States Consider Imposing Their Own Foreclosure Regulations

In the wake of the country’s foreclosure crisis, more states are considering imposing new regulations on mortgage companies in the interest of preventing foreclosure.

At least 25 states have proposed bills to regulate the way a bank processes foreclosures. In many instances lenders have used fraudulent or sloppy paperwork to seize homes. Banks have also been reluctant to offer modifications or other foreclosure alternatives to homeowners.

California’s Attorney General Kamal Harris has proposed regulations that are close to passing in the state. It should be noted that California has the second highest foreclosure rate in the country. Under the new state regulations, a bank would not be allowed to begin the foreclosure process while a homeowner or bankruptcy attorney is negotiating for a loan modification.

Oregon has also introduced legislation on the ways bank handle mortgage modifications.

New York’s Attorney General Eric Schniederman wants to impose criminal penalties on banks that used forged documents to foreclose on a property.

New foreclosure regulations also allow homeowners the opportunity to hire foreclosure lawyers and sue their lenders if they used wrongful or fraudulent means to seize a property.

Regulations were what banks were hoping to avoid when they agreed to settle with the federal government for $25 billion. The Mortgage Bankers Association warns that if states impose new regulations it could slow down foreclosure processing and thereby slowing the housing recovery. They also warned that the cost of new regulations could be passed on to future borrowers.

Foreclosures drive down the price of homes and preventing them is not only beneficial to the affected homeowner but homeowners in general. If at all possible, troubled homeowners should take steps to stop foreclosure for themselves and their neighbors. Under the guidance of a foreclosure attorney, a person can seek alternatives to losing their homes through a short sale, personal bankruptcy or a loan modification.