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Foreclosure Legislation Is Not a Solution

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As a community banker in New Mexico for over three decades, I am compelled to respond to recent news articles and opinion pieces which overstate the level of the current problems related to mortgage foreclosures in New Mexico. These articles suggest additional legislation is needed to further regulate foreclosures in our state.

Unfortunately, the unintended consequence of such legislation may actually make it more difficult for future homeowners to qualify for a home loan.

The last thing any banker wants is for a bank customer to lose his or her home. No one is well served or profits when a foreclosure occurs. Families are displaced and the foreclosure process is expensive and lengthy. Banks do not profit, homes sit empty and neighborhoods suffer.

The recent national recession has placed some individuals in a situation where they simply cannot pay their monthly mortgage payment. We are fortunate in New Mexico, however, as New Mexico continues to experience fewer foreclosures than many of our neighbors in the West and Southwest.

By far the vast majority of mortgage loans in the country are serviced by a few large financial institutions, and this is also true in New Mexico. As a result of legal action by the 50 state attorneys general, consent orders were issued requiring the 14 largest mortgage loan servicers to correct deficient foreclosure practices. Recently the Office of the Comptroller of the Currency released details of the steps these loan servicers are taking to comply with these orders.

As a result of these orders, in addition to hiring independent contractors to review 2009 and 2010 foreclosure activity, they were required to fix unsafe and unsound foreclosure practices. Two specific areas addressed required each servicer to establish policies providing for a single point of contact to assist borrowers and implementing controls to prevent “dual tracking” of loans in the foreclosure process.

The 50 state attorneys general should be commended for taking action to address the problems at these large institutions.

From the perspective of this community banker, the problems experienced at the large servicers, related to their foreclosure practices, have not been a problem in New Mexico’s community banks. Additional state regulation in this area will only serve to further restrict access to mortgage credit.

Again, this will hurt all New Mexicans who may be looking to purchase a home in the future. With New Mexico’s home-building and residential real estate industry still suffering significant economic stress, new regulations may further reduce access to mortgage credit, will not create jobs, will not make housing more accessible, and will not stimulate economic growth.

As the current chairman of the Independent Community Bankers of New Mexico, in mid-December I finished our fall member visits to almost every community bank in New Mexico. I spoke with the executive management of each bank and without exception, every bank executive officer concurred that more state regulation was not the solution to the problems created by the large mortgage servicers.

The proposed legislation dealing with foreclosures in New Mexico, which was pre-filed for the 2012 session of the New Mexico Legislature, deals with the same problems already addressed by the actions taken by the OCC as a result of the action of the 50 state attorneys general.

The current foreclosure problems will not be solved if the proposed new legislation is passed, as promised by the proponents of the bill. In fact, if this type of legislation is passed it will most likely further restrict home mortgage credit in New Mexico, hurting the very citizens its proponents desire to help.

Samuel S. Spencer Jr. is president & CEO of Lea County State Bank.

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