The Foreclosure Relief Law, aimed at beefing up protections for people facing foreclosure, went into effect in Minnesota on Aug. 1. Ron Elwood of the Legal Services Advocacy Project helped craft, negotiate and shepherd the bill through the legislative process. He offers his perspective.
Q: What is the most important aspect of this law?
A: Its fundamental premise is that a homeowner who is eligible for a loan modification or other option to avert foreclosure must be offered one, and if for some reason that doesn’t happen — the system doesn’t work as it is intended — then the homeowner can legally force a “time out” to make sure every opportunity to save the home is provided. Also, the bill sets up procedures to prevent “dual tracking,” meaning the practice of simultaneously processing a loan modification request and proceeding with the foreclosure.
Q: How have lenders responded to the legislation?
A: The Minnesota Bankers Association — from the get-go — worked closely with Legal Aid on crafting this bill. The result was a strong yet balanced final product. Their expertise and assistance was invaluable in working through the significant legal and technical complexities inherent in this kind of legislation. Their constructive participation throughout was a central factor in developing a solid bill that received unanimous acclaim in the House and Senate. ... The Minnesota Credit Union Network also was a partner in reaching a positive outcome.
Q: How unique is this kind of legislation nationwide?
A: To my knowledge, only California has done anything similar. So it’s pretty unique.
Q: Who is responsible for enforcement, and what are the penalties if a lender doesn’t comply?
A: The sole purpose of the bill is to prevent unnecessary and avoidable foreclosures. Prior to enactment, a failure or violation might trigger a government action, but the homeowner had no statutory right to say, “Wait, there’s been a mistake. I’m eligible for a loan modification. Stop the train.” Under the enforcement provision, if there is a violation, the homeowner has the right to ask the court to halt the foreclosure, ensuring that before the home is lost, a loan modification or other alternative for which the homeowner is eligible is offered.
Q: Who is responsible for alerting the homeowner of his or her eligibility for a loan mod?
A: The new “loss mitigation” standards the bill establishes require servicers to initially notify a homeowner (in writing) of all available loan modification or other options available to avoid foreclosure. Then, after receiving a request (within any required deadlines) for a loan mod or other option, the servicer must offer the option or options for which the homeowner is eligible.
Q: Who gets the credit for making this happen in Minnesota?
A: First and foremost, the bill authors, Rep. Melissa Hortman and Sen. Patricia Torres Ray. There were many other Republican and Democratic legislators, too numerous to name, who took a keen interest in moving the bill forward. The committee chairs and lead minority members of the key House and Senate committees through which this bill had to travel deserve credit, as well, for without their support the bill would not have become law. The Minnesota Bankers Association, the Minnesota Credit Union Network, the Minnesota State Bar Association and the Minnesota Land Title Association all were instrumental in and critical to the ultimate success of the legislation. Last, but far from least, a group of grass-roots consumer advocates — Jewish Community Action, Isaiah and Minnesotans for a Fair Economy, specifically — were key factors in making this bill happen.
Q: Foreclosure rates have fallen dramatically; does this law have the power to still help a significant number of people?
A: Yes. It is true that foreclosures are declining in Minnesota — and that’s a good thing. However, it is a mistake to believe the crisis has passed. There were about 18,000 foreclosures in Minnesota last year, which is 300 percent above the normal rate. The trend is going in the right direction, but we are not out of the foreclosure woods yet.