Virginia lawmakers are currently working on a bill that would require banks to maintain current and accurate records into the chain of title in regards to mortgage loans. The measure called House Bill No. 1506 is in direct response to the unhealthy and sometimes fraudulent foreclosure trend plaguing the nation and was officially introduced to the state’s legislature January 12, 2011.
As government initiatives such as the Home Affordability Modification Program (HAMP) have failed struggling homeowners and reports of predatory lenders erroneously foreclosing on millions of homes via the robo-signing scandal, financially strapped consumers have had very little assistance in regards to preventing repossession. The laws surrounding the stages of foreclosure are set up by a state, not nationally, and as a result local lawmakers are charged with the position of consumer protection. Virginia is the most recent state to work towards implementing processes to ensure that lenders follow mandatory steps in regards to foreclosure proceedings.
About House Bill No. 1506
According to the recently introduced bill, lenders would have to provide written notification in regards to a title sale at least 45 days before the transaction is made. Plus, lenders must provide property owners with written notification if foreclosure is looming on the horizon. These new and required steps to Virginia's current repossession process have been proposed as a way to slowly improve the system so homeowners have more time to fight back and prepare for the battle. The bill is the brainchild of Republican Delegate Bob Marshall and the politician has a history of displeasure in regards to how title transfers occurred.
The proposed changes are especially important for Virginia homeowners as the state implores non-judicial foreclosure practices. Mortgage Marvel defines the judicial foreclosure process as "Type of foreclosure proceeding used in some mortgage states that is handled like a civil lawsuit and conducted entirely under the direction of a court." This process takes significantly more time to implement than the non-judicial system, which allows lenders to quickly transfer a deed of trust as a way to offset losses when a borrower goes into default.What States Have A Non-Judicial Repossession Process?
It is up to each state how to implement foreclosure proceedings and Virginia is not alone in its choice. District of Columbia, Idaho, Massachusetts, North Carolina, Oregon, Tennessee, Texas, Washington, West Virginia and Wyoming presently have only non-judicial foreclosure systems. States including Alabama, California, Georgia, Hawaii, Mississippi, Missouri, Montana, Nevada, and New Hampshire have both options of judicial and non-judicial proceedings, but tend to favor the latter.
Non-judicial proceedings offer banks a quickened pace in reclaiming a property and putting it on their books as real estate owned (REO). Generally, legal proceedings can be extremely time consuming and the repossession process is no different. By removing the court system from the process, homeowners in non-judicial states can expect the process of losing their home to move more quickly.
Why There is a Non-Judicial System
Historically, a majority of judicial proceedings in relation to foreclosure were uncontested, as the borrowers involved in the process did not have the money to fight the system. Since the mid 1900s, lenders have fought to streamline the repossession process to offset their expenses associated with the proceedings. This has resulted in a slight majority of states favoring the non-judicial methods. As a result, states and local court systems are now starting to react to the system and are in charge of leveling the playing field for homeowners in need.
While homeowners may be distressed to learn that going to court is not a legal necessity, non-judicial proceedings may pave the way for real estate markets to rebound more quickly than states implementing a judicial process. The slower process of judicial proceedings keeps shadow inventory off the market longer, and further drags down housing values. According to the mortgage analyst firm, 1010data, it is this relationship that will ultimately make the California real estate rebound faster than New York (Housingwire.com).
