Foreclosure Moratorium – 2009
Background
In response to the climbing foreclosure rate of the time, Rep Ferrendino attempted to pass a well intentioned but highly flawed foreclosure moratorium bill at the close of the 2008 state legislative session. With no prior knowledge of the bill, no input given, and too short of a timeframe to salvage anything meaningful, CBA helped defeat the bill in Committee. Wanting to try again in 2009, Representative Ferrendino approached CBA over the summer of 2008. After months of cooperative negotiations, CBA was able to mold the legislators’ initial desired approach into the most responsible approach that is currently being undertaken around the country. Rep. Ferrendino’s 2009 foreclosure moratorium bill is the product of these negotiations.
CBA Position
While the fundamental approach taken in the bill is still something CBA disagreed with, there was an understanding that doing nothing was not an option in this legislature. After months of negotiations, Rep. Ferrendino produced a responsible bill that we stayed neutral on.
Issue
The bill gives a borrower facing foreclosure a 10-day timeframe to “apply” for a 90-day delay. The application would be reviewed by an independent HUD-approved counselor which would determine if the distressed borrower meets a responsible list of specific criteria and requirements. CBA injected responsible requirements to protect lenders against numerous potential statutory abuses from borrowers, and inserted a sunset date of June 30th 2011. Among other things, CBA addressed trespassing liabilities when posting notices, sheltered lenders against possible biased-counselor decisions, and removed unnecessary delays that would increase costs to all parties. CBA also included specific usage, upkeep and financial qualification requirements that must be met. Additional CBA changes ensured that the lender would receive 100% of escrow and insurance payments and 66% of all other expenses during the timeout (other state’s laws require no borrower payments), otherwise the deferment period would end. Only owner-occupied first liens for personal use (no business loans) under $500,000 qualify. There are other mitigating limits such as bankruptcy. Any late payment during the timeout automatically resumes the foreclosure. The lender looses no right to determine if any workout will take place or on what terms. This act has been signed by the Governor.