New Obstacles on the Course: State Foreclosure Laws Continue to Complicate Mortgage Loan Servicing


It is no secret that the housing crisis is a drag on the economy for which there appears to be no quick and easy fix. President Obama’s recent announcement that his administration would revise the underutilized Home Affordable Refinance Program (“HARP”) in the hopes of assisting underwater borrowers was the latest federal effort to assist homeowners during the ongoing financial crisis. As has been the case with each previous federal effort, the HARP announcement comes on the heels of ever more inventive – and, for servicers, expensive – state and local legislative initiatives with the same ends.

Three years ago, we first reported on state efforts to address the foreclosure crisis in our Alert “Make My Day: States Dare Servicers to Foreclose.” We provided an overview of the types of measures that jurisdictions were enacting, almost all of which were extending the foreclosure process. If that was the sole intent, those measures have been effective! Recent reports reflect that an average foreclosure takes over 986 days in New York; New Jersey, Florida, and Maryland also lead the pack of states with lengthy foreclosure timelines.ii However, legislators have recognized that a lengthened foreclosure timeline will not solve our crisis; in fact it may actually create new problems! Since that alert, 39 states have enacted more than 140 new foreclosure-related measures. Servicing practices, which have also come under increased scrutiny, were recently the subject of an Interagency Report of Foreclosure Policies and Practices.iii States have heightened their focus on these practices, and as a result have enacted more than 90 servicing-related measures during the past three years. Because of the loss of federal preemption resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act, these laws also have a greater impact on national banks and federally chartered thrifts.

In this alert, we provide a brief update on the types of measures that states and localities have enacted to combat the foreclosure crisis and how these efforts continue to complicate the residential mortgage servicing business.

Please see full alert below for more information.

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