As the number of bank, government and tax lien foreclosures continues to rise in Virginia, legislators are setting their sights on the processes used by lenders in foreclosing on these properties. A number of homeowners has reported that lenders have foreclosed on their properties without proper documentation or after making them wait for a modification application result.
Several owners of foreclosed homes in Virginia Beach and in other areas of the state reported that after applying for a loan modification, banks made them wait while their payments accumulate, only to tell them later that their application was not approved and that they now need to pay tens of thousands of dollars to make their loans current.
According to housing market analysts, this is one of the most common reasons why the number of Virginia foreclosed homes keeps rising; another is the fact that lenders are allegedly losing borrowers' documents. In response, Delegate Robert G. Marshall sponsored a bill that will require lenders to maintain mortgage loan transfer records in the local level and also document title chain before a foreclosure can be done. The legislation also specifies that civil penalties will be given for fraudulent filings.
Currently, lenders use the Mortgage Electronic Registration System (MERS) to record residential loans. This system allows banks to bypass local record agencies and avoid fees, but, for borrowers, the system makes it hard to find documents related to bank, government and even tax lien foreclosures. Marshall's bill reportedly aims to prevent this from happening and also prevent lenders from forging signatures and using fake affidavits.
According to local legislators, although there are other reasons for the rise in the number of foreclosed homes, the MERS system is one factor that contributes to the problem. Meanwhile, others have cited the fact that Virginia is a nonjudicial area, or a state that does not require lenders to go to court to prove a foreclosure case, as part of the reason for the huge number of foreclosures in the region.
Most residents support recent laws proposed in the state which are meant to solve problems related to the processing of bank and tax lien foreclosures. According to them, these recommendations should have been made a long time ago and they could have saved a lot of homeowners.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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