Oregonians who face losing homes get help from new law
Lenders are now required to meet with homeowners in trouble to discuss loan modification options
Published: October 01. 2009 4:00AM PST
Oregon homeowners facing foreclosure have one more line of defense thanks to a law that went into effect Monday requiring lenders to discuss loan modifications with troubled borrowers.
Signed into law earlier this year by Gov. Ted Kulongoski, Senate Bill 628 requires lenders to meet either in person or over the phone with borrowers who are in default to determine whether they qualify for a loan modification. The law requires such a meeting only if the borrower requests it.
“Not every borrower will be able to modify their loan but some are (able), and we are seeing some loan modifications out there, so it’s definitely an option,” said Lisa Morawski with the Oregon Department of Consumer and Business Services. “We really encourage people to take advantage of this opportunity.”
A loan modification, which effectively lowers a borrower’s house payment by reducing the principal balance, interest rate or extending the length of the term of the loan, is a tool the federal government has encouraged lenders to use to help combat the nation’s tide of foreclosures. The federal Home Affordable Modification Program passed earlier this year offers financial incentives to lenders who modify homeowner loans.
However, in testimony last week before the Senate Committee on Banking, Housing, and Urban Affairs, Gene Dodaro, the acting comptroller general of the United States, said the federal Government Accountability Office believes the Treasury Department’s estimate of 3 million to 4 million homeowners who would likely be helped under the federal loan modification program “may have been overstated.”
Dodaro also said “concerns have been raised about the capacity and consistency of servicers participating in HAMP in offering loan modifications to qualified homeowners facing potential foreclosure ... however, the ultimate result of Treasury’s actions to increase the number of HAMP loan modifications and the corresponding impact on stabilizing the housing market remains to be seen.”
Through August, lenders have offered 571,354 loan modifications to homeowners nationwide and initiated 360,165 of them, according to a recent report from the federal Housing and Urban Development Department. Statistics on loan modifications by state or county are not available.
“Many homeowners ... often have a difficult time getting in touch with the right person at their lending company,” said state Sen. Suzanne Bonamici, D-Washington County/Portland, who proposed the legislation, in a state news release. “This law gives Oregonians the tools they need to potentially save their home.”
Oregon’s new law requires lenders to send notice to homeowners facing foreclosure that a meeting to discuss loan modification is possible.
Should the homeowner request a meeting, the lender would then be required to make available an official with the capacity to authorize a loan modification to meet either in person or on the phone.
The lender would also be required to file an affidavit with the county where the affected homeowner resides stating that such a meeting took place.
The affidavit would be filed at the time of foreclosure, according to Morawski.
The notice would be sent out at roughly the same time the lender files a notice of default, a document which initiates foreclosure proceedings and is generally filed after a borrower is three months behind on a home loan. The notice of default gives the lender the authority to auction off the home if the loan is not brought current.
Through Monday, 2,648 notices of default have been filed in 2009 in Deschutes County, an increase of more than 103 percent through the same day last year, according to county records.
“It’s true, the foreclosure option is usually the last resort, and when inevitable, this (law) is not going to stop it,” said Linda Navarro, the executive director of the Oregon Bankers Association.
However, Navarro said the banking industry in the state supports the bill because it provides clarity to lenders about their responsibilities, many of whom “have been working fast and furious to participate in modification programs” but are sometimes challenged by communication with the borrower.
“From our standpoint, if this helps provide some clarity about the options available to a borrower, and helps that borrower and lender talk, that’s a good thing,” she said.
Andrew Moore can be reached at 541-617-7820 or amoore@bendbulletin.com.
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