Foreclosure News

On January 28, Jerry Jackson of the Orlando Sentinel reported that Florida State Representative Darren Soto plans to propose a “foreclosure bill of rights” which would help slow foreclosures in the state of Florida. Similar legislation has also been proposed in other states, including Texas and New York.

Here are some details regarding his proposal:

(1) This law would apply to “homestead properties,” not second homes or investment properties. The ramifications of this provision would mean that only people claiming the real estate as their primary home would receive the benefits of the bill, as opposed to vacationers and landlords.
(2) Banks would be required to make a “good faith” effort to renegotiate home loans. This would curb lenders from falsely promising to renegotiate home loans, and place some pressure on lenders to help solve the mortgage crisis. Mortgage lenders may now be subject to criminal charges and civil liability for false promises.
(3) Banks would be further required to comply with mandatory document disclosures. The effect of this would be twofold. First, the mortgagor will be obligated to disclose all correspondence and information with the homeowner. This may help one of the problems of the mortgage fallout misinformation. Second, this will help the homeowner decide if the lender is acting in her best interests, and alert her to changes in the terms of the loan.
(4) Lenders cannot immediately run to court to initiate a foreclosure action and are subject to mandatory mediation proceedings. In a mediation proceeding, both sides get together to try to negotiate a deal through a mediator and settle the matter out of court.
(5) To help the lenders, the law will provide for a “forbearance lien” which will “allow lender to recoup the amount of the principal they agree to reduce, when the property was eventually sold.” The banks, while forgoing some of their capital in the short run, will regain some of it down the road.
(6) The bill will also specify settlement negotiation requirements. This will encourage settlement that will hopefully satisfy both parties. If the terms are set, this will make settling possible foreclosure actions easier and more efficient.
(7) Banks would be supplied criteria for the commercial reasonableness of renegotiated loans. In a foreclosure action the banks hold a large advantage in that they can take the property from the homeowner at any time. This power position gives them leverage in the renegotiation of loans. This provision would help even the playing field between the lender and the mortgagee.