Ohio Foreclosure Prevention Task Force Created
In early 2007, Ohio Governor Ted Strickland established the Ohio Foreclosure Prevention Task Force to scrutinize the increasing number of home foreclosures in Ohio. The Task Force is expected to report to the Governor a unified and coordinated statewide response to foreclosure issues. The Task Force is the latest effort to combat predatory lending issues, which the Ohio legislature sought to address in the recent passage of Senate Bill 185. This legislation brought further regulation on the mortgage lending industry, including mortgage brokers, real estate appraisers, title agencies, and non-depository mortgage lenders. State and federally chartered depository institutions are exempted from the new regulations under Senate Bill 185.
The Task Force, chaired by Ohio Department of Commerce Director Kimberly Zurz, expects to focus its attention on outreach and education to homebuyers and owners in foreclosure, proactive intervention for homeowners facing imminent foreclosure, and financial resources to assist Ohioans facing foreclosure or the possibility of foreclosure to keep their homes.
Task Force members have initially called on the mortgage lending industry to make blanket changes to lending practices and foreclosure processes, and also attempt to provide workout arrangements for those homeowners facing or potentially facing foreclosure actions, specifically those with adjustable rate mortgage loans. Detailed recommendations and practices for the lending community are possible and likely inclusions in the Task Force report due to the Governor in the next several weeks.
Specifically, the Task Force established various subcommittees to address and make recommendations related to (1) the effectiveness of Senate Bill 185 to address predatory lending issues; (2) additional legislation and regulations to implement Senate Bill 185; (3) workout solutions with lenders to keep borrowers in their homes; among other issues.
Congressional Panel Hosts “Homeownership Preservation Summit”
The Task Force and its subcommittees are also expected to review and consider possible implementation of a recent federal initiative endorsed by a myriad of groups including the national Mortgage Bankers Association. Developed and structured by U.S. Senator Christopher Dodd (D-Connecticut), the “Statements of Principles” from the Homeownership Preservation Summit outlines ways to maximize the number of borrowers who can stay in their homes and prevent foreclosure. These “Principles”, likely to be reviewed by the Task Force include:
1. Early Contact & Evaluation
• Request lenders to contact subprime ARM borrowers in the early stages of default to determine if a work out is possible.
2. Modify Existing Loans to Create Long-term Affordability
• Lenders are asked to determine if loan terms can be restructured.
3. Dedicated Foreclosure Prevention Teams
• Services are asked to create or partner with experienced third-party counselors to assist in foreclosure prevention issues and counseling for borrowers.
4. Low-Cost Refinancing
• For those eligible, lenders should refinance subprime borrowers into standard loans.
5. Credit Availability
• Create new products and expanded programs to permit eligible borrowers to refinance out of resetting subprime ARMs.
6. Maximize Success, Minimize Damage
• Not every foreclosure can be avoided, but efforts should be taken to minimize the damage to borrowers, communities and the mortgage market when foreclosure must continue.
• Develop a system to measure success of these programs and efforts to keep borrowers in their homes.
The activities of the Task Force, the current litigation filed by Ohio’s Attorney General against New Century Financial, pending investigations of other mortgage industry players, and recent Congressional legislative actions are expected to remain highly visible in Ohio and throughout the mortgage industry for some time to come.