OLYMPIA—A bill that could help homeowners avoid foreclosure is scheduled for a public hearing before the Judiciary Committee next Wednesday, January 26 in House Hearing Room A at 8:00 AM.
HB 1362, sponsored by State Rep. Tina Orwall, aims to protect and assist homeowners from unnecessary foreclosures by making strategic changes to existing law.
“The statistics are staggering; this problem is not going away and thousands of families are losing their homes,” said the Des Moines Democrat. “In the summer I met four people in my district who live on the same block and they are all facing foreclosure. What they and many other folks in the same situation need are options, and that’s what my bill will try to give them.”
Orwall’s legislation adopts a multi-pronged approach to stemming foreclosures by:
1. Making a more robust “meet and confer” requirement. In 2009, the Legislature passed a bill that required a meeting between lender and homeowner, before residential foreclosure could proceed. The 2011 bill will strengthen that requirement—the meeting must be in person, must assess the homeowner’s ability to pay the existing or a modified mortgage, and now applies to all residential mortgages, not just certain years.
2. Creating a foreclosure mediation requirement. If the lender and homeowner cannot reach agreement during “meet and confer,” the homeowner can request a foreclosure mediation to see if he/she is eligible for a loan modification.
3. Funding more housing counselors. Research has shown that trained housing counselors working with homeowners have reduced the number of foreclosures.
4. Reducing barriers to foreclosure alternatives. The bill makes changes to the foreclosure process to more easily permit “cash for keys” exchanges between the bank and homeowner.
5. Providing a consumer protection act remedy for failing to comply with the foreclosure process.
“We’re looking at the new faces of foreclosure; this is not something that happens to other people. Thousands of families are at risk of losing their homes, among them you can find neighbors, co-workers, friends and family members,” Orwall said. “It’s time to stop seeing foreclosures and poverty as someone else’s problem and start seeing it as a problem of the times that is affecting more and more people from all walks of life.”
Orwall’s bill is modeled after a Nevada law that created the Foreclosure Mediation Program in which the bank or other lender is required to make a “good faith” effort, through mediation, to work on a new loan agreement with the borrower. So far the outcome has been good, as almost half of the program’s participants are keeping their homes and avoiding foreclosure in nearly nine in ten cases.
According to some banks, like Chase, face-to-face meetings between borrower and lender result in something other than foreclosure (such as loan modification) more than 50 percent of the time. And banks also say they don’t want to hold foreclosed properties on their books.
“Something as important as the loss of a person’s home is at least worth a face-to-face meeting to find a solution that will benefit lenders and mortgage holders,” added Orwall.
The companion bill in the Senate sponsored by Sen. Adam Kline is also expected to get a hearing soon.