Bill would ban upfront payment to mortgage consultants
Sen. John Nelson’s S1130 would establish rules for mortgage consultants who claim to negotiate with lenders on behalf of homeowners facing foreclosure.
The bill would ban mortgage consultants from charging up-front fees, and it prohibits fees that aren’t disclosed to the homeowner.
“You’ve got firms out there that are taking advantage of people in distress, getting paid upfront and not doing their jobs, and that needs to stop,” said Nelson, a Republican from Litchfield Park.
The bill was approved by the Senate Commerce and Economic Development Committee on Jan. 26. It now heads to the Senate floor.
Sen. Sylvia Allen, a Republican from Snowflake whose background is in real estate, said she’s not sure whether she will support the bill because she doesn’t believe in meddling in the affairs of private businesses.
“Again, it is putting more regulations on a business, and I want to make sure it is warranted,” she said. “Sometimes the things that we do don’t really solve the problem. It continues, but we just burden business with regulations, paperwork and fees.”
S1130 also would establish new rules that dictate how contracts must be carried out, and it would allow clients to seek punitive damages in court.
If the bill passes, mortgage consultants would be required to put contracts in writing and present them to clients at least one day before they are signed. It would allow clients to terminate any contract within three days after it’s been signed.
Finally, the bill exempts certain people from its provisions, including attorneys, licensed real estate brokers and people who conduct business under laws that already regulate banks, trust companies, credit unions and insurance companies.
Bill would compel lenders to seek alternatives to foreclosure
Rep. Michele Reagan, a Scottsdale Republican, has introduced a bill to force mortgage companies and lenders to at least attempt to work with homeowners on finding alternatives to foreclosure.
H2626 would require lenders to make an effort to contact the borrower to explore options, such as a loan modification, at least 30 days before a notice of foreclosure is recorded. Lenders, however, would not be required to provide assistance.
The bill, which was approved unanimously in the House Commerce Committee on Feb. 17, would apply only to property purchased between January 2001 and December 2008, a clear attempt to help people who had purchased homes at peak prices.
Reagan said only 8 percent of Arizonans who ask their financial institutions for mortgage relief actually get any. She wants to force lenders to prove that they’ve made an effort to avoid foreclosure.
“We know that there are some cases when foreclosure is inevitable, and the people really are in houses they can’t afford,” she said. “That’s not true for a lot of people in Arizona right now. There are many cases where people, with a little bit of help, could stay in their homes.”
No one spoke against the bill in committee. Meanwhile, the Arizona Bankers Association registered a neutral position.
Sen. Ron Gould, a Republican from Lake Havasu City, said the bill is unnecessary because lenders already have a financial incentive to avoid foreclosures: They lose money when homes are sold at a loss.
“The lenders are going to act in their own interest, and their best interest is to negotiate with the borrower,” Gould said.
Senate panel OKs bill restricting ‘balloon loans’
A Senate panel has approved a bill to protect home buyers from loans that could come back to hurt them.
The bill, S1288, would restrict lenders from issuing specific types of “balloon loans” to home buyers, prohibit any lender from establishing a pattern of extending credit to people who lack means for repayment, and restrict lenders from charging a pre-payment penalty on home loans.
The Senate Commerce and Economic Development Committee voted unanimously on Feb. 17 to send the bill to the floor by way of the Rules Committee.
Sen. John Nelson, a Litchfield Park Republican who sponsored the bill, said S1288 will prevent further deterioration of the housing market and prevent unnecessary foreclosures in the future.
“If it was your mother or your grandmother, and you watched her getting taken to the cleaners, as an individual, you get mad,” Nelson said. “So why shouldn’t we approach it the same way for either our constituents or the citizens in the state?”
S1288 would prohibit loans that include payments that are more than twice as large as the average of earlier scheduled payments.
There are, however, a few exceptions. The bill would not apply to balloon payments due at least five years after the date of the loan.
And it would not apply to loans that take into consideration a borrower’s seasonal or irregular income.
The bill, which is backed by the Attorney General’s Office, also prohibits loans with repayment schedules that cause the principal balance to increase.
Basics on five other foreclosure bills:
• H2511, introduced by Rep. Rick Murphy, a Republican from Glendale, would prevent cities from levying a sales tax on the transfer of property to a lender in the event of foreclosure. Instead, it would allow cities to collect a sales tax from the eventual buyer of the property. The measure also specifies that the sales tax must be applied to the lesser amount of either the property’s value at the time of the transfer to the lender or the property’s value at the time of resale.
• H2739, introduced by Rep. Anna Tovar, a Democrat from Tolleson, would establish a mandatory mediation program through the court system for residential foreclosures. Under the bill, the mediation program must address, among other things, loan modification and restructuring of debt. The court may impose sanctions on a party that failed to make a good-faith effort to reach a settlement. Foreclosures would be put on hold during mediation. The program would end on July 1, 2020.
• H2740, introduced by Rep. Anna Tovar, a Democrat from Tolleson, would allow a homeowner who defaults on a mortgage to occupy the home as a renter if he or she notifies the lender of their intent to rent and makes on-time monthly rental payments at an amount determined by a justice of the peace. The renter must continue to use the house as a primary residence. The bill would prohibit lenders from foreclosing on a home until one year after the borrower notifies the lender of intent to rent.
• H2766, introduced by Rep. Barbara McGuire, a Democrat from Kearny, requires the landlord of a property subject to foreclosure to provide each tenant a written notice 60 days before the property’s sale. It also requires landlords to give the tenants of the property at least 30 days to vacate. If a landlord fails to provide proper notice, the tenant may recover damages or one month’s rent plus the amount of the security deposit and attorney fees, whichever is greater.
• H2270, which is sponsored by Tempe Democrat Rep. Ed Ableser, would prohibit mortgage brokers from making residential loans without checking a borrower’s ability to repay it. It also bans mortgage brokers from making residential loans with the intent that it will not be repaid and the mortgage broker will get the property’s title through foreclosure.