Carpenter submits 2 bills to protect homeowners from unfair foreclosure practices

Posted: May 12, 2017 | Senator Carpenter

AUGUSTA — Two bills by Sen. Mike Carpenter, D-Houlton, would protect homeowners from unfair foreclosure practices.

The bills — LD 731 “An Act To Require Mortgage Servicers To Act in Good Faith in Dealings with Homeowners,” and LD 1355, “An Act To Ensure the Timely and Proper Completion of Residential Foreclosures” — were among several foreclosure bills that received public hearings before the Judiciary Committee on Thursday.

“The crash of 2008 was the greatest financial crisis this country has faced since the Great Depression. Unethical and deceptive banking practices left countless Americans financially destitute with little or no way to recoup money or assets they lost,” said Sen. Carpenter. “These bills protect consumers and ensure that foreclosure processes are done in a fair and honest way.”

Widespread predatory lending and complex bundling of mortgages that lead to the financial crisis resulted in an explosion of foreclosures across the country. These foreclosures revealed that mortgage bundling between financial institutions often went undocumented, causing confusion as to the true owner of the mortgage and leaving the borrower with no legal recourse to the lender.

For example, in a recent court case U.S. Bank was the plaintiff, but JPMorgan Chase was the entity receiving payments from the borrower. Although JPMorgan was dealing fraudulently with the borrower, the court was only legally permitted to penalize US Bank. LD 731 requires that the bank must act honestly, or in “good faith,” when lending to homeowners and changes foreclosure mediation laws to provide courts authority to directly penalize the lender responsible for receiving payments from the borrower.

The second bill, LD 1355, makes several changes to laws regarding public sale of foreclosed homes, including the waiver of foreclosure process. Currently when a home is foreclosed upon and goes up for sale, the bank takes ownership of the home and leaves the homeowner with the impression that they no longer owe any money on the home. However, the bank can file a “waiver of foreclosure” at any time afterwards and put liability back on the homeowner.

Attorney Tom Cox, who brought both foreclosure bills to Sen. Carpenter, mentioned a specific example where the lender had bought the property at a foreclosure auction and the homeowner believed that he no longer had responsibility for the property. Four years later, that lender filed a waiver of foreclosure, sending a copy to the house in which the borrower had not lived for over five years.

“That borrower suddenly discovered that the waiver of foreclosure reinstated his ownership and liability to care for the property and reinstated his liability for the debt on that mortgage that had previously been extinguished,” said Cox.

According to a CoreLogic report from January, Maine has one of the highest foreclosure rates in the country.

Both bills face further action in the Judiciary Committee and votes in the House and Senate.