An end to the madness?

by Joanne Zuhl, Staff Writer

For the tens of thousands of Oregonians and their families who have lost their homes in the past four years, the recent announcement of the national mortgage settlement is of small comfort compared to their loss. The 49-state settlement will stretch over three years, and divide the $25 billion pound of flesh from the five major lending institutions down to about $1,800 per victim in Oregon.

But for the tens of thousands who are in the pipeline of foreclosure today, an ounce of prevention is still worth a pound of cure.

In Salem, two bills are left alive that would give Oregon homeowners protection against the predatory lending practices that contributed to the housing crisis and the avalanche of foreclosures it caused. Championing that cause through the Senate committee process is State Sen. Chip Shields, D-North/Northeast Portland, who chairs the General Government, Consumer and Small Business Protection Committee.

Shields’ committee  cleared Senate Bills 1552 and 1564 that would install protections for consumers when they go to modify their loans to avoid foreclosure, and do away with the dual-track process that allowed banks to blindside homeowners with foreclosure even while they were in the process of modifying their loan. The measures echo the national mortgage settlement overview, the details of which are still unknown.

However, the bills survival is questionable, and reports as of yesterday (Feb 27) indicated they might not survive a vote. House Republicans snuffed four similar bills by denying hearings in the committee process. And there’s a Republican proposal to remove the dual-track violation from prosecution under the unfair trade practices act, an action that Shields says would water down the law, remove any remedy to victims and prevent the state attorney general from pursuing justice on an issue that now dominates concerns among his constituents.

Chip Shields: I’d say four years ago, 70 percent of my constituent case work was helping people who were having problems with government agencies, department of human services, etcetera. Now, 70 percent of our constituent work is people who are just complete at wits end about how inept, either on purpose or by accident, their lender or their mortgage company is. People in situations where they’re going along with the modification process in good faith, and then, wham, they get the notice right in the middle of it that the bank is foreclosing on them for no good reason — when they’ve been following the advice of the person on the other end of the phone. So it’s a huge problem, and we’re not just hearing from homeowners, we’re hearing from Realtors who are amazed at how poorly their clients are being treated.

Joanne Zuhl: How are these bills going to help people now in the throes of foreclosure? What will it do to those who are teetering toward it?

C.S.: Unfortunately, it’s going to be prospective. It is not going to help people who are currently in foreclosures. It will help people who are threatened by foreclosure. There’s a huge massive wave coming. It will do a significant amount of good for a significant amount of people.

Regarding the dual-track bill, people have been working with their lender, only to find out that their bank was working to foreclose on them while they were in the modification process. This will end the dual track nonsense that banks have been doing. People have been thinking they are doing the right thing, working with their lender, and then the banks hit them with foreclosure regardless of whether there is any type of stumble at all.

On the modification efforts, I’ve heard incredible stories of Bank of America customers who are never talking to the same person twice, or being told the bank never received the paperwork. This would bring in a third party arbitrator, which I think will make the process more fair and honest and allow people that kind of face to face negotiation.

J.Z.: How do these compare to regulations that are part of the national settlement in which Oregon participated? Do we need this locally?

C.S.: This will definitely complement the national settlement. As I understand it, the final settlement hasn’t been signed off by all the parties. This will still allow the Oregon attorney general to go after the banks that engage in fraud. And that was the promise the Oregon attorney general made to me, that he would never agree to a settlement that would grant immunity for fraudulent dealings.

J.Z.: The national mortgage settlement will net Oregon an estimated $230 million, the bulk to be distributed from homeowners who were victims. But $30 million goes to the state of Oregon. How would you like to see that applied?

C.S.: That’s a good question. I think it should go to the homeowners themselves to buying down principle, so people can afford their mortgages.

J.Z.: What is your reaction to the House Republication’s refusal to bring up several foreclosure bills for discussion?

C.S.: At the end of the day, there are two currencies in politics, one is money and the other is people power a lot of times money wins, but not all the time. So it’s going to depend on people calling on their state representatives, particularly those who live in East Multnomah County and areas outside of Portland, to call on their representatives to say this is important. We’ve got to stand up to the banks. The Oregon attorney general should have the right to sue banks when they engage in fraud in these matters. At the end of the day, the Republicans will weigh who is more important to them — the banks or their constituents. It will be up to the constituents to make their concerns known to their legislature. At the end of the day, people power does win out; it just takes a hell of a lot of work.

J.Z.: What’s the survival rate for these bills?

C.S.: I’d say 50/50.

J.Z.: You’d have to get the support of the house to sign off on it at some point. What do you say to Republicans who suggest that these efforts amount to overregulation of the industry and won’t help Oregonian’s avoid foreclosure?

C.S.: Going back to the fact that the modification bill has come out unanimously, I don’t know if it’s true the Republicans think it’s too much regulation. The Senate Republicans on my committee agree with me that having a modification mediation program just makes good common sense. The question is whether the House Republican leadership will listen to the people or listen to the banks.

J.Z.: Have the banks and lenders been aggressive on this in Salem?

C.S.: Yeah, there is a group that’s called the United Financial Lobby. They’ve been very aggressive in trying to kill any type of mortgage relief for everyday people.

J.Z.: How much further are state lawmakers willing to go to manage this market in the future, to keep this crisis from happening again?

C.S.: We definitely need to do more. Part of the challenge is that we are preempted from doing a lot on federally chartered banks, and so in many respects, this is a U.S. Congress issue. But I think that to the degree that we can continue to stand up for consumers, I’m sure that my committee can push the ball forward.

What the national mortgage settlement does beyond the $25 billion

The landmark national mortgage settlement was reached between 49 states, the federal government and five major lenders: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. The settlement will provide as much as $25 billion in relief to distressed borrowers, and for signing states and the federal government.

It also establishes the following new standards for operations regarding loan modifications and foreclosures. The devil is in the details, which have yet to be released, but here are the highlights:

  • Puts an end to robo-signing, the signing of affidavits filed with the court without personal knowledge. Affidavits/sworn statements utilized in foreclosure proceedings must be accurate as to the amounts owed and the standing of the bank/servicer to file for foreclosure and must be based on the signor’s personal knowledge of the facts. The affiant must actually review the bank/servicer records before signing. And banks/servicers shall not pay incentives to employees or third parties to encourage speed in the signing of affidavits.
  • Requires pre-foreclosure referral notice to borrower of their loan status 14 days before a delinquent loan is referred to a foreclosure attorney. The notice shall contain facts supporting the bank’s/ servicer’s right to foreclose along with other information about the loan history, terms and the amount required to bring the loan current.
  • Establishes new protections to ensure accuracy of borrower’s account information, including posting payments within two days and accepting partial payments when they’re within $50 of the scheduled payment.
  • Requires quarterly reviews of foreclosure documents to ensure compliance with the agreement and third-party oversight of actors and agents involved in the foreclosure process.
  •  Restricts dual-track actions under which foreclosures could move forward even during the medation process. Once a loan has been referred to foreclosure, the agreement allows for suspending the foreclosure process if the borrowing receives a loan modification and files in a timely basis.
  •  The bank/servicer shall establish an easily accessible single point of contact assigned to each homeowner who reaches out to the bank/servicer due to difficulty making their loan payments.
  • Banks/Servicers shall develop loan portals where borrowers can check, at no cost, the status of their loan modifications, to be updated every 10 business days.
  • Requires the loan modification denial notice to contain the reasons for denial and inform homeowner that he/she has 30 days to rebut the denial.
  • All default, foreclosure fees and bankruptcy related service, including third-party fees shall be bonafide, reasonable in amount, and disclosed to the borrower in detail. Likewise, attorneys’ fees charged in foreclosure shall only be for work actually performed and shall not exceed reasonable and customary fees.


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