Allowing owners of foreclosed homes to remain as renters for at least a year would stabilize neighborhoods and minimize the fallout for families, a state lawmaker contends.
A bill by Rep. Anna Tovar, D-Tolleson, that would grant homeowners on the brink of foreclosure the right to rent houses they can no longer afford to own is among several that Democratic lawmakers say would help address the state’s lingering foreclosure crisis.
“When you foreclose on a home you have to uproot your children and move to a different community,” said Tovar, the House minority whip. “So being able to stay in the same home that you once owned now as a renter would keep the family a part of their community. That way the home is filled, not vacant and being broken into, and those are some really good effects.”
HB 2326 was assigned to the House Commerce Committee, followed by the House Judiciary Committee, but has yet to be scheduled for a hearing.
The bill would prevent the beneficiary of a potential foreclosure sale from selling a property for at least one year provided the homeowner pays monthly rent. Beneficiaries would be required to notify homeowners of this option, and under the measure justice courts would determine the fair market rent of properties.
“Foreclosure is a huge issue in my district and statewide,” Tovar said. “The lack of laws here at the state Legislature to help out foreclosure victims is really sad.”
Jeffrey Kastner, managing attorney of housing and government benefits for Community Legal Services, which serves low-income people facing foreclosure, called offering an option to rent would provide benefits all the way around.
“People would be paying taxes and not dislocating their families,” Kastner said. “I think it’s a fabulous idea for HOAs because the property is kept up and people are paying their dues.”
A bill authored by Rep. Debbie McCune Davis, D-Phoenix, would, among other things, require loan-servicing companies to do more to communicate clearly with borrowers facing foreclosure, educate them about their options, offer loan modifications when possible and proceed with foreclosures only after determining that borrowers can’t qualify for loan modifications.
“It may not change the outcome, but it will give people information in a timely manner,” McCune Davis said.
Rep. Daniel Patterson, D-Tucson, who signed on to the bill as a primary sponsor, said state government needs to do more for distressed homeowners.
“There aren’t enough options for people to stay in their homes and prevent neighborhoods from going into decline,” he said. “This is our attempt to provide more tools for working families to stay in their homes and work out fair terms for their mortgages instead of letting big banks dictate the quality of life.”
Chris Groninger, policy and outreach manager at the Arizona Foundation for Legal Services and Education, said that foreclosures often stem from a lack of knowledge.
“During the foreclosure process people are overwhelmed with the amount of paperwork. Sometimes they don’t understand that they have rights,” Groninger said. “Having a professional tell you that you can do something to prevent or navigate the situation is empowering.”
McCune Davis’ bill was assigned to the House Banking and Insurance Committee, followed by the Commerce Committee. It has yet to be scheduled for a hearing.
Among other bills, none of which had been scheduled for committee hearings:
• HB 2301 by Patterson would allow municipalities to require beneficiaries of foreclosure sales to remove rubbish, weeds and potential public safety hazards on properties;
• HB 2300 by Patterson would allow homeowners facing foreclosure to submit an affidavit requesting a 60-day postponement during which the homeowner may attempt to negotiate a revised payment or loan modification.
• HB 2618 by Rep. Katie Hobbs, D-Phoenix, would allow tenants or subtenants to continue renting properties up for foreclosure auction for the remainder of the lease period or 90 days, whichever is longer.