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Fast Foreclosures? Not in Illinois

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

On December 9, Crain’s Chicago Business published an article discussing climbing foreclosure process time in the state of Illinois.

Fast foreclosures? Not in Illinois

The plunging volume of home foreclosure suits in Illinois over the past year or so should mean courts can process cases more quickly, right?

Wrong.

The average time it took lenders to foreclose on a home in the state climbed to a new high of 889 days in the third quarter, up from 828 a year earlier, according to RealtyTrac Inc. It’s the longest time since RealtyTrac started tracking the measure in first-quarter 2007, when the average foreclosure took 243 days.

At 889 days—nearly two-and-a-half years—Illinois had the fifth-longest foreclosure time in the country in the third quarter, according to RealtyTrac. The U.S. average was 615 days.

Foreclosure times keep rising even though the number of new cases is falling, easing the burden on the state courts that were swamped by foreclosure suits as the housing crisis peaked a couple years ago. Newly filed Illinois foreclosure cases fell to 2,843 in October, roughly a quarter of the peak monthly volume of 12,659 hit in October of 2009, according to RealtyTrac.

Times are rising even after a state “fast-track” law took effect last year that’s designed to zip foreclosures of abandoned homes though the process.

State Sen. Jacqueline Collins, D-Chicago and a sponsor of the legislation, said the longer times suggest the measure is not reducing the gridlock that has left some neighborhoods with too many boarded-up homes in foreclosure.

“Even though we have this legislation has it really benefited the communities ravaged by the financial tsunami?” Collins asked. “The housing market is seeing an improvement in certain communities but not in hard-pressed communities.”

The new law grew out of contentious debates in Springfield over who was responsible for maintaining abandoned homes in foreclosure that contribute to blight and criminal activity and depress the value of nearby properties. The law allows a lender to request an immediate foreclosure trial for a property certified as abandoned. It was expected to significantly reduce foreclosure times and included new fees funding housing counseling and maintenance of abandoned homes.

‘A LITTLE LIKE TURNING THE TITANIC’

Since Senate Bill 16 took effect in June 2013 new fees lenders must pay have generated about $18 million that the Illinois Housing Development Authority has used to help municipalities get abandoned residential properties back into use and provide help to homeowners at risk of foreclosure, according to the agency.

Illinois is not alone. Foreclosure times are rising in other states like Florida where new laws went into effect.

“As fast-track foreclosure laws revamp foreclosure processes it can become a little like turning the Titanic with big organizations,” said Daren Blomquist, vice president at Irvine, Calif.-based RealtyTrac.

Collins sees little evidence that the state’s fast-track law has made much of a dent in hard-hit communities like Lawndale. Collins, who is open to tweaking the law, said she fears lenders may be using it only to take back abandoned homes in stronger markets.

“That was my concern initially,” Collins said. “I was afraid they’d cherry-pick homes where there was still equity in the property.”

Representatives of the Illinois Bankers Association and Illinois Credit Union League declined to comment.

NEW REQUIREMENTS FOR LENDERS

Some lawyers think the rise in foreclosure times stems in part from new requirements lenders need to meet to get a judge to approve a foreclosure. The rules, established in 2013 by the Illinois Supreme Court, were designed to make sure homeowners and lenders were fairly treated, but some lawyers said the rules, along with heightened scrutiny of the process, led to some motions being denied and delays.

Stewart Kusper, a lawyer with Kusper Law Group Ltd. who has represented homeowners in foreclosure suits in recent years, said the new rules coupled with the volume of securitized home loans that have been bought and sold by multiple lenders is delaying some foreclosures. For example, a lender seeking to foreclose on a home loan that’s been held by multiple lenders over the years has to backtrack the loan history to when it was originated.

“It’s not just as simple as saying, ‘They missed a payment and here’s what’s due,’” Mr. Kusper said.

Some judges say results matter more than foreclosure times.

“How many of (the foreclosures) have a positive solution, either a loan modification or a sale of the property or something that’s a graceful exit?” said Judge Robert Gibson, associate judge in DuPage County’s Chancery Division. “If the ultimate result is something that everyone’s happy about then it’s not necessarily a bad thing it took longer.”

Please click here to view the article online.

About Safeguard
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally.
Website: www.safeguardproperties.com.

Bankruptcy Court Finds Debtor Entitled to a “Free House” Because Mortgage Foreclosure Complaint Barred by New Jersey Statute of Limitations

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

In a recently released article to JD Supra Business Advisor, Duane Morris LLP discusses a recent decision by the United States Bankruptcy Court for the District of New Jersey.

Bankruptcy Court Finds Debtor Entitled to a “Free House” Because Mortgage Foreclosure Complaint Barred by New Jersey Statute of Limitations

Mortgage lenders should be aware of the New Jersey statute of limitations on mortgage foreclosure complaints. In In re Washington, 2014 Bankr. LEXIS 4649 (Bankr. D.N.J. Nov. 5, 2014), the United States Bankruptcy Court for the District of New Jersey held that a mortgagee and its servicer were time-barred from enforcing their rights under a note and accelerated mortgage more than six years after the borrower’s default pursuant to the New Jersey Fair Foreclosure Act, N.J.S.A. § 2A:50-56.1. As a result, the Bankruptcy Court concluded that the borrower would effectively receive a “free house.”

In 2007, the borrower in Washington purchased a three-unit residential property in Morris County, New Jersey. The borrower financed the purchase, in part, by a note for $520,000, which was secured by a 30-year mortgage, maturing in March 2037. However, after making only three monthly payments on the note and mortgage, the borrower defaulted in July 2007. Thereafter, pursuant to the note and mortgage, the lender accelerated the maturity date.[1]

In December 2007, the lender filed a foreclosure complaint in New Jersey Superior Court, which averred that the lender “by reason of said default, elected that the whole unpaid principal sum due on the aforesaid obligation and mortgage … shall be now due.” Three years later, in October 2010, the Superior Court notified the lender of various filing deficiencies and returned the foreclosure complaint packet for supplementation. Another three years later, in July 2013, the Superior Court issued an order dismissing the foreclosure complaint for lack of prosecution, without prejudice. The lender never re-filed the foreclosure complaint, and in March 2014, the borrower filed a petition for relief under chapter 7 of the Bankruptcy Code. Thereafter, the borrower (now a bankruptcy debtor) initiated an adversary proceeding in the Bankruptcy Court to determine the validity of the lender’s mortgage lien.

The borrower sought summary judgment in the adversary proceeding on the grounds the lender was foreclosed from enforcing the loan documents by the relevant state statutes of limitations. Specifically, the borrower claimed that the six-year statute of limitations applicable to negotiable instruments precluded the lender from initiating suit for the borrower’s default on the note. See N.J.S.A. § 12A:3-118(a) (establishing a six-year statute of limitations for negotiable instruments). Likewise, the borrower claimed that any action on the mortgage was time-barred after six years because the state Fair Foreclosure Act required any such enforcement within “[s]ix years from the date fixed for the making of the last payment or the maturity date[.].” See N.J.S.A. § 2A:50-56.1.[2]

Incredibly, the lender conceded that the six-year statute of limitations for enforcement of the note had run. In re Washington, 2014 Bankr. LEXIS 4649 at *20. However, the lender countered that enforcement of the mortgage was subject to the 20-year limitation period recognized under New Jersey common law. Id. Though neither party disputed that the loan was accelerated to 2007, the lender argued that the maturity date – as stated in the loan documents – remained March 2037 for purposes of the Fair Foreclosure Act.

Following exhaustive discussion of the relevant section of the Fair Foreclosure Act and its legislative history, the Bankruptcy Court concluded that the lenders had in fact accelerated the maturity date of the loan to the 2007 default date. Id. at *35. The Bankruptcy Court further noted that neither party had made any effort to de-accelerate the debt and that the lender had failed to file a valid foreclosure complaint within six years of the accelerated maturity date as required under the Fair Foreclosure Act.[3] Accordingly, the Bankruptcy Court held that the lender was now time-barred from filing a foreclosure complaint and from obtaining a final judgment of foreclosure. Id. at 36.

Given its conclusion that the lender could no longer pursue a valid foreclosure action against the borrower, the Bankruptcy Court was also compelled to disallow the lender’s secured claim against the borrower’s bankruptcy estate pursuant to section 502 of the Bankruptcy Code. See 11 U.S.C. § 502(b)(1) (providing that a claim should be allowed “except to the extent that [it] is unenforceable against the debtor and property of the debtor, under any agreement or applicable law[.]”). Moreover, because the lender lacked an allowed secured claim, the underlying lien was deemed void pursuant to section 506 of the Bankruptcy Code. The end result, to the clear displeasure of the Bankruptcy Court, was for the borrower to retain the subject property free and clear of any claim of the lender.[4]

Notes

1. The parties disputed the acceleration date, which was variously identified as June 1, 2007, July 1, 2007, or December 14, 2007. In its opinion, the Bankruptcy Court recognized that under any reckoning, the lender was time-barred from enforcing the loan documents. In re Washington, 2014 Bankr. LEXIS 4649 at *16.

2. This section provides, in relevant part:
An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or note … whether the date is itself set forth or may be calculated from information contained in the mortgage or note … ;
b. Thirty-six years from the date of recording of the mortgage … ; or
c. Twenty years from the date on which the debtor defaulted … .

N.J.S.A. § 2A:50-56.1.

3. The Bankruptcy Court rejected the lender’s argument that its renewed efforts to initiate foreclosure proceedings would relate back to its original foreclosure complaint.

4. The Bankruptcy Court’s opinion closes: “The Court will proceed to gargle in an effort to remove the lingering bad taste.” In re Washington, 2014 Bankr. LEXIS 4649 at *39.

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.

At MBA’s Urging, Federal Action Taken on Eminent Domain Mortgage Seizure Proposal

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

On December 17, the Mortgage Bankers Association (MBA) released an MBAlert discussing a provision in the Fiscal Year 2015 omnibus appropriations bill that bars HUD, FHA and Ginnie Mae from insuring, securitizing, or establishing a Federal guarantee for mortgage loans seized through eminent domain.

At MBA’s Urging, Federal Action Taken on Eminent Domain Mortgage Seizure Proposal

At MBA’s Urging, Federal Action Taken on Eminent Domain Mortgage Seizure Proposal
Last night, President Obama signed into law the Fiscal Year 2015 omnibus appropriations bill. As a result of MBA advocacy, included in this government spending bill is a provision that bars HUD, FHA, and Ginnie Mae from insuring, securitizing, or establishing a Federal guarantee for mortgage loans seized through the power of eminent domain. In recent years, a growing number of municipalities across the nation, at the urging of a private investment company, have considered using eminent domain to seize performing, underwater mortgages and refinance them. MBA and its state and local MBA partners have thus far been successful in preventing the implementation of this eminent domain proposal, communicating the profound consumer and industry consequences that would exist from this action. Given that the proposal is primarily reliant upon the refinancing of seized loans through FHA’s short refinance program and resecuritization through Ginnie Mae, passage of the omnibus bill shuts down the proposal’s most viable refinancing option through September 30, 2015.

This is a major victory for MBA, one that will pay dividends in current and future municipal debates over the proposal — in localities like San Francisco and Richmond in California. To view this important federal provision, please see page 1,560 of the omnibus bill.

Please click here to view the alert online.

Up to 400 Jackson Homes Could be Demolished if City Receives $10.8 Million Grant From State

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

On November 18, mlive.com released an article discussing the possibility of Jackson, Michigan receiving a portion of grant funds from the Michigan State Housing Development Authority targeted at eliminating blight.

Up to 400 Jackson homes could be demolished if city receives $10.8 million grant from state

JACKSON, MI – Up to 400 Jackson homes could be razed if city officials receive a $10.8 million grant from the state aimed at eliminated blight in Michigan communities.

City Manager Patrick Burtch said 12 communities applied for an available $75 million from the Michigan State Housing Development Authority earlier this month, including Detroit, Lansing and Adrian, among others.

Burtch said he’s confident Jackson will receive some of the money requested.

“The last time around we weren’t granted anything, and we were invited to apply this time around,” he said. “Our program is really a model for the state and we’re the third largest community to apply for funding.”

City officials began aggressively demolishing homes under the Neighborhood Stabilization Program in 2011, claiming the program was a silver bullet which would eliminate blight, increase property values and decrease crime in Jackson. To date, nearly 300 properties have been razed as part of the initiative.

“We still have 800-1,000 vacant homes in Jackson,” Burtch said.

The city will not have to contribute any sort of match to receive the funding, and MSHDA officials will announce grant recipients Tuesday, Nov. 24.

The U.S. Treasury signed off on a proposal in June 2013 – the first of its kind in the nation – that allowed the MSHDA to create a blight elimination program using federal money originally set aside for mortgage relief.

Last summer, Gov. Rick Snyder announced Detroit will get $52.3 million for the program, Flint will receive $20.1 million, Saginaw $11.2 million, Pontiac $3.7 million and Grand Rapids $2.5 million.

City officials would be allowed to not only demolish homes using the grant funds, but purchase them prior to demolition as well, Burtch said.

Jackson City Council voted 5-2 Tuesday, Nov. 18, to grant Burtch the authority to oversee the program without regular council approval. “If the grant money is received, the city must move quickly to meet very fast-paced program requirements,” City Attorney Bethany Smith said in a memo requesting council members sign off on the plan.

Councilwomen Arlene Robinson, 1st Ward, and Kimberly Jaquish, 2nd Ward, voted against the request.

“I would rather see us be building this city up rather than tearing it down,” Jaquish said.

Please click here to view the article online.

Pennsylvania Rehabilitates the Abandoned and Blighted Property Conservatorship Act

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

On October 23, Dana Janquitto, associate with Reed Smith posted a Real Estate Legal Update regarding Pennsylvania HB 1362 (“An Act amending the act of November 26, 2008 (P.L. 1672, No. 135).

(US) Pennsylvania Rehabilitates the Abandoned & Blighted Property Conservatorship Act

Property owners, lien-holders and community development organizations in Pennsylvania, take note. Governor Corbett recently signed House Bill No. 1363 amending the act of November 26, 2008 (P.L.1672, No.135), also known as the Abandoned and Blighted Property Conservatorship Act. Depending on your viewpoint, the amendment gives much needed teeth to a tool for combating blight, or expands the already broad power of neighboring residents and business owners to interfere with a legitimate property owner’s interest. The amendment sailed through the Pennsylvania Legislature without a single “nay”, showing the Commonwealth is unified on the topic of remediating blighted real estate holdings.

The Abandoned and Blighted Property Conservatorship Act allows the court to appoint a conservator to rehabilitate deteriorating residential, commercial and industrial buildings. The conservator is then responsible for bringing buildings into municipal code compliance when owner fails to do so, and steps into the owner’s shoes for the purposes of filing plans, seeking permits, and submitting applications.

The Act does not relieve the actual property owner of any liability or obligation with respect to the property, and the property owner may become responsible for debts incurred as a result of the conservatorship.

A brief summary of the changes to the Act:

Expansion to Vacant Lots and Adjacent Property: The amendment allows conservators to take over vacant lots, which is a boon to neighbors eying up a trash-filled lot for a community garden. Previously, it was uncertain whether the Act only applied to land containing buildings or other improvements. Adjacent properties may be now considered in a single petition if they are owned by the same owner and used for a single or interrelated function.

Definition of Abandoned Property and Standard for Assessment: The Act now provides a definition of “abandoned property”, which was curiously missing from the original text considering the Act’s title. This fills a much-needed hole for judges, who previously had to dig into the legislative history and other acts to provide a definition. The court must give “reasonable regard” to the conservator’s determinations when assessing the rehabilitation plan, including costs to develop the property.

Expansion of Potential Conservators: The definition of a “party in interest” is expanded. Neighboring residents or business owners, previously limited to a 500 foot radius, may now petition the court if they are located within 2,000 feet of the subject property (in Philadelphia terms, essentially a change from 1 block to 4 blocks). A non-profit may have participated in a prior rehabilitation project within a five mile radius of the subject property, rather than a one-mile radius. The old definition tended to limit prospective non-profit conservators to a handful of neighborhoods.

Swapping Lien Priority: Important for senior lien-holders: a senior lien-holder can lose its priority status if it declines to provide financing for the rehabilitation. New rehabilitation financing can get priority status over the senior lien if the court determines the change in priority is necessary to induce another lender to provide financing. Furthermore, distribution from the proceeds of a sale now go first to Commonwealth liens, unpaid property taxes, and properly recorded municipal liens. It appears other government liens, such as federal income tax liens, have been moved further down the list.

Shifting Burden of Proof: The burden to prove whether the property has been on the market in the past 12 months has been shifted to the owner, who must present “compelling evidence” that the property has been actively marketed. Previously, the burden was on the petitioner to prove a negative, i.e., that the property had not been marketed.

Petition Costs Recoverable: The owner must reimburse the petitioner for costs of preparing the petition whether the owner elects to repair, the owner sells the property to the conservator or the court approves the conservator’s petition. Previously, if the recalcitrant owner opted to repair the property, the petitioner had no mechanism to recoup its costs. The ultimate goal of the petition –a repaired property- ends up being realized, even if conservatorship does not end up with control of the property, which incentivizes more petitions and workouts.

Reduced Time to Sale: The conservator must control the property for three months before sale (without a successful petition from the owner to terminate the conservatorship), down from six months.

Miscellaneous Provisions:

Bids for contracts are no longer required if the conservator is financing the development.
If the owner opts to repair the property, a bond is required rather than left to the discretion of the court.
The petition requires submission of title reports, and notice to certain municipal authorities, such as utility providers.
A hearing is no longer required for abatement if the court approves the submitted plan.
The developer’s fee has been expanded to include a conservator’s fee.

Property owners should consider curing any outstanding municipal code violations, including health, fire or occupancy, and completely secure any abandoned property in compliance with the Doors & Windows Ordinance. In addition, senior lien holders should review requests for rehabilitation financing carefully to retain lien priority.

Lastly, neighbors, business owners, and non-profit community development organizations should take note. You might want to take a tour of the scofflaw buildings in the neighborhood.

Please click here to view the Real Estate Legal Update online.

About Safeguard
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally.
Website: www.safeguardproperties.com.

Moody’s Investors Service Assigns Stable Outlook to State HFA Sector for Second Consecutive Year

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

On November 11, HousingWire released an article titled Moody’s: Outlook stable for housing finance agencies.

Moody’s: Outlook stable for housing finance agencies
Mortgage loan revenues enough to cover HFA expenses

For the second consecutive year, Moody’s Investors Service has assigned a stable outlook to the state housing finance agency sector.

The outlook is driven by strong and improving revenue margins, which reached 11% in 2013, says Moody’s in a new report, “2015 Outlook – US State Housing Finance Agencies: Strong Margins Drive Stable Outlook.”

“We anticipate that HFA margins will increase incrementally in 2015 as revenue from loan sales continues increasing, full spread mortgages drive revenue growth, and loan portfolio performance continues to improve,” says Rachael Royal McDonald, a Moody’s Vice President and Senior Analyst, in a client note.

Moody’s does expect margins to remain below the pre-crisis peak of 15%.

An additional factor behind the stable outlook is the ability of mortgage loan revenues, the most stable HFA long-term revenue source, to cover general and administrative expenses. While the ratio of loan revenues to expenses has declined significantly since 2008, the ratio remains healthy at 3.6x.

Moody’s also notes that HFA portfolio performance continues to strengthen, which will bolster both current future mortgage loan interest income. A year-over-year decline of over 4% in single-family delinquencies will both reduce loan losses and help steady monthly mortgage loan revenues. Delinquencies in the 60-89 day category also dropped to its lowest percentage in five years.

“Furthermore, higher interest rates would drive margins upward as HFAs realize more income off of investments,” said McDonald.

What could change the analyst outlook is this: Margins of over 15% would provide HFAs with enough cushion to weather a housing or economic crisis that rivaled the most recent one. Between 2007 and 2010, median HFA margins declined seven basis points from 15% to 8%, they say. Operating margins of over 15% would signal that HFAs had enough income to endure a similarly stressful hit to their income.

Margins over 15% are not the only prerequisite for a positive outlook, Moody’s says.

In addition to strong financial performance, HFAs must make a marked return to financing on-balance sheet mortgage loans so that they have a predictable revenue stream to cover their operating costs. A ratio of mortgage loan interest income/G&A expenses of over 4x would indicate strong coverage of G&A expenses. In addition, strong portfolio performance would also be a prerequisite to a positive sector outlook.

Conversely, several factors could drive a negative sector outlook including operating margins under 10%, mortgage loan interest income/G&A expenses of under 3x or a significant weakening of portfolio performance.

Please click here to view article online.

Missouri Supreme Court Invalidates St. Louis County Foreclosure Law

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

On November 13, the St. Louis Post-Dispatch reported that the Missouri Supreme Court has ruled a 2012 St. Louis County foreclosure ordinance unenforceable due to the county lacking authority in its charter form of government to implement it.

Missouri Supreme Court Invalidates St. Louis County Foreclosure Law

JEFFERSON CITY • Missouri’s top court has invalidated a St. Louis County ordinance that required lenders to try to mediate disputes with homeowners before foreclosing on their properties.

The state Supreme Court ruled Wednesday that the 2012 ordinance was void and unenforceable from the outset because the county lacked authority to implement it under its charter form of government.

The ruling has the same result as 2013 appeals court decision, but for a different reason. The appeals court had said the St. Louis County ordinance became moot when a 2013 state law was enacted prohibiting local ordinances from imposing additional obligations on mortgage agreements.

Supreme Court Judge Richard Teitelman cast the only dissenting vote in Wednesday’s decision. He said the foreclosure ordinance should have been valid under a charter county’s powers.

Please click here to view the article online.

Los Angeles Ordinance Aims to Charge Foreclosure Fees to Banks

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

On November 12, Reuters released an article discussing the passing of a foreclosure registration amended ordinance by the LA City Council.

Please Note: As previously reported, the Los Angeles City Council recently gave its initial approval to a measure that would place a $356 inspection fee on every bank-owned home in the city. The Foreclosure Registry Program/Notice of Default (NOD) to Real Estate Owned (REO)/Amendment has now passed final council approval.

Los Angeles ordinance aims to charge foreclosure fees to banks

LOS ANGELES (Reuters) – Banks and other lenders that own foreclosed homes in Los Angeles would have to pay fees to fund building inspections under an ordinance passed on Wednesday as part of an effort to combat blight caused by abandoned and neglected properties.

If the measure is signed by Mayor Eric Garcetti, Los Angeles would become the largest U.S. city to implement such fees, which aim to compel banks to maintain properties they seize from homeowners.

“This inspection fee will give us enforcement measures to prevent blight in our city,” Councilman Gilbert Cedillo said in a statement. “This ordinance will continue to hold the banks accountable for foreclosed homes that remain empty in our neighborhoods.”

Although California’s housing market is recovering, Los Angeles still grapples with foreclosures. There are nearly 8,000 foreclosed properties in the city, and the Housing and Community Investment Department is trying to verify the status of about 1,600 others that have received notices of default, a spokeswoman said.

Los Angeles has struggled to track foreclosed properties despite creating a registry in 2010, and officials have had difficulty forcing banks to maintain them.

Under guidelines passed on Wednesday, the city would join Las Vegas, Chicago, Oakland, California, and other cities in assessing fees to help keep track of foreclosed properties and forestall blight.

Banks and lenders would have to pay $155 annually to register each foreclosed property, plus a one-time inspection fee of $356. Those who did not pay after 30 days would be charged $250 a day, up to a maximum of $100,000.

The money would go to the Housing and Community Investment Department, said a spokesman for Cedillo, and be distributed to the Department of Building and Safety to conduct code-violation investigations.

Opponents said the measure was a money-grab by the city.

“Most of these houses are not in a bad situation, said Stuart Waldman, president of the Valley Industry and Commerce Association. “We feel like the city is using this revenue to fund staff positions.”

Please click here to view article online.

L.A. City Council Backs Proposal to Toughen Foreclosure Registry

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

On October 29, the Los Angeles Times published an article discussing the initial approval by the LA City Council of a measure that would strengthen the city’s foreclosure registry program.

L.A. City Council backs proposal to toughen foreclosure registry

Los Angeles is poised to tack a new fee on foreclosed properties, in a move that the city hopes will help keep the homes from turning into crumbling wrecks.

The City Council on Wednesday gave its initial approval to a measure that would toughen L.A.’s foreclosure registry program, which is designed to help city officials keep tabs on bank-owned vacant properties but which community groups and a city audit have said isn’t working.

The new measure, which passed unanimously in a preliminary vote, would place a $356 inspection fee on every bank-owned home in Los Angeles, enough to fund a once-a-year check of each house and to upgrade software so city departments can use the registry more effectively.

It’s a way to get a better handle on the thousands of foreclosed homes across Los Angeles, before they deteriorate and drag down neighboring properties, said City Council member Gil Cedillo, who is sponsoring the measure.

“We’re trying to make lemonade here,” Cedillo said. “We’re trying to take an incredible crisis and turn it into something better.”

More than 35,000 houses have been listed on the registry since it was launched last year, including more than 7,100 this year, with their owners paying a $150 registration fee and listing a local property manager to contact in case of problems. But the city’s Division of Building and Safety has said it barely uses the registry to track down owners of nuisance properties, and has no resources to proactively inspect foreclosures before they become problems.

A measure to improve the registry was first proposed in 2012 by then-City Council member, now-Mayor Eric Garcetti, but has sat dormant for nearly two years, in part because of lawsuits against a similar program in Chicago.

In May, City Controller Ron Galperin issued a highly critical audit of the registry — calling it “inherently flawed” — and urged improvements. Some community groups called for changes too, even staging well-publicized cleanups of a particularly dilapidated bank-owned house on 111th Street last spring to draw attention to the issue.

Beverly Roberts, a member of the Alliance of Californians for Community Empowerment, says she sees too many crumbling vacant properties in her South L.A. neighborhood. It’s time, Roberts said, for the banks that own them to be held accountable.

“You can see the weeds grown up and the house boarded up, and it looks like they should be getting ready to demolish it,” she said. “It makes our community look raggedy, and we’re tired of it.”

Business groups spoke up against the proposal Wednesday, saying that it was too broad and that it was penalizing any bank that owns a house regardless of the home’s condition

“We all support reducing blight,” said Ruben Gonzalez, senior vice president at the L.A. Area Chamber of Commerce. “You’re simply punishing every lender whether they’re being good corporate citizen or not.”

Properties that are on the foreclosure registry are more than twice as likely as average to have a code enforcement complaint on record, according to a Los Angeles Times analysis of the registry and city building data. And since January, housing officials have found more than 1,600 houses that were in some stage of foreclosure but have not been registered, Helen Morales, a senior investigator with the city’s Housing and Community Investment Department, told the City Council on Wednesday.

The new fees — and a $250-per-day fine for failing to register — should help to end that, said City Council member Paul Krekorian, one of the measure’s co-sponsors.

“This is so long overdue,” he said. “I’m pleased we’re finally bringing this to the finish line.”

The City Council scheduled a final vote for Nov. 12. With no opposition from members so far, a spokesman for Cedillo said he was confident that the measure would pass.

Please click here to view the article online.

Foreclosure Task Force Makes Recommendations

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

On November 24, the Albuquerque Journal published an article discussing the New Mexico Legislature created Foreclosure Process Task Force and the recommendations listed in its recently issued final report.

Foreclosure Task Force Makes Recommendations

Better communication between lender and homeowner is a theme in recommendations by the Foreclosure Process Task Force to fix the way delinquent mortgages are handled in the aftermath of the housing collapse.

Describing the collapse as a “massive servicing mess,” task force chair Diana Dorn-Jones, executive director of the United South Broadway Corp., said Wall Street banks service 70 percent of the outstanding mortgages in New Mexico and regularly fail to communicate in good faith with homeowners.

“They are losing paperwork, mis-posting payments and failing to provide a single point of contact for a homeowner to negotiate with,” she said in an email. “The task force was formed to address these problems.”

The task force, created by the state Legislature this year, recently released its recommendations. It favors keeping New Mexico’s current system of using state district courts to process foreclosures, but recrommends added procedures and protocols to improve the odds that delinquent homeowners might find a way to keep their homes.

Key elements include a state-imposed requirement that a lenders and loan-servicing companies have a “single point of contact” to help a delinquent homeowner through “loss mitigation,” which involves ways to lessen the lender’s financial loss from a bad home loan. For example, a short sale is a loss-mitigation strategy.

Another key element is to make mediation, currently available in two district courts, available everywhere in the state.

Sen. Michael Padilla, D-Albuquerque, is working on a bill, based on the committee recommendations, to introduce in the upcoming Jan. 21-Feb. 20 legislative session.

Recommendations include a ban on robo-signing, which happens when lenders mass-produce foreclosure actions with little or no legal oversight. The practice of robo-signing was exposed in late 2010, which was the peak year of the mortgage meltdown, creating a national scandal.

A practice called “dual tracking” also would be banned. This occurs when a lender negotiates a mortgage modification with a homeowner while simultaneously filing a foreclosure action against the same homeowner.

Other recommendations include providing the means to fast-track foreclosures on abandoned properties and requiring a notice to the local government when a foreclosure has occurred.

Foreclosure activity in the Albuquerque metro area remains at a heightened level. RealtyTrac reported 1,177 homes somewhere in the foreclosure process in the third quarter, down by half from 2,350 in the third quarter of 2010 but three times the pre-collapse level of 372 homes in the third quarter of 2007.

“The problem is urgent, as we expect foreclosures to spike in the coming year, due to re-sets on home equity loans and a high inventory of underwater properties, which homeowners can’t sell when they can no longer afford them,” Dorn-Jones said in her email.

“There are more than 8,000 underwater homes in the state, most in Albuquerque. There are 3,500 homes actually in foreclosure right now. Combined, that is nearly 7 percent of all mortgage loans in the state.

“We see more than a thousand clients a year who are delinquent or in foreclosure due to a temporary financial crisis. We deal with bank violations and substandard servicing every day. It takes many months or years for these banks to process a simple loan modification that should take 30-60 days.

“Scores of homeowners in New Mexico who want to work out a plan to stay and pay their mortgages are being needlessly evicted. Out-of-touch, out-of-state banks are walking away from reasonable offers for short sales and deeds in lieu of foreclosure, leaving vacancies and vandalism in their wake.

“Our most important recommendation is to clarify New Mexico homeowners’ right to a day in court so they won’t lose their homes due to negligence and incompetence by mortgage servicers.”

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Please click here to view the Foreclosure Process Task Force Recommendations Final Report.

Please click here to view the Foreclosure Process Task Force July Update.