Thursday, January 13, 2011

Orwall, Kline introduce foreclosure measure to level playing field for homeowners in crisis

The home foreclosure crisis shows no signs of ending soon, putting tens of thousands of Washington families at risk. Rep. Tina Orwall and Sen. Adam Kline are teaming up to address the problem.

They announced a new bill to address the problem at a press conference this afternoon. The legislation adopts a multi-pronged approach to stemming foreclosures. It:
  • Makes a more robust “meet and confer” requirement. In 2009, Senate Bill 5810 required a meeting between lender and homeowner, possibly on the telephone or in person, before residential foreclosure could proceed. The 2011 bill will strengthen that—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.
  • Creates 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. Foreclosure mediation with a neutral person in the room has been shown in other states to drastically reduce the number of foreclosures.
  • Funds more housing counselors. Research has shown that trained housing counselors working with homeowners have reduced the number of foreclosures.
  • Reduces 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.
  • Provides a consumer protection act remedy for failing to comply with the foreclosure process.
Kline and Orwall’s bill is modeled after a law written in 2009 by the Nevada Assembly former speaker, Barbara Buckley. Her law created the foreclosure mediation program under which the bank or other lender is required to make a "good faith" effort in a mediation hearing to work on a new loan agreement with the borrower to avoid foreclosure.

The program is working. This past Tuesday the Las Vegas Sun reported that nearly half of the program’s participants are keeping their homes and avoiding foreclosure in nearly nine in ten cases.

Buckley says Nevada’s mediation program is showing that when people meet face-to-face, they reach agreements. And banks like Chase have said that 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. Banks also say they don’t want to hold foreclosed properties on their books.

Housing advocates, who sponsored a special summit on foreclosures today in Olympia, consider the bill to be one of their top legislative priorities.

Orwall’s bill is expected to be heard in the House the third week of session. Kline’s identical Senate version will be heard this month as well.

Washington state foreclosure facts
  • Over 132,000 mortgages will be foreclosed between 2009 and 2012.
  • In 2009 alone, more than 30,000 families lost their homes to foreclosure.
  • By the end of 2010 about 77,000 families had lost their homes.
  • More than 115,000 families are past due on their mortgages.
  • Between 2009 and 2012, 2,104,655 homes will experience a foreclosure-related decline in value totaling $19.5 billion in lost home equity—that’s $9,259 per home in the state.
Communities of color have experienced a disproportionate burden of foreclosures. 8% of African Americans and Latinos have lost their homes compared to 4.5% of whites. It’s estimated that 21.6% of African Americans, 21.4% of Hispanics, 18.6% of Pacific Islanders, 16.5% of American Indians, 15.7% of Asians, and 14.8% of whites are in imminent danger of foreclosure nationwide.