Mortgage Foreclosure Act Update

House Bill 2973 may be sent to the Governor on either of the last two days of the 95th General Assembly (Jan. 12, 13, 2009). The House of Representatives must concur in Senate Amendment No. 7, which becomes the bill, for this to happen.

  1. (1) It creates a new section in the Mortgage Foreclosure Act that prohibits a mortgagee from filing a foreclosure complaint unless the requirements of this new Section have been satisfied. It applies only to residential real estate that is the primary residence of the mortgagor and may be used only once per mortgage. It does not apply to mortgages issued or originated on or after the effective date of this bill (when the Governor signs it) or if the mortgagor has sought relief under the U.S. Bankruptcy Code.

  2. (2) If a mortgage is delinquent more than 30 days, it requires that the mortgagee send a notice by first-class mail to the mortgagor advising him or her that she may wish to seek housing counseling. No foreclosure action may be instituted before this notice is sent, and legal action is stayed for 30 days after the notice is mailed. The new section details what information must be contained in the notice, and it may be combined with a counseling notification required under federal law. It is to be sent to the common address of the residential real estate secured by the mortgage.

  3. (3) During the 30-day stay after this notice, if an approved housing-counseling agency sends written notice to the mortgagee advising that the mortgagor is seeking its services, it creates another 30 days' stay after the date of that notice. During this new stay the mortgagor or counselor or both may proffer to the mortgagee a loan-workout plan. If the mortgagee accepts this plan, it prohibits any foreclosure action as long as the mortgagor complies with it. If the mortgagor does not comply with it, the mortgagee may enforce the contract. The plan and any modifications must be in writing and signed by both parties.

  4. (4) Housing-counseling agencies must be approved by the U.S. Department of Housing and Urban Development. It also allows the Secretary of the Department of Financial and Professional Regulation to certify other persons or entities as approved counseling agencies if there are shortages of them in a particular geographic area. But for-profit entities may not be certified to do this.

  5. (5) House Bill 2973 prohibits the parties from waiving any provision of this new section. The General Assembly's written intent is that compliance with this Section does not prejudice a mortgagee in ratings of its bad-debt collection or calculation standards or policies. This new section is automatically repealed two years from its effective date, which is when the Governor signs it.