Kaine bill would extend foreclosures by 30 days

RICHMOND — Time is precious during the weeks before foreclosure and Gov. Timothy M. Kaine is trying to give homeowners another 30 days to keep their heads above water.
He sent a last-minute bill down to the Virginia legislature this week that would require lenders of subprime mortgages to wait an extra month before foreclosure proceedings begin.
Foreclosures in Virginia are some of the fastest in the country.
And Virginia’s rate of foreclosure has doubled since last year, Kaine said during a press conference where housing advocates, lenders and Realtors praised his leadership in the issue Wednesday.
The bill is just one recommendation from a task force he set up to prevent mortgage foreclosures.
If approved, SB 797 would require lenders to give           borrowers of subprime loans a chance to ask for a grace period before their mortgages are accelerated. If borrowers call their lender in time, they could get a 30-day extension before the four- to five-month foreclosure process begins.
“That’s going to be the difference between someone losing their home or not — those 30 days,” Kaine said.
The 30-day extension will come with a recommendation — get housing counseling from a Housing and Urban Development-accredited agency.
Kaine said people who receive the extra time will be encouraged to call housing counselors to recover from default, sell their home or find another way to preserve their investment.
One local housing counselor said she’s been swamped with new clients who are seeking help to prevent foreclosure.
“It’s very complicated and some good folks were relying on the fact that the lender would tell them everything he or she knew,” said Margie Leon, housing counselor at the Virginia Cooperative Extension in Prince William County.
Still, about one-third of loans borrowed in 2005 and 2006 were subprime, and more than half of those borrowers actually qualified for loans with lower rates.
That’s why it’s important to learn about mortgages and contact HUD-approved housing counselors like herself, Leon said.
She works for the Cooperative Extension, a government agency that, along with non-profit agencies such as Housing Opportunities Made Equal of Virginia, or HOME, works to educate consumers and prevent foreclosures.
Experts anticipate another wave of foreclosures starting in May, when rates of two-year interest-only ARM mortgages will reset.
That means people with these types of loans could see increases in their monthly payments of $500 to $1,000 a month.
“It depends on how much you borrow and what your terms are, but it can be substantial and people don’t get raises to offset those kinds of hikes,” Leon said. “Not only that, but that’s just your first rate increase, and it’s going to increase every month or six months.”
Every loan is unique, she added, that’s why counseling is important.
“Foreclosure is a traumatic experience and any time the owner is trying to make an effort toward mortgage retention, the more time you have to work this thing out, the better chance the homeowner has,” she said.
That’s why Kaine said an important message for subprime mortgage holders is to take action early.
“You don’t need to wait for the notice, there are people out there who want to help,” Kaine said.
There are other bills in the General Assembly that would stop the continuation of a subprime crisis. The Senate has already passed SB 709, which would prohibit Virginia-licensed brokers to sell mortgage loans at higher rates for which customers qualify. Another bill, HB 408, would penalize persons involved with foreclosure scams. The House and Senate have agreed to pass that bill as well.
Kaine’s SB 797 heads to the Senate Commerce and Labor Committee.
Staff writer Lillian Kafka can be reached at 804-649-8710.