BLOG VIEW: States’ Anti-Foreclosure Efforts: Too Much, Too Little?

As the merits and limitations of the Bush/Paulson homeowner relief plan are debated, state-level policymakers from coast to coast have unveiled their own measures designed to aid stricken borrowers.

These programs, like their national counterparts, often feature long titles that conveniently form catchy and appropriate acronyms: Gov. M. Jodi Rell, R-Conn., introduced the Connecticut Fair Alternative Mortgage Lending Initiative & Education Services Program (CT FAMLIES), a $50 million project aimed at the state's subprime fallout, in November.

While a memorable acronym has yet to be revealed for a newly proposed initiative in California, loan servicers there may see changes in their required duties across much of the servicing cycle if a new piece of urgency legislation is passed.

If approved, the California bill, introduced by Senate President Pro Tem Dom Perata, D-Oakland; and Sen. Michael Machado, D-Linden; and Ellen Corbett, D-San Leandro, inserts a number of speed bumps and cushions designed to break – or at least delay – the cycles of foreclosure, abandoned properties, depressed neighboring home values and further foreclosures.

According to a statement released by Perata's office, the bill would mandate, among other items, borrower contact and appropriately worded warning of an impending interest-rate reset at specified points three times prior to the rate's date of reset.

If the warnings prove insufficient to stop default, servicers must provide a list of HUD-certified credit counselors as well as hold an in-person meeting with the borrower a minimum of 30 days before filing the notice of default.

Failing those measures, if the foreclosure process rolls on, the servicer must ‘mail a notice addressed to 'resident' in order to alert tenants that the property owner is delinquent in the mortgage payments,’ the bill says, adding that a warning message about the foreclosure must be printed – in both English and Spanish – on the outside of the mailing envelope.

Furthermore, the California bill would increase the minimum time period allowed for tenants to vacate a foreclosed property, as well as issue penalties to servicers and their partners who fail to adequately maintain a foreclosed property – from allowing criminal trespassers down to allowing mosquito larvae to grow in the home's swimming pool.

Many Republicans in the California state senate, meanwhile, have expressed concern about possibly overly hasty passage of urgency bills, especially those that may ultimately prove restrictive.

‘Too many times, people tend to overreact,’ Senate Republican Leader Dick Ackerman told the Los Angeles Times.

Elsewhere in the U.S., the mantra is still counseling and contact.

Gov. Janet Napolitano, D-Ariz., who recently met with representatives of such firms as J.P. Morgan Chase, GMAC, Wells Fargo and Washington Mutual, emerged with a plan that urges borrowers to call the HOPE NOW hotline as well as their lenders, who are likewise encouraged to reach out to their borrowers. A statement from the governor's office calls this strategy ‘an aggressive approach.’

Nevada may have an even tougher time claiming to take an aggressive approach to preventing foreclosure – despite the particularly high number of foreclosures posted in the state.

One of the Nevada government's primary anti-foreclosure efforts, a state-run resource Web site at, seems to have fallen short.

According to its counter, the Web site had just 2,043 page views since its launch in October, and no one is saying how many of those views were by unique visitors (or visitors who are neither curious journalists nor members of the Nevada government itself). In any case, the figure pales in comparison to Nevada's 6,694 foreclosure filings in November alone, according to RealtyTrac data.

But since the announcement of the Web site's launch, the office of Gov. Jim Gibbons, R-Nev., has made no further official comment on the state's foreclosure crisis or released subsequent plans for action.

Jessica Lillian, Commercial Mortgage Insight


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