September 14, 2009
Federal agencies and mortgage lenders have been working to try to
slow the number of home foreclosures, with little in the way of
success. Now, at least one state is trying its hand by changing the
law.
North Carolina Gov. Bev Perdue has signed a new law aimed at making it harder for banks for foreclose on homeowners.
"When a home is foreclosed - it's bad for our families, it's bad for our communities, it's bad for our businesses and it's bad for North Carolina," Perdue said. "This bill makes it easier for homeowners to work out a deal with their lenders and avoid foreclosure."
Court records show that nearly 40,000 North Carolina homes have gone into foreclosure so far in 2009. According to the Center for Responsible Lending, more than 2.2 million North Carolina homeowners will see their property values decline over the next three years because of foreclosures in their neighborhood. Foreclosures hurt lenders as well, costing them an estimated 40 percent of the loan value.
"Everybody loses when a foreclosure happens," said Northern Carolina Attorney General Roy Cooper. "Giving homeowners and lenders more time to find solutions can save homes, neighborhoods and money."
Not all foreclosures can be prevented, but some homeowners are able to work out repayment plans and loan modifications with their mortgage lender or servicer. Cooper says the new law will ensure that homeowners and their mortgage lenders have the chance to voluntarily resolve foreclosures.
The law empowers the Clerk of Court presiding over a foreclosure hearing to ask what steps have been taken to prevent foreclosure and to continue the hearing for up to 60 days to allow homeowners and lenders more time to negotiate a solution.
To give homeowners a fair opportunity to appeal foreclosure orders, the bill also standardizes the amount of bond required at one percent of the balance due on the loan. Previously, some homeowners were asked to put up a bond worth the entire value of the loan balance in order to be able to appeal their foreclosure.
The bill also protects North Carolina consumers from unfair debt collection practices by debt buyers, a new breed of debt collectors that purchase old debts and aggressively file lawsuits to collect on them. In some cases, the debts have already been settled or paid. Debt buyers must now prove that they have the right to enforce the debt and be able to verify the amount owed. The new law also prohibits debt buyers from filing or threatening to file suit when barred by the statute of limitations.
