A new foreclosure law that took effect Thursday provides Idaho homeowners with better information regarding their rights and ensures lenders provide ample notice of sales and respond accordingly with mortgage modification requests.
Unfortunately, said Brett DeLange, foreclosures will not stop as a result of the new legislation.
"The most upsetting thing is that we have so many foreclosure matters facing homeowners in our state," said the Idaho Attorney General's chief of consumer protection.
Attorney General Lawrence Wasden sponsored House Bill 331, a collaboration between his office and the Idaho Bankers Association that passed during the last legislative session, following the dismal results in his office's February report on the state's housing crisis.
Foreclosures in 2010 were up 11.23 percent in Idaho -- 124.25 percent higher than 2008. Latah County assessor Pat Vaughan told county commissioners Wednesday the county was lucky to have the lowest foreclosure rate in 2010 of all the 44 counties in Idaho.
"When we took a systematic look at the complaints that we had received," said DeLange, "we saw complaints that kept repeating themselves. Our goal is to stop those and to end them."
Homeowners had complained of confusion regarding their rights when faced with foreclosure, a lack of communication with lenders and an inability to get speedy information regarding the options they could take to possibly prevent losing their homes.
"Too many homeowners were telling us they don't know who to talk to or they get shuffled around," DeLange said.
Under the new law, lenders must issue a notice to homeowners facing foreclosure that details their financial obligations and the penalties they face if they do not resolve their default. The notice must also advise homeowners to contact lenders about available loss mitigation programs, including a mortgage loan modification, a form for which must be attached to the notice.
If a modification request is filed, a lender must respond to it within 45 days. A foreclosure sale cannot proceed prior to a response. The lender must also agree to meet with the borrower, if requested, or discuss the matter over the phone.
DeLange said the new legislation also addresses a complaint from homeowners of up-front processing fees for mortgage modification requests.
"It prohibits taking fees up front from these sorts of operations," he said. "Far too often we saw them do nothing."
Lenders must now file their foreclosure notices with a residence's respective county recorder's office 20 days prior to a sale, as well as notify a borrower of a new sale date if the initial time of sale is postponed. Before Thursday, lenders did not have to notify borrowers of rescheduled sales dates.
"The (former) law was not clear with respect to a house whose foreclosure sale was postponed," DeLange said. "The law now makes clear that the homeowner needs to be made aware of any postponed sale."
Dawn Justice, president and chief executive officer of the Idaho Bankers Association, said the trade association offered its assistance to the attorney general's office in drafting the new legislation it would proved mutually beneficial to both lenders and borrowers.
"The (foreclosure) process has gone through many, many transitions over the past several years," Justice said. "Not everyone engages when they're facing potential foreclosure. We thought maybe if there was a way that we could reach out even more to make it easier and more understandable for homeowners that are going through financial foreclosure they would."
The IBA focused on two components of the bill, she said, which were a 14-day notice of foreclosure sale and defining actions homeowners could take to potentially avoid it.
"It's all about foreclosure prevention. Avoiding foreclosure is in everybody's interest across the board," Justice said. "The first option is, you want to keep someone in their home."
Lenders don't benefit from foreclosure sales, Justice said, because homes generally sell for less than the loan amount.
"(The lender) made the loan on the full amount of the cost of the house when they bought it," she said. "That all disappeared because now it's being sold for way less than the balance of the mortgage that's owed on it."
DeLange said the attorney general's office was thankful for the work and insight the IBA provided in the legislation-writing process.
Anyone found in default prior to today should also be provided with a supplemental notice from their lender and a mortgage modification request application.
(c)2011 the Moscow-Pullman Daily News (Moscow, Idaho)
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