House committee approves foreclosure prevention bill

RICHMOND, Va. (AP) - Gov. Timothy M. Kaine’s proposal to give additional information and time to some homeowners facing foreclosure was sent Thursday to the House of Delegates floor.
    The House Commerce and Labor Committee endorsed the measure 19-3. The action came on the same day the Mortgage Bankers Association announced that foreclosures nationally reached an all-time high in the fourth quarter of 2007 and probably will keep increasing.
    Some legislators, however, remain unconvinced there’s a problem.
    “There’s no crisis generating this,“ Del. Bill Janis, R-Henrico, said of Kaine’s legislation. “There’s no urgency to it.“
    Janis noted that less than 1 percent of all mortgages - a record 0.83 percent, according to the mortgage bankers’ organization - were in foreclosure.
    “When they foreclose, it’s not necessarily a bad thing,“ he added.
    Janis said homes lost to foreclosure and sold at bargain prices present a good opportunity for first-time homebuyers. In fact, he said the first home he purchased after being discharged from the Navy was a foreclosure that he otherwise probably wouldn’t have been able to afford.
    Del. Jennifer McClellan, D-Richmond, countered that foreclosures depress the value of other property in the community. She noted that thousands of variable-rate mortgages are scheduled to reset this year at higher interest rates, putting even more homes at risk of foreclosure.
    “If that is not a crisis I don’t know what is,“ she said.
    The spike in foreclosures has been attributed largely to the boom in high-interest, subprime loans to borrowers with blemished credit or insufficient income to make payments. The legislation is limited to homeowners with those types of mortgages.
    The bill would require lenders to send borrowers who are in default a letter at least 10 days before a final acceleration notice. The letter must state there may be ways to avoid foreclosure and provide contact information for the lender and at least three counseling agencies approved by the U.S. Department of Housing and Urban Development.
    The lender also must inform the borrower that a 30-day extension will be granted upon request. If the borrower fails to contact the lender by a date designated in the letter, however, the company may send the acceleration notice and demand payment of the loan in full.
    Some legislators said lenders already go to great lengths to help borrowers keep their homes.
    “I just don’t think this bill does anything about this so-called crisis,“ said Del. Chris B. Saxman, R-Staunton.
    Others said it beats doing nothing.
    “It doesn’t hurt the banking industry and it might help the poor borrower, so I don’t see why we don’t go ahead with it,“ said Del. Frank Hargrove, R-Hanover.
    The measure must go back to the Senate for consideration of several largely technical amendments. If passed and signed into law, the provisions would expire on July 1, 2010.
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    The bill is SB729.
    On the Net: http://legis.state.va.us