The foreclosure process is, hypothetically, fairly simple. Homeowners fail to make their mortgage payments and then receive a notice in the mail saying they have 35 days to pay. If they don’t, the lender usually files a complaint in court. The complaint asks for the property to be sold as a penalty for the homeowner’s nonpayment.
In practice, foreclosure is rarely straightforward. The median length of Maine foreclosures in 2012 was 404 days, though the process can last up to a maximum of 570 days. And prior to or in the interim, the homeowner may pursue a variety of options to keep the home or avoid a technical foreclosure, such as loan modification, principal forgiveness, loan refinancing, forbearance, a short sale or a deed-in-lieu of foreclosure.
State government, municipalities and banks benefit from having homeowners avoid defaulting on their mortgage. And in a state like Maine, where 4 percent of all homes with a mortgage were in the foreclosure process in September 2013 compared with 2.3 percent for the nation, there is a need to strengthen assistance for struggling homeowners. The No. 1 reason people seek loan modifications is because of a reduction or loss in income.
As a result of the housing bubble — Maine home values increased 68 percent between 2000 and 2006, while incomes only increased 17 percent, according to the Maine State Housing Authority — Maine courts got more foreclosure cases than they could resolve in 2010. They ended the backlog in 2012, but now foreclosure filings are inching back up. They increased 10 percent in 2013, to 4,756.
The Maine Legislature can help reduce the number of homes lost to foreclosure; improve the mediation process, which helps banks and homeowners find an alternative to foreclosure; and speed up the process of foreclosing on abandoned properties. Luckily, specific steps to accomplish these things were laid out in a report by Attorney General Janet Mills and presented to the Legislature’s judiciary committee in January.
Some of the recommendations presented in the report can be accomplished without legislative approval — such as committing the attorney general’s office to finding more grant funding for housing counselor programs. But some will require the Legislature’s authority. That’s the reason for LD 1389, sponsored by Rep. Jarrod Crockett, R-Bethel. An amended version got unanimous approval by the judiciary committee last week. It deserves the full Legislature’s OK.
The bill would make a number of critical changes. One would close a loophole that has so far allowed plaintiffs in a foreclosure action to avoid paying a real estate transfer tax, used to fund the Maine Bureau of Consumer Credit Protection’s foreclosure diversion program, which connects struggling homeowners with free housing counselors.
Improving access to housing counselors is essential, so homeowners can better navigate the options available to avoid foreclosure. The attorney general’s report called it “the single most important factor in helping homeowners save their homes and in helping foreclosures proceed more smoothly and more efficiently.” But with counselors handling an average of 70 active cases each, and running out of funding, the program — and homeowners — will only suffer. At the very least, they deserve the money they are entitled to.
The bill also would create a way for courts to confirm whether a property has been abandoned in uncontested cases, allowing for an expedited foreclosure process. That way lenders can get the properties back on the market, hopefully avoiding a depreciation of home values in the area.
And the bill requires what are called real estate property preservation providers — who are charged with winterizing homes, changing locks or removing items from homes presumed to be abandoned — to be regulated in a similar way to debt collectors. The bill would prohibit them from breaching the peace against anyone, require them to inventory personal property removed from homes and mandate them to produce that inventory upon request.
After horror stories of independent contractors changing the locks on the wrong home or shining flashlights into the wrong home late at night, they certainly need more oversight and to be held to a higher standard.
We are pleased that Crockett and the judiciary committee have built on previous efforts to improve consumer protections and streamline the foreclosure process when warranted. They have crafted a bill that often-opposing sides can — and should — support.