By Stephen Groves
In Virginia, the home foreclosure process can send people packing in less than two weeks.
At least two legislators, a Democratic senator and a Republican delegate, plan to launch efforts next session to reform the process.
Sen. Chap Petersen, D- Fairfax, and Del. Bob Marshall, R- Manassas, want to introduce legislation that would be the first step in reform and shedding more light on the foreclosure process.
“It would start to bring transparency to those who cut corners to make a profit,” Marshall said.
Virginia has one of the fastest foreclosure processes in the country. Once a foreclosure notice of sale is posted, a house can be sold at auction just 14 days later in some cases, although most foreclosure processes take more time.
And because little if any paper records are left when one lender purchases a mortgage from another, foreclosure in the state can be confusing.
"It's a very disorganized system," Petersen said. "I'm looking to standardize the process."
Petersen is introducing three bills, each being worked out by Legislative Services, he wrote Monday on his blog. The bills aim to extend the notice period for a foreclosure sale from two weeks to 30 days and make it illegal for loan servicers to fake signatures or documents in order to obtain an order of foreclosure. Petersen also wants to make it mandatory that loans transferred from one lender to another be recorded in the land records of the county where the property is located.
"In modern day banking, the people who are collecting on a loan are not the people who actually own it," Petersen said.
Marshall is introducing a similar bill to make sure borrowers can easily find out who owns their mortgages. His bill would require county filing fees when a loan is transferred between lenders.
“I had constituents call me who didn’t know who owned their loans,” Marshall said.
And it's not because the process is illegal.
“Currently, Virginia law does not require that assignments of mortgages be recorded,” said Tom Domonoske, a Harrisonburg attorney who has represented homeowners facing foreclosure.
Marshall is also awaiting an opinion from Attorney General Ken Cuccinelli looking into the practices of Reston-based Mortgage Electronic Registration Systems (MERS). Marshall questions whether the firm, which acts as a middle-man in records keeping for millions of mortgages, is breaking state law by not paying a fee every time a mortgage changes lenders.
MERS said in a statement that it “does not eliminate, omit, or otherwise fail to report land ownership information from public records. … Parties are put on notice that MERS is the mortgagee and notifications by third parties can be sent to MERS. Mortgages and deeds of trust still get recorded in the land records.”
The recent concern by lawmakers over the foreclosure process is echoed across the country. While Virginia has a relatively low foreclosure percentage compared to other states, one in every 577 homes was foreclosed in October, according to RealtyTrac, which tracks real estate transactions across the county. The highest foreclosure rate was on homes located between Richmond and Washington, D.C., according to RealtyTrac.
"We've had in the last three or four years in northern Virginia a storm of foreclosures," Petersen said.
State legislatures across the country are facing the problems that come with the rash of foreclosures that came when the housing market tanked.
Heather Morton, legislative analyst with the National Conference of State Legislatures, said they are tackling issues in several areas, such as providing relief to home-owners struggling to make payments, regulating the industry so better records are kept when mortgages are transferred, and keeping property value up in neighborhoods that have empty houses due to foreclosures.
“You’re not just talking about a recession,” said Ted Gayer, co-director of the economic studies program at the Brookings Institute. “You’re talking about a recession coupled with a housing market bust.”
The vast number of foreclosures left mortgage lenders unprepared, Gayer said. That, combined with the uncertainty in the foreclosure process has crippled the market, he said.
The complexities of the market can leave lawmakers scratching their heads on how to react to a complicated problem. But for Marshall, the motivation is simple: “To ensure people who own homes or are paying their mortgages don’t lose their investment.”
I received a notice from Samuel I. White, attorneys for my lender, Wells Fargo that my home was sold at auction four days after I received a notice on my door that foreclosure had occurred. I have a written notice that Fannie Mae is now the holder of my Deed of Trust and I must vacate within 5 days.
I purchased my rural home in 2004 and refinanced with Wells Fargo in 2007 to lock in the best rate at that time. (5.78%) I have documented well my attempts to modify my loan with Wells Fargo since October 2009 and believe the lender has been overpaid during 2008 & 2009. Although I have been unemployed for almost two years, I believe the inability of Wells Fargo to negotiate the terms of my loan in a timely manner has added to my dire financial situation.
The banks have had more than two years to adjust their books concerning the values of property and the loans associated with these properties. Are our government leaders blind not to see the one-sided greed on behalf of the lenders? My experience and documents reveal that Wells Fargo has repeatedly refused to negotiate the terms of my loan.
It took me twenty years to buy my humble home and three years to rennovate and make minor upgrades. I used my own savings, no construction loans, with the intent that this will be my place of retirement in 15 to 20 years. Property, for me, was supposed to be a long-term investment.
In the Virginia Bill of Rights, it states that I have the right to own property. I believe Wells Fargo infringed on my rights by not adjusting my loan principle to reflect a tremendous drop in market value. Where are the Civil Rights lawyers? Why is our government allowing the banks to steal our homes? Why must I loose my only remaining asset so the bank/lender can make an acquistion or financial gain?
My question to Fannie Mae is which shelter would they like me to take up residence? I have nowhere to go. I still have a car, but its cold outside. When are they going to lock my doors and throw my grandmother’s furniture on the street?
The good news is that I have recently interviewed with the Justice Department and USAID so I hope to be employed very soon. Regardless, Wells Fargo, Samuel I White, P.C. and Fannie Mae are eager to see me homeless.
P.S. The judge in western district bankruptcy court granted Wells Fargo the right in their motion to foreclose on my home in October, one year after I began to communicate my desire to negotiate the terms of my inflated loan.
Great thread, keep it coming.
I carefully read many mortgage instruments including deeds of trust and notes. I have never come across the clause where the payments required are optional.
Has anyone heard of reserves? These are monies one sets aside to make payments and cover living expenses if one is out of work or has a pause in regular income.
I love the stories about how someone bought their home 20 years ago and lost it to foreclosure. How could that happen? The price they paid 20 years ago was, say, $100,000. They borrowed $80,000 at the time. So now, on a 30 year amortization schedule assuming an 8% interest rate they would owe about $48,000. Surely the home is worth more than $48,000 so they could sell it? Wait! It turns out they owe $260,000! Did someone cash out and not tell us? Awwww shame on those mean banks for not letting them have their big party and keep the housebank that they sucked dry….
Legislators beware. For every foreclosure story, if fully and carefully analyzed, there is greed, deceit, and horrible fiscal mismanagement. These poor little consumers you are trying to protect are well informed and acting in their own self interest without regard to what they have signed and agreed to. And when they could cash out they did with a vengance!
Nice post and very well written. Thanks for this!
It may be true that Wells Fargo did not modify your loan, but you don’t give us any details as to the kind of modification you were looking for, or whether you’d have been able to make mortgage payments after your loan was modified.
More than likely, Wells Fargo will sell your home for much less than the amount of money they gave you to buy it, so since Wells Fargo will likely lose money for foreclosing on you, saying that Wells Fargo is being greedy is not a fair description of their practices. The fact that there was a “tremendous drop in market value” for your home does not change the fact that you were given an amount of money to use to buy the home. That amount of money, it turns out, was an inflated amount, but you still received the money and used it to buy your home. Who’s to blame for all this is the question. I want to place blame on the bond raters that gave AAA ratings to mortgage backed securites when those raters knew the mortgage loans in those securites were subprime. I believe they are guilty of fraud, but I don’t see any of those bond raters being penalized for fraud or their officers going to prison for fraud. I also place the blame on home buyers at the time of the inflated prices, and I’m one of them. I bought two homes, one in April 2004 and one in August 2005, which at the time I believed were very inflated in value. I could have chosen to continue renting, but I CHOSE TO BUY those homes believing the prices were inflated, just like YOU CHOSE to buy your home and refinance it as you did. Every month, I make payments on the homes I bought. The second home I got I make interest only payments on, so I’ve never paid any amount of the original principle off. I still owe the original sale price of $245,900 for the home over five years after I bought it, and I make interest only payments on that amount, even though that home is now worth about $150,000. Since I haven’t missed any payments, the two banks that hold the mortgage have no reason to modify my loan, and I haven’t asked them to. I am accepting responsibility for my own bad decisions to buy those homes at inflated values, and I’m making the payments on them, even though I hate making such large, interest only payments on the second home. There’s no way I can get out of this situation legally or ethically. I hope that maybe in 15 years when I’ll be 71 years old, the housing market will have recovered to the point where I can sell my homes and at least break even on them.
As a lender, I can tell you exactly what the repercussions of this legislation will do. Virginia has been our number one state for lending because it makes the foreclosure process streamlined and cost effective. In turn, we can offer lots of loans at our lowest interest rates and fees in Virginia. As opposed to DC and Maryland, where legislation has been paced year after year in favor of the borrowers. Our fees used to be much higher in DC and Maryland. However because of recent legislation, we (along with hundreds of lenders) have pulled out of lending in DC and Maryland altogether as of 2010. Lending is about risk, whenever you add time and cost to the equation, we have to increase rates and fees to adjust for that risk. Or if build up enough risk like DC where it can take up to a year to legally foreclose, you won’t find any lenders left.
If you think this legislation is going to help homeowners, think again. Expect to see a few less lenders in the area and increased rates and fees if they pass this bill. Each time you add red tape to business, it means more lending risk and we’re just going to pass that risk/cost onto the homeowners.
I believe I read that the legislation is asking to extend the period for foreclosure from two weeks to a month. How will such a small increase in that foreclosure period add to lender costs?
Boo-hooey to Wendy S. – why do you think that since the value of your home has dropped that you should get a lowered principal balance on your home – just because you struggle with payments? My home’s value is less now too – just like yours – that’s just the way it is. Should Wall Street give you a break when stocks drop in value too?
Cheers to Paul S. – I’m with you all the way on your thinking!
Bless you Jim for owning up to responsibility when so many others think they are “entitled”.
And to the Lender – The only risk is a “bad” risk – that’s why borrowers are charged higher interest rates and fees to begin with, and that’s why there’s mortgage insurance for the lender; otherwise, I see no need for increased rates/fees for those who are credit-worthy, financially stable, mature, and responsible.
One problem the vast majority of America has is no one saves for a rainy day (or year) and they think the sun will shine every day.
WE NEED REFORM. Thank God for the Fair Debt Collection Practices Act which does outline what needs to be within an acceleration letter as well as giving 30 days to respond, etc.
VA State statutes do not protect and are also incorrect in the governing of foreclosures.
There should be protections in place that are clear, such as: The default notice as to what default exists should give 30 days for the debtor to respond; If the debtor does not respond, or doesn’t catch the default up to continue with loan; an acceleration letter should then be required that gives 30 days notice – AND OF COURSE THE AMOUNT OF THE DEBT TO CATCH UP PAYMENTS AND THE PAYOFF AMOUNT REQUIRED TO BE PAID OFF AS WELL AS THE CREDITOR’S NAME. If after the acceleration letter, then a Power of Sale Notice should go out with the Trustee Sale Notice; Newspaper Ads; etc. This is a no brainer and whoever is creating legislation is not thinking of the process. Legislature has disregarded proper notice to a debtor to save their home from a quick, wrongful foreclosure. There are other areas that change needs to occur, but I don’t have time to write it out on this blog.