Senate OKs bill to protect homeowners from unfair foreclosures
AUGUSTA — The Maine Senate gave initial approval to LD 731, a bill that requires that banks must act honestly, or in “good faith,” when lending to homeowners.
The bill, “An Act to Require Mortgage Servicers to Act in Good Faith in Dealings with Homeowners,” is sponsored by Sen. Mike Carpenter, D-Houlton.
“The 2008 financial crisis wreaked havoc on too many homeowners in Maine and across the country. Unfortunately, some of the causes of the crisis are still in place,” said Sen. Carpenter. “I am thrilled that my colleagues in the Senate joined me in supporting this important measure that protects homeowners and ensures that lenders use scrupulous practices.”
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. The legislation 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.
Attorney Tom Cox, who brought the bill to Sen. Carpenter, said that this measure would be one of the strongest protections for homeowners in the country.
According to a CoreLogic report from January, Maine has one of the highest foreclosure rates in the country.
LD 731 faces further votes in the House and Senate in the coming weeks.