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Wednesday, November 26, 2008

Some good ideas from California

From recent news feeds comes information about a recently enacted California law that has some good ideas about real estate foreclosures that we could use here in Michigan.

During the recent California legislative session a number of bills have been introduced that attempted to deal with various problems associated with the enormous amount of foreclosures taking place in the state. One that survived and was signed into law is Senate Bill 1137. It addresses problems experienced by three different groups: homeowners in default, renters of homes that have gone into foreclosure, and communities in which foreclosed properties are located.

The new law requires that foreclosing lenders take certain steps to help, or attempt to help, homeowners who are in default on mortgages that were originated between January 1, 2003 and December 31, 2007. At least thirty days prior to filing a notice of default (NOD – the first step in the California foreclosure process) the lender or its agent must attempt to contact the borrower by phone "in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure." The borrower must be provided with "the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency."

In the event that the borrower’s billing or contact address is different from that of the property, the lender is obliged to notify any residents (such as renters) when a notice of sale is posted. The notice shall be posted on the property and also sent by mail. It must be in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean (California’s major spoken languages). We’d likely need to include Arabic and maybe a few Eastern European languages here in Michigan – Ed. The notice advises residents that the property is in the foreclosure process and may be transferred as soon as within twenty days. It also tells them that the new owner may give them a notice to vacate. The notice, must be for at least 60 days, not the usual 30, as a result of SB 1137.

Finally, the law provides that the new owner of the foreclosed property (whether it be the foreclosing lender or a successful bidder at the auction) must maintain vacant residential property. Failure to maintain means "failure to care for the exterior of the property, including, but not limited to, permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action to prevent trespassers or squatters from remaining on the property, or failing to take action to prevent mosquito larvae from growing in standing water or other conditions that create a public nuisance." This law authorizes local jurisdictions to fine the new owner up to $1,000 per day – given proper notice and time to respond – for failure to maintain property as specified.
We really could use that locally. Local Home Owners Associations have been trying to do something to keep neighborhood values up, but they have had a tough time enforcing their orders to keep up properties, especially with banks, which tend to just ignore their requests.

These are all reasonable ideas to help deal with the fall-out of the greatly increased foreclosures that we are experiencing all over the country. Hopefully, Michigan lawmakers will consider similar laws for our state.

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