawmakers Not to Eliminate Foreclosure ‘Settlement Conferences’

Indiana Attorney General Greg Zoeller is trying to stop legislation that would eliminate a consumer protection known as the “settlement conference,” which is a homeowner’s final recourse before their home goes to foreclosure, according to an announcement on Zoeller’s website.

So far, the proposal has not received sufficient discussion or debate in committee or floor sessions, according to Zoeller. He urged Indiana lawmakers to stop the proposal before it gets any further in order to keep the settlement conference intact as a consumer option to avoid foreclosure and help them stay in their homes.

“After the foreclosure crisis exposed the unethical practices of major mortgage servicers, my office worked extremely hard in our multistate investigation against five major banks to create new consumer protections for distressed homeowners,” Zoeller said. “The right created by law to a court-supervised settlement conference and face-to-face meeting between borrowers and lenders has helped thousands of distressed homeowners work out plans to avoid foreclosures. We will aggressively oppose any attempt by the bankers’ lobby to roll back the clock and take away this crucial protection.”

The Indiana AG’s office has long been involved in protecting the state’s consumers when it comes to foreclosures and foreclosure prevention. participated in the multi-state investigation of five major financial institutions in 2010 over “robo-signing” practices on foreclosure documents that in part precipitated the foreclosure crisis. Those five servicers reached a settlement worth $25 billion in 2012, and the state of Indiana received $28.8 million from that settlement. The AG’s Office also helped bring the settlement conference in to widespread use in 2010-11 as a result of teaming with the Indiana Supreme Court task force to develop the Mortgage Foreclosure Best Practices.

Under the current format of the settlement conference, distressed borrowers meet face-to-face with mortgagees, supervised by the court, in an attempt to work out some type of foreclosure alternative such as a loan modification or short sale. According to Zoeller, the Indiana Supreme Court’s Mortgage Foreclosure Trial Court reported a total of 13,341 settlement conferences during a nearly five-year period between April 2010 and January 2015. According to the court, 7,002 of those conferences (more than half) resulted in a “workout” of delinquent mortgage payments or some type of mutually agreeable settlement, and out of those settlements, the borrowers were able to stay in their homes in 6,174 of them. The AG’s Office also helped 125 homeowners achieve loss mitigation such as a load mod or short sale in a year and a half period between January 2013 and July 2014.

Zoeller said the settlement conference is being eliminated because of a proposed amendment that was added to a Senate bill in January that requires municipalities to keep a registry of persons who abuse the tax process in relation to vacant, abandoned, and often blighted properties. Zoeller said he does not object to the bill itself, which would help municipalities eliminate blight, but he is opposed to the amendment, which would remove the 2011 reforms that put the settlement conference in place and would eliminate a distressed homeowner’s right to have such a conference with the mortgagee to avoid foreclosure. Zoeller has been urging lawmakers not to include this amendment to the Senate bill, his press release said.

Those in favor of the amendment say that settlement conferences are “duplicative” and “unnecessarily time consuming,” since lenders are required by the Dodd-Frank Act to administrate loss mitigation efforts. Zoeller argues that removing the settlement conference would take away the homeowner’s last resort before foreclosure, and also that settlement conferences tend to have higher rates of success for keeping borrowers in their homes than other loss mitigation attempts. He said his office still receives about 500 complaints per year on average with regards to mortgage servicing, so he still believes that the settlement conference should be maintained.

“The worst of the foreclosures may be behind us, but that’s no reason to grow complacent and take away this procedure that provides a measure of fairness for distressed homeowners in dire financial situations,” Zoeller said. “It is imperative that lawmakers act in the best interest of their homeowner-constituents and do the right thing to preserve this important and effective tool for homeowners. Lawmakers should remove this offensive amendment from the bill and shelve the amendment permanently, and allow settlement conferences to continue.”

Please click here to view the article online.

How Would Bill Affect Home Foreclosures?

Posted on September 13, 2018September 13, 2018 by Safeguard

On March 6, the Albuquerque Journal published an article discussing New Mexico’s Senate Bill 439 (Home Loan Protection & Certain Foreclosures).

How would bill affect home foreclosures?

If you own a home, or ever hope to, you should be aware of a bill before the 2015 Legislature which may drastically affect your rights. We’re going to look at Senate Bill 439. You can find the full text at nmlegis.gov.

But first, it’s important to understand how home ownership in New Mexico works. Assuming you did not hit the lottery, receive an unexpected inheritance or find a bag of cash while walking your dog, you probably borrowed money to buy your house from a bank or mortgage company. How the lender secures repayment is the important distinction before our lawmakers under SB 439.

Historically, loans in New Mexico have been based on the mortgage system. Under this approach, the borrower signs a contract to repay the loan on specified terms, which is called a promissory note. The borrower’s performance under the promissory note is then secured by a second document, a mortgage, which creates a lien on the real estate in the lender’s favor.

The important distinction is that you are the title owner of the property subject to the lien created by the promissory note and mortgage. If you fail to pay as required under the promissory note, the lender must bring a legal action to assert their lien rights directly against the secured property.

This process if known as a judicial foreclosure.

In contrast, in 1987 New Mexico recognized the deed of trust system as another form of real estate financing. The Deed of Trust Act was created to provide lenders with “inexpensive and expeditious foreclosure proceedings.” This system employs the same contract for payment, or promissory note, but instead of a mortgage, there is a deed of trust which places title ownership of the real property in the name of a third party, the trustee.

Having title ownership in the third party trustee, who is usually chosen by and affiliated with the lender, allows the lender to proceed with foreclosure upon a simple notice of trustee’s sale without any oversight or opportunity to be heard. If the homeowner has defenses to foreclosure claims, the homeowner must institute legal action to stop the trustee’s sale. This is known as non-judicial foreclosure.

Senate Bill 439 seeks to expand the use of the deed of trust system by exempting those transactions from the scope of the Home Loan Protection Act. That 2003 legislation was directed against “abusive mortgage lending [causing] too many homeowners [to become] victims of over-reaching creditors.”

The HLPA restricts what lenders can charge for loans and requires that loans provide a net benefit to the borrower, not just fees to the lender. If enacted, SB 439 would serve to re-empower those “over-reaching creditors” to both ignore consumer protections carefully established in 2003 and to act without any oversight through non-judicial foreclosure proceedings just so long as they utilize a deed of trust.

If you have any doubt that there are plenty of “over-reaching creditors” to go around, you might note that “big banks” have paid out more than $100 billion – yes billion – in fines and settlements to the U.S. Justice Department stemming from nationwide fraudulent lending and foreclosure practices during the recent “real estate bubble.”

Lenders profess it is necessary they be allowed to evade the oversight of judicial foreclosure because it is too slow, often requiring years to accomplish with great expense. I have personally handled hundreds, perhaps thousands, of foreclosure cases since joining the court in 2009, at the very height of the “bubble,” and I can tell you firsthand delays are almost always the result of intransigence and neglect on the lenders’ part, not in the judicial system itself.

It is common for lenders to initiate a lawsuit then let it sit for months, even years, without action. Often the excuse is they couldn’t even locate the paperwork proving they own the loan they are seeking to foreclose upon, or that they did not receive loan modification applications which were in fact submitted multiple times in accord with federal regulations.

Sometimes, there is no excuse at all. They simply fail to act upon their lawsuits. To be sure, there are borrowers who orchestrate and enjoy staying in their home without making payments as long as they can, but the lender can simply proceed to trial.

I have scheduled dozens and dozens of trials on residential foreclosures. Not a single case has actually gone to trial. The judicial system is simply not the problem in New Mexico foreclosure litigation.

The oversight from judicial foreclosure requires lenders prove their claims to an independent judge before they take your home away. Non-judicial foreclosure does not make them prove anything to anyone.

You can “Judge for Yourself” whether our Legislature should make it easier for lenders to foreclose without proof or oversight. If $100 billion is any indication, the lenders have a lot to prove.

Please click here to view the article online.

Please click here to view the full text of SB 439.

Free Web-Based Foreclosure Education Course Offered to General Public

Posted on September 13, 2018September 13, 2018 by Safeguard

On March 18, DS News published an article discussing Understanding Foreclosure: A City Leader’s Guide, now available free for the first time to the general public.

Free Web-Based Foreclosure Education Course Offered to General Public

A new Web-based course that will provide city leaders with strategies to successfully address foreclosures in their cities will be offered for free to the general public, according to an announcement from National League of Cities (NLC) and Wells Fargo on Wednesday.

The course, entitled Understanding Foreclosure: A City Leader’s Guide, was initially launched in 2014 at the Congress of Cities in Austin, Texas. NLC is offering the course as part of its NLC University, which is NLC’s collaborative education and professional development initiative.

“The National League of Cities is pleased to offer Understanding Foreclosure: A City Leader’s Guide with Wells Fargo for the first time to the general public, free of charge,” said Clarence E. Anthony, CEO and executive director of NLC. “The tools in this course provide proven strategies to help city leaders across the nation understand and navigate the intricacies of the foreclosure process. Ultimately, a better understanding of this issue will lead to better outcomes for our communities and their residents.”

The course is intended to equip city leaders with the best information and resources that will allow them to take a proactive stance on foreclosures should their cities experience another mortgage crisis like the one that hit the nation in 2008.

“At Wells Fargo we understand the important role we play in helping our communities succeed,” said Wells Fargo’s Mike Rizer, head of Community Relations. “This course, developed with the National League of Cities, provides information and strategies that will help to improve quality of life in our neighborhoods, and that we hope will ultimately promote long-term economic prosperity.”

The course features three self-paced modules that informs participants as to the basics of foreclosures and the devastating impact they have on communities. The course includes a series on mortgage basics, such as who is responsible for the care of vacant and abandoned properties, and building strategies and partnerships to address foreclosures. Each module features specific learning objectives and engagement activities.

“This webinar is interactive and easy to follow,” Kansas City, Missouri, Mayor Sly James said. “A better understanding of mortgage processes can improve relations between lenders and residents, help stabilize neighborhoods and improve livability in our city.”

Please click here to view the article online.

Wisconsin Supreme Court Tackles “Walkaway” Foreclosures

Posted on September 13, 2018September 13, 2018 by Safeguard

Updated 4/27/17: Reinhart Boerner Van Deuren S.C. Attorneys at Law released an article titled The Timing of the Foreclosure Sale Process for Occupied Properties in Wisconsin.

Link to article

Updated 4/25/16: Wisconsin AB 720 has been signed by Governor Scott Walker.

Link to Enrolled Legislation text

Additional Resources:
Milwaukee Journal-Sentinel (Scott Walker sings bills on ‘zombie homes,’ photo IDs, drunken driving)

WISN ABC 12 (Mayor Barrett rails against Gov. Walker, ‘Zombie Houses’)

Updated 3/5/16: The Milwaukee Journal-Sentinel published an article titled Senate may take up zombie homes bill.

Link to article

Updated 1/22/16: The Milwuakee Journal-Sentinel published an article titled GOP bill would create more ‘zombie’ homes, Milwaukee officials say.

Link to article

Link to WI AB 720 text

Updated 11/4/15: The October issue of the Wisconsin Lawyer (State Bar of Wisconsin) featured an article titled Foreclosures in Limbo: Zombie Properties.

Link to article

Updated 3/20/15: The National Law Review posted an article titled Zombie Properties May Haunt Lenders in Wisconsin Foreclosures.

Link to article

Legislation Update
February 17, 2015

Circuit courts must order mortgagee banks to sell foreclosed and abandoned property, known as “walkaway” foreclosures, within a reasonable time after obtaining a foreclosure judgment, the Wisconsin Supreme Court has ruled.

Shirley Carson obtained home mortgage loan for $52,000 but subsequently defaulted. The Bank of New York Mellon, as loan trustee, sought a judgment of foreclosure and sale of the premises, waiving its right to a deficiency judgment against Carson. But the bank could not locate Carson to serve the complaint, and served by publication.

The process server said Carson’s house in Milwaukee appeared to be abandoned. The mortgage loan servicer filed a “registration of abandoned property in foreclosure” and the bank obtained a default judgment determining that Carson owed the bank more than $81,000. The circuit court ordered the property to be sold at any time after expiration of the three-month redemption period during which Carson could redeem the property.

The order prohibited the bank and Carson from committing waste on the property, and said the bank could take steps to secure the property if it was abandoned. However, the circuit court did not definitively rule that the house was an abandoned property.

The bank did not secure the property and it was burglarized, vandalized, and became subject to fines and building code violations. Carson incurred $1,800 for failing to maintain the property, and the bank did not maintain it despite an order from the city.

More than 16 months after the foreclosure judgment was entered, the property still wasn’t sold, and it wasn’t up for sale. The bank said it elected not to bring a sale because it wasn’t fit for selling. Carson remained owner with legal right to possession.

Carson, who could not maintain the property or pay the fines, filed a motion to find the property abandoned, and sought an order that the bank sell the vacant property.

Carson filed the motion under Wis. Stat. section 846.102, which says the sale of abandoned property “shall be made upon the expiration of 5 weeks from the date when such [foreclosure] judgment is entered.”But the circuit court denied the motion, concluding that circuit courts don’t have authority to compel a sale of abandoned property under the statute. Carson appealed, and the appeals court reversed.

In Bank of New York Mellon v. Carson, 2015 WI 2015 (Feb. 17, 2015), a four-justice majority ruled that section 846.102 authorizes circuit courts to order mortgagee banks to sell abandoned foreclosures, and must order sales within a reasonable time.

“The plain language of the statute grants the circuit court the authority to order a bank to sell the property,” wrote Justice Ann Bradley wrote in a majority opinion. “Indeed, under the statute the court’s judgment must include a requirement that the property be sold.”

The majority noted that mortgagee banks can delay sales on other types of foreclosure properties, but state law treats abandoned property differently.

In addition, the majority ruled that mortgagee’s “must” sell, despite the bank’s argument that it must wait five weeks to sell but has a five-year window to sell after that.

The bank had argued that like other foreclosure statutes, section 846.102 merely creates a delay mechanism to give homeowners one last chance to redeem.

“Wisconsin Stat. § 846.102 addresses properties that have been abandoned, properties which borrowers no longer have an interest in retaining,” Justice Bradley wrote. “Thus, the policy concern of creating a delay does not appear to be implicated.”

The intent of the statute is to help municipalities deal with abandoned properties promptly, the majority explained, since abandoned properties attract crime.

“Interpreting Wis. Stat § 846.102 as permitting sale at any time within five years after judgment is entered would exacerbate the problem that the statute was meant to ameliorate,” wrote Bradley, noting studies on the negative impact of vacant property.

The majority remanded the case for a determination on abandonment, and an order of sale within a reasonable time after the five-week period. What constitutes a “reasonable time” should be based on the totality of the circumstances, the court noted.

Concurrence

Justice David Prosser wrote a concurring opinion, joined by Justices Annette Ziegler and Michael Gableman. The concurring justices would affirm the lower appeals court decision, agreeing that Carson could seek judicial sale of the abandoned property.

But they disagreed that section 846.102 requires circuit courts to order the prompt sale of abandoned properties, stating the majority’s mistaken interpretation “is likely to have profound ramifications on real estate financing in Wisconsin.”

Justice Prosser noted that mortgagee banks normally have incentives to promptly sell foreclosed property, since they normally recoup debts upon the sale. Thus, mortgagee banks would only delay sales if there’s a rational economic reason to do so.

“[I]f the mortgagee is expected to assume responsibility for abandoned property, the mortgagee must be given reasonable options, even if unpalatable, rather than be forced into unwanted sale without the protection of the equitable principles upon which mortgage foreclosures rest,” Justice Prosser wrote.

Justice Prosser said banks with less flexibility to determine the timing of abandoned home sales might increase financing costs or deny certain mortgage loans. He said the majority’s decision may require prompt sale of thousands of abandoned properties.

Source: State Bar of Wisconsin

Additional Resource:

Milwaukee Journal Sentinel ( Milwaukee officials hail court ruling on ‘zombie’ properties)

Tough Choices for Servicers After Tenant Foreclosure Law Expires

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 5, National Mortgage News published an article discussing potential issues facing mortgage servicers after the expiration of the federal Protecting of Tenants at Foreclosure Act at the end of 2014.

Tough Choices for Servicers After Tenant Foreclosure Law Expires

Mortgage servicers are bracing for a potential public relations nightmare: scores of renters and their belongings on curbs across America, after evictions from foreclosed properties.

Consumer advocates expect a rash of evictions in the coming months on properties entering foreclosure following the expiration of the federal Protecting Tenants at Foreclosure Act.

That 2009 law upheld existing leases and required that tenants in foreclosed properties be given 90 days’ notice before being evicted. It was originally set to expire at the end of 2012, but a provision of the Dodd-Frank Act extended the law until the end of 2014.

Wells Fargo, the nation’s largest mortgage servicer, said it is no longer following the guidelines prescribed by the federal law, while JPMorgan Chase, Citigroup and Nationstar are voluntarily following its rules. Bank of America said it is in the process of reviewing its policy.

With the law’s expiration, mortgage servicers will have to maneuver a patchwork of state and local regulations. Just nine states and Washington, D.C., currently offer the same protections as the expired federal law, while 17 states have no specific tenant protections or allow servicers to evict immediately following a foreclosure sale.

“I expect to see more evictions in the coming months,” said Kent Qian, a staff attorney at the National Housing Law Project in San Francisco. “Some renters are going to be left out in the cold.”

Roughly 30% to 40% of properties in foreclosure have tenants or renters, said Linda Couch, a senior vice president for policy and research at the National Low Income Housing Coalition.

“One of the reasons Congress decided to act in the first place is that foreclosure affects a large number of renters,” said Couch.

Bills to make the law permanent failed last year. Now that Republicans control both houses of Congress, making the law permanent “is not in the cards,” Couch said. But consumer advocates are still looking for some housing policy legislation that might reenact the law.

Banks are servicers on many foreclosed properties, which may be held on their own books or serviced on behalf of investors in securitizations. In the past, when a property became real estate-owned following a foreclosure, the tenant lost his deposit and no longer had the right to occupy the home unless the new owner offered him a new lease. Mortgage servicers typically do not want to be landlords, so most tenants were required to move.

Evictions may be in the financial interest of investors when tenants fail to pay rent. Often when a home goes into foreclosure, the existing tenant does not know who to send the rent to and simply stops paying.

But a flood of evictions could play poorly with a public already angry at mortgage servicers.

“Any bank that is going to continue with the same criteria that the government imposed (with the federal law) is doing so to reduce the reputational risk, that’s all,” said Cary Sternberg, a default servicing expert.

“On the other side, these banks and servicers represent trusts and investors, and now they are going to expose themselves to financial risk if investors come back to them saying, any time you give a tenant three months’ notice, they could be losing money,” he added.

Mortgage servicers that do not voluntarily adhere to the federal law’s requirements have gauged that the financial risk they face from investors is greater than the potential reputational risk from tenants, Sternberg said.

To be fair, many servicers, including Wells Fargo, offer relocation assistance to tenants in foreclosed properties. And both Fannie Mae and Freddie Mac will continue to follow the law for their respective REO inventories. The Federal Housing Administration typically requires that properties be vacant when they are turned over to the agency after a foreclosure.

So far, consumer advocates have not seen much fallout yet because properties with foreclosure sales dates in December are still covered by the federal law.

Though home prices have rebounded significantly from the depths of the 2008 financial crisis, there are still millions of distressed properties languishing in some state of the foreclosure process — or heading there — affecting many, many tenants.

There were 820,000 properties stuck somewhere in the foreclosure process in December that had not yet been liquidated through a foreclosure auction or by a bank taking legal title to the property, according to Black Knight Financial Services.

Servicers have long complained that laws like the Protecting Tenants at Foreclosure Act delay a REO property’s sale after an already lengthy foreclosure process. It now takes an average of 1,010 days — or nearly three years — for a delinquent loan to move through foreclosure, according to Black Knight.

In many states, a foreclosure terminates the rights of a tenant. So without the federal law, a mortgage servicer or purchaser of an REO property does not have to file a separate eviction notice to remove a tenant.

“In traditional foreclosure states, you get the right of possession when the foreclosure is completed so the owner would just get a sheriff to go to the property,” to evict the tenant, said Qian.

In non-judicial foreclosure states, where foreclosures are not processed by a court, an owner would have to file a separate eviction notice, he said.

There is confusion because some state laws provide tenants with the notice of the foreclosure itself, while others require a notice period after a foreclosure, but before an eviction can proceed.

A few states including Massachusetts, New Jersey and Rhode Island have “just cause” laws, where a foreclosure is not considered a valid reason to evict a tenant.

Jeremy Bergstrom, a senior staff attorney at the Sargent Shriver National Center on Poverty Law, said bank servicers still might adhere to the federal law because of the added expense of complying with the hodge-podge of state laws.

“These tenants are truly the innocent victims of foreclosure because they didn’t fall behind on the mortgage, and are current on their rent and could be evicted through no fault of their own,” Bergstrom said.

Please click here to view the article online.

San Francisco Controller’s Report Discourages Eminent Domain Use

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 5, Bloomberg published an article discussing San Francisco Controller Ben Rosenfield’s recent report warning of potential negative impacts from the city’s participation in an eminent domain program designed to help homeowners avoid foreclosure.

San Francisco Controller’s Report Discourages Eminent Domain Use

(Bloomberg)–San Francisco’s controller discouraged lawmakers from going forward with a proposal to use the city’s eminent-domain powers to help homeowners avoid foreclosure, citing federal limitations and risks to the city’s borrowing costs.

“The city’s participation in an eminent-domain program will likely have broader negative impacts on the city’s participation in financial markets, at least for an initial period,” San Francisco’s Controller Ben Rosenfield wrote in a report released Thursday.

The study is a response to a proposal from San Francisco Supervisor John Avalos to use eminent domain to take over loans on property with a market value below the mortgage amount. Avalos has said he wants to help working-class and middle-class workers stay in the city of about 837,000.

The San Francisco Board of Supervisors asked the controller in October to look into the idea of partnering with Richmond, a nearby refinery town of about 108,000 that voted in 2013 to adopt a plan to use eminent domain to seize loans and modify them to help homeowners.

The report cited a federal law that bars some government agencies from involvement in any mortgage seized through eminent domain. While it doesn’t place any restrictions on U.S.-backed mortgage giants Fannie Mae and Freddie Mac, a memo from the general counsel at the Federal Housing Finance Agency said the practice threatens their safe and sound operations, the report said.

‘Inviable Option’

“Precluding any participation from Fannie Mae and Freddie Mac, the use of eminent domain would seem to be an inviable option,” according to the study.

The controller recommended developing a mortgage-assistance program for borrowers with troubled mortgages that would reduce the principal loan amount. He also suggested creating an emergency-assistance program for homeowners facing an unexpected hardship who have defaulted or are at risk of default.

“The eminent-domain proposal is not one we’re recommending,” Rosenfield said in a telephone interview. “It comes with risks. It hasn’t yet been proven in any jurisdiction in the U.S.”

Avalos said he’s discouraged that the controller didn’t offer a plan to help borrowers whose loans have been securitized.

“I’m disappointed that they seem to have bought into Wall Street’s scare tactics about eminent domain,” Avalos said in a statement. He said he plans to call a hearing soon to review the report.

“Using eminent domain could put the entire city’s residents at risk by making lenders less willing to lend money to future homebuyers,” David Stevens, president of the Mortgage Bankers Association, said in an e-mailed statement.

Please click here to view the article online.

New York AG Proposes New Expanded Bill to Reduce Zombie Properties

Posted on September 13, 2018September 13, 2018 by Safeguard

Updated 4/20: On April 18, the Yonkers Tribune released an article titled A.G. Schneiderman Introduces Expanded Legislation to Combat Spread of “Zombie Properties” Across State.

Link to article

Link to “Abandoned Property Neighborhood Relief Act of 2015” (Assembly Bill A6932-2015) text

Link to Senate Bill S4781-2015 (sister bill) text

On February 16, DS News published an article discussing New York Attorney General Eric Schneiderman’s new proposed Abandoned Property Neighborhood Relief Act.

New York AG Proposes New Expanded Bill to Reduce Zombie Properties

New York Attorney General Eric Schneiderman Zombie Foreclosures New York Attorney General Eric Schneiderman announced on Monday that he plans to introduce an expanded version of the bill he proposed last year reduce the number of zombie properties in the state.

The goal of Schneiderman’s new proposed Abandoned Property Neighborhood Relief Act is to cut down on the increasing number of residential properties that fall into disrepair when they are abandoned by owners during the foreclosure process and subsequently not maintained by mortgagees. Such properties are often referred to as “zombie properties.”

Speaking at the New York State Association of Towns’ 2015 Training School and Annual Meeting on Monday, where he announced his intention to introduce the expanded legislation, Schneiderman said the number of zombie properties in New York increased by almost 50 percent in 2014 compared to 2013, which amounted to about 16,700 zombie properties. Scheneiderman quoted data that in the 10 counties in New York with the most zombie properites, approximately 42 percent of properties in foreclosure are abandoned before the lengthy process is finished. When the bank fails to maintain these properties, they fall into disrepair, which in turn lowers property values of surrounding houses and invites vandalism and violent crime.

“Leaving zombie properties to rot is unfair to municipalities and unfair to neighbors, who pay their taxes and maintain their homes,” Schneiderman said. “In the next two weeks, my office will resubmit to the Legislature our bill that would require banks to take responsibility for maintaining properties much earlier in the foreclosure process, take that burden off of towns and cities, and allow local governments to more easily identify the mortgagees of these properties to make sure they maintain them. And as my office enforces the requirement that banks take responsibility for these properties, any fines we levy will go into a fund to help towns and cities hire more code enforcement officers.”

The proposed Abandoned Property Neighborhood Relief Act addresses the problem of homeowners who may be unaware of their legal rights abandoning their homes once they receive a foreclosure notice. The new bill requires mortgagees to provide homeowners with early notice that they are legally entitled to remain in their homes until a court orders them to leave. Also as part of the new bill, mortgagees are required to identify, secure, and maintain vacant properties soon after they are abandoned rather than at the end of the foreclosure process. The bill requires mortgagees and their loan servicing agents to periodically inspect properties with delinquent mortgages to ensure that they are occupied. The bill also makes it unlawful for a mortgagee or anyone acting on the mortgagee’s behalf to enter an occupied property and intimidate, harass, or coerce a lawful occupant into vacating the property.

“Many vacant and abandoned properties are a significant source of blight, magnets for criminal activity, negatively impact property values and detract from residents overall quality of life,” Binghamton Mayor Richard C. David said. “This issue impacts cities across the nation and the Attorney General’s proposal to hold mortgage lenders more accountable and provide a strategy to keep these properties from deteriorating will ultimately protect homeowners and improve the integrity of our neighborhoods.”

The Abandoned Property Neighborhood Relief Act is part of Schneiderman’s broader strategy to help New York homeowners and communities recover from the foreclosure crisis, according to Schneiderman’s announcement. His other actions toward obtaining this strategy include securing $2 billion in a National Mortgage Settlement to help financially struggling families and dedicating $100 million of that money to the Homeowner Protection Program (HOPP), which provides housing counseling and free foreclosure prevention legal services to struggling homeowners in New York. According to Schneiderman’s office, HOPP has helped 39,000 families in the state as of December 2014.

Please click here to view the article online.

New Mexico Senator Sponsoring Bills to Provide Protection for Homeowners Facing Foreclosure

Posted on September 13, 2018September 13, 2018 by Safeguard

On February 13, the Albuquerque Journal published an article titled Bills aimed at protecting homeowners.

Bills aimed at protecting homeowners

A senator from Southwest Albuquerque is sponsoring seven bills aimed at protecting homeowners at risk of experiencing a home foreclosure.

Sen. Michael Padilla, D-Albuquerque is taking a broad approach. He wants to help educate home buyers about home owning costs beyond mortgage payments, to improve the ability to track the owner of a foreclosed property and to enhance opportunities to resolve payment problems before going to court.

Padilla lives in the 87121 zip code area of Southwest Albuquerque, which has one of the highest foreclosure rates in the metro area. One in every 364 homes in the area was in some stage of foreclosure in January, according to Irvine, Calif.-based RealtyTrac which tracks foreclosure trends. By comparison, the statewide foreclosure rate in January was one in every 1,932 houses.

“The foreclosure issue has been improving in areas where the economy is beginning to turn around,” Padilla said, “But in areas where it has not, including this area that I am talking about, it continues to be an albatross around those subdivisions.”

Padilla’s Bills are:

SB27: Calls for $50,000 to continue supporting a task force that has examined foreclosure-related issues in the metro area. Padilla, who helped establish the task force, wants it to be able to continue its research throughout New Mexico

n SB28: Asks for $500,000 for the New Mexico Mortgage Finance Authority to run a pre-purchase home buyer education program

n SB29: Would reduce from 14 years to four years the amount of time within which a lender can seek to recover money if a foreclosure doesn’t cover the loan in full

n SB30: Would enhance opportunities for mitigation prior to foreclosure proceedings and prohibits “robo-signing” of documents,

n SB141: Calls for $1.58 million from the general fund for the administrative office of the courts in fiscal year 2016 to provide foreclosure settlement facilitation programs

n SB142: Clarifies that foreclosure proceedings must be handled through the courts in all cases

SB143: Requires creditors to record a foreclosure judgment with the county clerk within 45 days, enabling cities to trace the owner to ensure that vacant properties are maintained

Please click here to view the article online.

Please click on each link to view the current versions of the proposed legislation: