By Felicia Howard

Old Dominion Watchdog

Several foreclosure bills failed to make it out of either the Virginia House or Senate this session, including a bill that would have given homeowners more notice of a pending foreclosure.

Sen. Chap Peterson, D-Fairfax, proposed legislation that would have required banks and mortgage lenders to send a written notice of the intent to foreclose on a property to the owner at least 30 days before any proposed sale. But Senate Bill 836 did not make out of a committee.

Virginia law now only requires a 14 day notice. 

Peterson said his proposal would have given homeowners a fighting chance at keeping their homes.
 
“This is not a very consumer friendly state and you can see that when you look at our laws on foreclosure.  In Virginia it’s the non-judicial foreclosures that are the problem,” said Peterson.  

According to Brian Phelps, housing counselor for the Central Virginia Housing Coalition, Virginia allows only non-judicial foreclosures, meaning that lenders are not required to go to court at anytime during the foreclosure process.  And it gives homeowners a short window of opportunity to try and modify their home loan, Phelps said. 

“I believe that it would be a lot better for Virginia to be a judicial state.  A lot more modifications will happen faster for the loan, and it would be much easier to find out what the real issue is for homeowners.  Being a non-judicial state is great for the lenders, but there aren’t many benefits for families and homeowners,” he said.

After a homeowner has been notified their loan payments are delinquent, they receive a notice from their lender.

“They can foreclose within 14 days, shortest in the nation.  Imagine somebody sends you a notice they are going to close in 14 days and then you’re out on the streets,” Peterson said. 

Peterson called them “drive-by foreclosures.”

Virginia law refers to such practices as short sales.

During the 14-day window, homeowners can continue to work out a payment plan with lenders, if the lender allows it.  Homeowners can also attempt to sell the home themselves.

In Virginia more than 100 organizations assist homeowners through the foreclosure process including Housing Opportunities Made Equal of Virginia, a nonprofit counseling agency. 

Paula Sherman, who works for Housing Opportunities as an education and  training coordinator, said that last year the organization had an 88 percent rate of successfully meeting homeowners goals, whether through a sale or avoiding foreclosure.

Ali Faruk, the organization’s director, said they want homeowners to avoid foreclosure and 14 days is not long enough.

“We want homeowners to be able to sell their home and recuperate. Fourteen days isn’t enough to do that, even in the best housing markets, but especially not in this one,” he said.   

Despite the quick turnaround, Virginia is not among the ten states with the highest foreclosure rates, and falls more in the middle.

In January, Virginia had 27,348 homes in foreclosure; Fairfax County alone had the most with 4,370, according to RealtyTrac.com, which tracks home sales and foreclosures nationwide.

Virginia is also one of the states that has the fastest short-sell processes in the nation.  Typically homeowners have an average of six months to nine months before they receive their short sale notice and Faruk said that time is usually spent making loan modifications.

“The first thing we try to do is to try to work on a loan modification.   When a family gets a first notice they are thinking about how do I stay in my home, not how do I sell it,” he said. 

Often after homes have gone into foreclosure, homeowners receive notice from lenders that they have been approved for loan modifications, Faruk said.  

But after a short-sell notice has been mailed, lenders may stop working with homeowners to change their loan, said Sherman.

According to her, lenders have the final say, making it important that homeowners seek assistance sooner rather than later.

“Many lenders tend not to do anything with a homeowner once the process has started.  That 14-day window gives the lender more leverage – that’s why it’s so important for people to come to us as soon as they can,” Sherman said.  It’s a shame that the bill didn’t pass because more time is always helpful.”

Contrary to Peterson’s thoughts, Sherman’s experience in working directly with homeowners and lenders have shown that people are not  thrown to the curb after their 14 day period is over.  After the short sale period has ended, homeowners usually have a 30 day period before they have to officially vacate the property.  

“Lenders must send a letter to homeowners formally evicting them from the property.  They then will leave voluntarily or involuntarily,” she said.  

There is no official law giving a time period for homeowners to vacate the property.  Depending on the situation, it can take months. 

“In areas of Virginia where foreclosures numbers are the highest, like the Tidewater area or Northern Virginia, it can take months for a homeowner to officially vacate,” Sherman said.  

Lawmakers also rejected two bills that would establish a civil penalty for making or using a fraudulent record or document to support a foreclosure.

Delegate Robert Marshall, R-Prince William, introduced the bills to address the specific documentation to be presented to homeowners proving the lender’s ownership of the property.

The legislature may have killed Peterson’s bill, but other foreclosure measures have been successful, specifically dealing with fraudulent documents.

Delegate Robert Marshall, R-Manassas proposed House Bills 2473 and 1506.  Both these bills required specific documentation to be presented to homeowners proving the lender’s ownership of the property.

Neither bill made it out of a House committee.

Marshall said he supported Peterson’s efforts as well.  

“Hopefully things will be better for homeowners in the next session,” said Faruk.