DS News

» VISIT US ONLINE @ DSNEWS.COM 57 didn't stop at business as usual. "Robust loss mitigation processes exist for homeowners who find themselves in financial difficulties and the processes are working well for most of the participants," Hildebeidel said. "is safety net should be counted as a very positive development." e industry trauma and resulting regulatory response has also led to better data and workflow management. "e review of foreclosure complaints and documentation and verification of chains of assignments and perfected endorsements of notes is much better than previously," Hladik said. "e records maintained by lenders and servicers are better and the information communicated to attorneys on files has improved." Lenders and servicers are definitely running tighter ships, although many will argue that, from a regulatory standpoint, the improved document controls amount to a small positive in the face of the very big burden in time and expense. Costs involved with foreclosures continue to rise. Hildebeidel raises the question of statutes of limitations challenges a full decade after the start of the housing crisis. He reports that some states such as Maryland have changed or attempted to change statutes specifically to try to prevent aged debt collection. Case law continues to address the due, default, and "accelerated" status of loan payments and how statutes of limitations apply to the different conditions. "It should be noted that continued challenges and tightening of statutes of limitations has the somewhat perverse effect of hastening the movement of defaulted loans into the foreclosure process and perhaps abrogating long loss- mitigation processes in favor of more immediate action and resolution," stated Hildebeidel. "ere is no immediate remedy for such an unintended consequence, only the continuing process of educating and explaining to judges and elected officials." Caroline Reaves, CEO of Mortgage Contracting Services, sees an increased need for property registration as more municipalities require loan servicers to register properties attached to loans in default. "It used to be servicers might be required to renew a registration or update it annually," said the CEO of the more than 30-year-old national mortgage services company based in the Dallas- Ft. Worth metro. "Now, many municipalities require multiple updates to a registration based on the status of the loan and the property. If any updates are missed, it is possible for the penalties to amount to $100,000 on a single property." Becoming more and more expensive, registration fees are based on the length of time the property has been vacant or foreclosed and, in some cases, can amount to $5,000 a year, Reaves reported. "Another trend we are seeing involves bond fees, which are becoming increasingly popular with municipalities and can be as high as $25,000 per property," she explained. "In some cases, only a portion of that money is refunded once the servicer is no longer responsible for the loan." Recent legal precedent has the potential to dramatically shorten some foreclosure processes, according to Hildebeidel. An Eleventh Circuit Court ruling last year after a Florida bankruptcy court appeal held that a debtor who surrenders a residence in bankruptcy must withdraw opposition to state foreclosure actions as the surrender signifies abdication of such rights and claims. e debtor's failure to abide by the apparent surrender amounted to breaking their commitment to the bankruptcy court and an abuse of the whole process. is decision will continue to tie bankruptcy and foreclosure more closely together, Hildebeidel asserted, although other jurisdictions, including Hawaii, have already dissented. Not only a mortgage, bankruptcy, title, and real estate tax sale legal expert, Hladik also served as Deputy Attorney General in the Harrisburg office of the Pennsylvania Bureau of Consumer Protection. He sees promise in the economic, institutional, and legislative momentum with regard to the current foreclosure system. "Legislation being enacted across the country that can streamline the foreclosure timeline on a vacant or abandoned house benefits many different stakeholders: the lender, the neighborhood where the property is, as well as the municipality that relies on that property for tax revenue," said Hladik. Diane Bowser, Executive Vice President, Special Servicing, at Houston-based Selene Finance, said the words "speed," "expedite," and "foreclosure" don't typically go together, and can even feed the "dangerous perception" that the servicer is doing something wrong. However, the new expedited foreclosure process on confirmed vacant properties in Ohio, Maryland, New York, and New Jersey do offer a welcome light in a previously dark part of the housing industry. "How often do you see a solution that makes all parties happy? Hopefully, we see this practice picked up by even more states," she added. Rep. Dever, sponsor of successful fast-track foreclosure legislation that became law in October of last year in the judicial state of Ohio, says good policy speeds up the process while blending together the needs of the property owner, lender, and local communities. e complexity of the foreclosure system is daunting — there are multiple parties and "various states of legal limbo," from city-owned properties to land banks to sheer zombie titles to other shades of gray — but the major and multifaceted costs demand full focus and effort. "Many people realized that the system was broken at so many different levels," Dever said. "When these properties get abandoned, it doesn't take very long before they become less valuable and more complicated and expensive to fix up. We had to do something, specifically when most of these cases would end up in court for years at a time without resolution." Unprecedented economic forces triggered horrific joblessness and millions of foreclosures during the downturn. e toll the recession took on people across the country perhaps clouded another dark side, the wave upon wave of abandoned homes that flooded a wholly inadequate foreclosure system. COVER STORY INDUSTRY INSIGHT INDUSTRY INSIGHT INDUSTRY INSIGHT 57 "When these properties get abandoned, it doesn't take very long before they become less valuable and more complicated and expensive to fill up. We had to do something, specifically when most of these cases would end up in court for years at a time without resolution." —Rep. Jonathan Dever

• Cover