Mortgage Forum

Mike

Here is an interesting article I came across, is the clock ticking on California's anti-deficiency and non-recourse status?

Banks: Law Can't Bother Us
By Elizabeth Warren - May 6, 2008, 9:04PM

With the mortgage crisis smeared across the headlines every morning, you would think that the mortgage holders would keep their heads down. You would be wrong. The national banks are floating a new idea: they shouldn't have to obey state law when they foreclose on someone's home.

Pre-emption has been a gravy train for the national banks, insulating their credit card business from state consumer protection laws. Some banks now want another ride on the pre-emption train, claiming that they shouldn't have to follow local foreclosure laws when they take people's homes. Tomorrow Congressmen Brad Miller (D, NC) and Steve LaTourette (R, OH) will introduce HR 5380 to make it clear that the banks don't have to follow the state law foreclosure laws that they have always followed. Here is the scary part: this is expected to be a close vote.

HR 5380 is a small, but smart piece of legislation. It says that if the states want to pass laws to deal with the current foreclosure crisis, then they are free to do so. In other words, this bill says that Congress may not be ready to fix the crisis, but it will at least stay out of the way so that the states can do so. If banks don't like the state laws, they are free to fight them in the state legislatures or the state courts.

They can even make constitutional arguments about takings. But Congressmen Miller and LaTourette say they can't claim that Congress gave them a free pass. Since the founding of this country, foreclosure laws have been the special province of the state. In the same way that they set up the basic rules of property law and property transfer, states decide the terms on which people could be thrown out of their homes or off their farms by the mortgage lender.

There are no federal foreclosure laws. Any mortgage holder including a national bank or thrift must abide by the terms of the state's foreclosure laws. But in the past few weeks, national banks have started making a new argument: state laws are pre-empted whenever a national bank holds the mortgage, so the states can't make them follow the local rules.

Pre-emption has been used successfully by the credit card companies to fight off state regulation, so now the banks want to escape local restrictions on foreclosure as well. The scope of this claim is stunning. Because there is no federal foreclosure law, would the banks be free to do whatever they wanted? Could they simply order families out of their homes? Would federally-charted banks start buying up troubled loans from other banks, then doing their own vigilante expulsions?

And if banks can get pre-emption here, where else can they get it? Do they become a law unto themselves? Congress has not acted swiftly to help homeowners. The bankruptcy amendments that would provide real relief to the most troubled families is stalled.

But here's a step Congress can take quickly: They can tell the banks that the federal pre-emption gravy train is not taking on any new passengers.

gtull1

Allowing mortgage companies to not follow foreclosure laws would be a disaster for the consumer! That's just disgusting!!

I understand that it may help to simplify national banking. Lenders want the same laws to apply, no matter which state the property is located in. This makes it much easier for a national mortgage company to do business across the country. Banks have become national conglomerates that don't want to be burdened with local foreclosure laws, or any local legalities for that matter.

On the other hand we have the consumers. Consumers want the lenders to follow the local laws that are designed to protect their property interests.

When in doubt, I ALWAYS side with the consumer. Boo on this proposed law. Booo!!!

rachael24

I agree with the last post...Im not a big fan of this proposed law at all!

__________________
Recent college graduate with a credit consolidation concentration.

gtull1

It's a bit disgusting isn't it? banks have enough power already. If America isn't careful, the consumers' interests will go down the tube. Very nasty law!!

Boo again!

rachael24

I worked for a bank for 2 years and I know what goes on...and yes it is VERY DISGUSTING!

__________________
Recent college graduate with a credit consolidation concentration.