The Foreclosure Crisis

The mortgage crisis has hit Oregonians on every economic level – from the elderly to the first-time home buyer, families across the state are struggling with sky-high interest rates on homes with sinking values.

Many of the homes on the brink of foreclosure could be saved through sensible loan modifications. Homeowners able and willing to make payments on re-negotiated loans often return more profit to the investor than a foreclosure sale.

Mortgage servicers are the middlemen between banks and homeowners, and they have the power to help Oregonians save their homes by changing their loans. Homeowners spend countless hours on the phone trying to get help, but are left feeling frustrated and confused. The problem is that all too often, servicers make more off foreclosures than they do off modifying loans – which means they have no reason to help homeowners keep a roof over their heads.

The most common market force – competition – does not apply in the servicing market. Borrowers do not choose their servicers and they cannot fire unresponsive firms. Moreover, many servicers obtain more revenue from foreclosure fees. As long as mortgage servicers remain unaccountable, problems will persist.

Economic Fairness Oregon is advocating for legislation this session that would:

-- End the dual track process (SB 1564)

         A foreclosure sale should not be conducted if a borrower is in compliance with the terms of a trial modification or a loan forbearance program or the parties are still actively negotiating loss mitigation options. 

         If the lender postpones a foreclosure sale, the homeowner must be given notice of the new sale date.

-- Increase Accountability with Mortgage Servicing Rules (HB 4137)

         The nation’s largest banks have not been dealing fairly with borrowers. Mortgage servicing rules set a standard of good faith and fair dealing, restrict excessive fees and require a single point of contact for borrowers in default.

         Compliance with all state foreclosure laws must be mandatory and enforceable.

-- Implement a Pre-Foreclosure Mediation Program (SB 1552 and HB 4140)

         Mandatory pre-foreclosure meetings have been established in 21 states with positive results; well-established programs report that participants reach a settlement more than 50 percent of the time.

         An effective program will: automatically schedule meetings; require lenders to send a representative with true decision making authority; be conducted by a neutral third party.