Proposed state legislation designed to protect consumer rights during home foreclosure proceedings is unnecessary, duplicates federal rules already in place, and would delay but not stop foreclosures, according to community bankers, who discussed the measure with the Journal.
The legislation, known as Senate Bill 1, won’t fix problems caused by large national mortgage originators, and it penalizes small local banks that did not commit the abuses SB1 hopes to fix, said Jerry C. Walker, president of the Independent Community Bankers Association of New Mexico.
“We’re the good guys here,” Walker said.
Senate Majority Leader Michael Sanchez, D-Belen, sponsored SB1 at the request of Attorney General Gary King.
The Attorney General’s Office analysis of the bill said SB1 would prevent mortgage holders from working to foreclose on homes at the same time they are negotiating with homeowners to change the terms of their loans. This so-called dual-track approach “increases the cost to the homeowner and places the homeowner at greater risk of foreclosure” because “there is a conflict between the ongoing loss mitigation efforts by one agent of the creditor (the servicer) and the foreclosure proceeding initiated by the creditor through its attorney.”
Most mortgage loans are serviced by a few large companies, and the federal Office of the Comptroller of the Currency has ordered the 14 largest to implement assistance programs for borrowers and to implement controls to prevent dual tracking, Walker said.
Sanchez said the bill requires “banks to work with eligible homeowners to complete a loan modification process before filing for foreclosure.” He said it provides all parties “a meaningful opportunity to explore ways to stop foreclosure.”
Samuel S. Spencer Jr., Lea County State Bank president, said his bank, like most community banks, always tries to keep borrowers in their homes and rarely forecloses on a mortgage. When a foreclosure is necessary, it’s simply because “the homeowner can’t pay the mortgage.” SB1 would extend the foreclosure process by several months and merely “delay the inevitable,” Spencer said.
Forcing small banks to carry bad debt longer than necessary weakens their balance sheets and could dissuade some from lending to home owners, said Ron Shettlesworth, president of Main Bank in Albuquerque.