Legislative panel endorses foreclosure bill

Posted May 12, 2009, at 10:23 p.m.

AUGUSTA, Maine — Legislation aimed at helping ease the foreclosure crisis in Maine won unanimous support from a committee Tuesday after lawmakers negotiated compromises with lenders and advocates for homeowners.

The bill, LD 1418, does not offer homeowners at risk of foreclosure any financial assistance. Instead, the bill would create an optional foreclosure mediation program within Maine’s Supreme Judicial Court to assist with negotiations between the owner and the mortgage holder.

The legislation also establishes a hot line and expanded outreach programs within the Maine Bureau of Consumer Credit Protection to help inform consumers about their options to avoid foreclosure.

Rep. Sharon Treat, the Hallowell Democrat who sponsored the bill, said the measure is modeled after programs in Connecticut that have helped many people keep their homes. Avoiding foreclosure benefits not only the homeowner but also the larger community and the lending institution that stood to lose more money through a forced sale.

“A lot of compromises were made,” Treat said after the unanimous vote by the Insurance and Financial Services Committee. “But the core of what I wanted to do to create a mediation program that works for the lender and the homeowner is there.”

While the foreclosure crisis is not nearly as severe in Maine as in other parts of the country such as Las Vegas and parts of Florida, reports indicate that Maine’s foreclosure rate is higher than the national average.

In a March 2009 report, the Center for Responsible Lending reported that 5,455 properties were in foreclosure in Maine at the end of 2008. About 58 percent of those were subprime loans, but the number of prime loans in foreclosure increased by 72 percent between 2007 and 2008.

An analysis prepared for the committee estimated that slightly more than 5,400 homeowners will go into foreclosure in the state this year. If roughly two-thirds of the homeowners sought mediation, nearly 1,600 of those could expect to stay in their homes, according to the analysis based on the Connecticut model.

As originally written, LD 1418 would have required parties to enter into foreclosure mediation services, but lending institutions strongly opposed the mandate. The original bill also would have required either the homeowner or the lender to make sure the home remained habitable to avoid urban blight, and would have prohibited tenants from being evicted from foreclosed properties.

The version endorsed by the committee Tuesday drops the home upkeep and tenant eviction provisions, although tenants in a foreclosed upon building still must be notified. Homeowners can choose to go into mediation, but a representative from the mortgage holder must attend the mediation sessions if the homeowner requests it.

The latter provision is important, bill supporters said, because some homeowners are having extreme difficulty figuring out who even holds their mortgage because of rampant repackaging and reselling of loans in the industry. Others are having trouble getting through to anyone with whom they can attempt to negotiate to avoid foreclosure.

Without access to such a “decision maker,” many homeowners feel powerless to avoid losing their homes, supporters said.

Carla Dickstein, senior vice president at Coastal Enterprises Inc., a nonprofit heavily involved in the debate over foreclosure in Maine, said the bill won’t help everyone. Some property owners are simply too far behind on payments or owe much more than the current value of their home.

But Dickstein said it is a strong step in the right direction.

“It’s a good compromise,” she said. “It certainly helps our work as housing counselors in that there is a place to go to have access to a decision maker.”

The mediation program would be financed through fees charged to the mortgage holder, while the hot line would be paid for with a portion of real estate transfer taxes. The mediation service would be offered first in areas of Maine with the highest foreclosure rates, such as the Lewiston-Auburn area, and then expanded statewide by 2010.

Because LD 1418 is an emergency measure, it will require a two-thirds vote by the full Legislature to become law. The committee’s unanimous vote in support of the amended bill could help win enough support from House and Senate lawmakers.

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