States Are Becoming More Proactive in Assisting Homeowners Facing Foreclosure

States across the country are seriously stepping up the effort to keep people in their homes. Along with the federal government, states are looking to try different ways to assist would-be foreclosure residents. One interesting idea under consideration is legislation requiring lenders to obtain an appraisal of a property’s value as a rental and then offering the borrower in default the option of renting the home from the lender for a maximum of ten years. An actual foreclosure would take place only if the borrower (potential tenant) did not earn enough to afford the rent. I seriously doubt that this type of legislation will be enacted, however. Do not ask me how the lender is supposed to afford all the property management and maintenance costs. The idea seems ridiculous to me, and as I listened to a 10-minute discussion about it on CNBC this morning, I could not get my head around it. However, it goes to show how badly states want to put a halt to the ongoing foreclosure epidemic that has been increasing every month since the beginning of 2006.

Some states are already responding aggressively and ahead of the federal government in helping home owners avoid foreclosure. The following is a short summary provided by Ruth Simon and Amy Merrick of The Wall Street Journal (04/04/08).

Here’s what some states have been doing:

• Ohio has contracted with more than 1,000 attorneys to work with borrowers free of charge to block foreclosures.
• Illinois is considering a bill that would impose a 60-day moratorium on some foreclosures.
• Maryland has enacted emergency legislation to give borrowers at least 150 days to cure defaults, effectively creating a short-term moratorium on foreclosures.
• Minnesota is considering requiring lenders to honor a borrower’s request for a 12-month deferment.
• Beginning May 1, borrowers in Massachusetts will have 90 days to cure any defaults before their mortgage company can foreclose.

The Mortgage Bankers Association opposes foreclosure moratoriums.

This entry was posted on Friday, April 4th, 2008 at 12:27 pm and is filed under Financing, Miscellaneous. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.