The Foreclosure Crisis hits home for Oregon

Oregon is now seeing the foreclosure wave that crested over places like Las Vegas and southern California a couple years ago crash down on us here:

Oregon now has the third highest foreclosure rate in the nation. Tens of thousands of Oregonians are facing the loss of their homes due to the economic downturn.

Foreclosures significantly decrease the value of surrounding homes. Without action. Oregonians will lose more than $9.2 billion in decreased home value because of neighboring foreclosures between now and 2012.

The Opportunity-

Modifying troubled loans helps all parties, but voluntary programs aren't keeping up.

Not only are foreclosures bad for struggling homeowners and their neighborhoods, they usually mean huge losses for the lenders as well. Unfortunately, not enough loan modifications are being considered:

Up to 50% of projected foreclosures could be avoided through loan modification or other workouts

Only 5-10% of struggling homeowners are getting the help they need

One of the biggest obstacles homeowners face in saving their home is simply communicating with their mortgage lender. Callers are shuffled through vast voicemail systems, bounced from one department to another and even receive contradictory information from different representatives. Eugene and Salem-based foreclosure counselor Stacey Howard summed it up in her testimony supporting SB 628 "We can't get through. We cannot get through and we're doing it every day. How is the homeowner — with their lack of information — supposed to accomplish this?”

The Solution-

The key to stopping preventable foreclosures is to give homeowners the right to have a meeting with their lender to discuss loan modification, and to have a loan modification evaluated for their mortgage before foreclosure takes place. SB 628, passed in 2009 does just that, and includes the following key provisions:

When a lender sends a foreclosure notice, they will include a notice and a form for the borrower to request a loan modification and a meeting.

The borrower is encouraged to work with a housing counselor to prepare a modification proposal. The Department of Justice will fund additional non-profit housing counselors through existing funds.

The foreclosure sale cannot take place until the lender has evaluated a loan modification in good faith and responded to the borrower.

In 2010, OSPIRG led the fight for improvements to SB 628 through HB 3610. This legislation, now in effect, requires a lender who denies a loan modification to inform the homeowner specifically why they denied the request. The information provided could give the homeowner a legitimate reason to challenge the denial, and ensures that the lender is actually doing the calculations required under the federal HAMP program.