How our legislators may not deliver on homeowner protection

A few weeks ago I wrote about house bills and ideas that could ease the way for Oregonians facing foreclosure.

" House Bill 4137 would add more specific requirements for servicers to follow, including deadlines to respond to borrower inquiries and limits on fees.

Senate Bill 1564 would bar lenders from putting a homeowner in a trial modification program and foreclosing on their home at the same time, the so-called dual-track process.

Senate Bills 1552 and 1576 and House Bill 4140 would require lenders to mediate with homeowners before foreclosing, as Washington, Delaware and Nevada do."

In addition, that blog talked about the emergency regulations Attorney General John Kroger issued, that brought the mortgage services industry under the Oregon Unlawful Trade Practices Act.

Today, the Oregonian reports, in an article by Elliot Njus, that although the Senate has passed most of the above reforms, Republican leaders in the house have removed much of the homeowner protections.  For instance, instead of barring lenders from using the dual track processes as seen in SB 1564 above, lenders would be require to contact homeowners with whom the lender has not had contact, let the homeowner know if they might qualify for a loan modification and inform them of the scheduled foreclosure date.

The GOP leaders also took out the requirement that lenders actually meet with borrowers before taking their home in foreclosure.  Instead, the new proposal would make mediation voluntary AND ease some legal hurdles for foreclosing.  Other changes include removing the emergency regulations of last month, involving the Oregon Unlawful Trade Practices Act, and a retroactivley validating the Mortgage Electronic Registration System .

A quick primer on MERS:  way back, whenever a mortgage was sold from one financial institution to another, documents were actually filed and recorded in the public records, providing a record of who owned what loan.  In addition to providing accurate information, the lenders paid fees for the recording of the documents.   When mortgage shenigans were in their infancy, MERS was created by the lien holders as a way to "register" ownership and changes of ownership on the loans, while avoiding the fees.  Oregon has long had a rule requiring such filings be recorded.  This discrepancy led to some courts in Oregon saying foreclosures involving MERS were improper and violated state law.  Make note that last year, legislation validating MERS died in a house committee. hmm.

Hello!?  I think these bills were aiming at some protections for homeowners, not making foreclosing by lenders easier.  So what started out as constructive measures intended to focus on specifics of helping homeowners in trouble, becomes something that makes foreclosure easier, doesn't make a lender actually talk to someone before taking their home, and validates a questionable practice of tracking who own what loan.

Really?

Oregon's Move Toward Foreclosure Protections

The Oregonian ran a pretty good article this past Saturday on measures the State of Oregon is taking to assist and protect homeowners facing foreclosure or trying to modify their current loans.  In the short term, Oregon Attorney General, John Kroger, issued some temporary rules, effective immediately, that include loan servicers under the unlawful trade practices act. 

Previously, banks, lenders and funders had operated outside these rules; giving them certain protections.  These new rules give homeowners and the state the ability to hold mortgage servicers accountable.  But, these rules really only help those who have already been wronged, and especially those in some sort of legal action; the minority of distressed home owners.  Yes, I suppose the rules also act as a bit of a hammer or deterrent encouraging loan services to behave. 

More interesting to the average distressed homeowner, are the homeowner protections one hopes the lawmakers will consider in the upcoming legislative session.  Mortgage reform and foreclosure protections are hot buttons that pit the strong banking lobby against home borrowers and distressed property owners, with the legislators in the middle; a place they don't relish.  This may at partially explain why some of the measures below, or their predecessors didn't get full consideration in the last legislative session.    In Saturday's Oregonian article, by Brent Huntsberger, lists the following bills expected to be considered:

" House Bill 4137 would add more specific requirements for servicers to follow, including deadlines to respond to borrower inquiries and limits on fees.

Senate Bill 1564 would bar lenders from putting a homeowner in a trial modification program and foreclosing on their home at the same time, the so-called dual-track process.

Senate Bills 1552 and 1576 and House Bill 4140 would require lenders to mediate with homeowners before foreclosing, as Washington, Delaware and Nevada do."

So I say "yay" for Attorney General Kroger for taking these short term measures by creating these temporary rules.  But the folks in Salem must not be intimidated into inaction by the power and emotion surrounding the foreclosure issues.  Get to work.

Oh,  and for some perspective, the Oregonian article cites CoreLogic's statistics that 2.88% of mortgages in Oregon were in foreclosure in October (the most recent numbers available) and 5.65% were considered delinquent.

If you have questions about the foreclosure process or short sales please get in touch.

The full Oregonian Article

Prices up and foreclosures down!?

S&P Case/Shiller and RealtyTrac released some interesting stats this week. 

The S&P Case Shiller Indices showed a second consecutive month of price increases for their 10 and 20 City Composites.  16 of the 20 market areas watched showed some increase, month on month.  Detroit, Las Vegas and Tampa showed decreases and Phoenix was unchanged.  Looking at annual numbers, Washington D.C. was the only area with a positive change and Minneapolis showed the worst decline at 11.7%.  As the spring and summer are usually busy real estate months, seasonal adjustments can decrease the impression of these housing gains.    Portland shows an increase from April to May of 1.2%, but an annual decrease of 9.1%  Though I don't see it in print, I remember hearing the NPR story on this data earlier in the week where the Case Shiller folks said something like, " Hey, seasonal adjustments or not, any increase is good".  I feel the same way.  The Report

RealtyTrac, tracks, among other things, notices for defaults , scheduled home auctions and home repossessions, all signs of impending foreclosure.  Their stats show that in the first two quarters, a majority (84%) of metropolitan areas saw a drop in their foreclosure rates as compared to 2010.  At first blush this is encouraging.  Industry insiders, like me :) attribute this less to the health of the economy and more to issues of unlawful or at least questionable foreclosure practices. 

Remember "robo signing"?  Where bank employees were supposedly approving legal paperwork without actually reviewing it?  That kerfuffle resulted in a slowdown of procedure and paperwork.  So in those instances, foreclosures are down because proper procedures are being followed.  Something to celebrate, I guess. 

Oregon is a non-judicial foreclosure state, which means, as long as proper procedures have been followed, lenders can foreclose without going through a court of law.  As long as proper procedures have been followed, there is the catch.  With the securitizing of mortgages, and the frequent resale of mortgages, lenders created MERS, the Mortgage Electronic Registration System.  This is a mechanism allowed the sale of mortgages, without recording those documents in the county in which the property is located. Thing is, a non-judicial foreclosure in Oregon is predicated on the recording of transfers of titles and liens.  There is at least one court case where a foreclosure was overturned due to this exact issue.  This MERS issue is slowing foreclosures down a bit too.

So it isn't that fewer houses are subject to foreclosure this year compared to last.  The situation is more that questionable practices surrounding foreclosures have mucked up the foreclosure machine.    Though in the spirit of the comment above regarding any market increases being a good thing, I suppose any slowing in foreclosures is a good thing also.