This is a guest post by Connellee Armentrout. Connellee is originally from Roanoke Virginia and is a second year law student at the University of Richmond.
In a recent interview, Bruce Whitehurst, President of the Virginia Banker’s Association, said: “There’s nothing fundamentally wrong with the current foreclosure system in Virginia.” But, it seems that many Virginia homeowners and some legislators would disagree with Mr. Whitehurst. In response to an increase in foreclosures and the horror stories of homeowners, several bills were introduced this General Assembly session to define or regulate the foreclosure procedure in Virginia. However, some of these bills have already fallen to the powerful banking lobby, and in the past year, the Banker’s Association alone has contributed more than $661,500 to Virginia politicians.
The fact is that there is something fundamentally wrong with a foreclosure system that allows homeowners who are current on their payments or who may have never even missed a payment, to be kicked out of their homes. These bills are not an attempt to keep people who cannot pay in their homes; rather, they address the problem of wrongful foreclosures.
In recognizing the need for foreclosure reform, the General Assembly heard from homeowners who have undergone wrongful foreclosures. Several Virginia homeowners told their horror stories, including Mustafa Rasuli whose foreclosure is still pending despite the fact that he has paid his loan current according to the instructions his lender gave him. After Hiring a lawyer, Mr. Rauli was able to discover that likely his foreclosure is the result of some misplaced paperwork between lenders who had bought and sold his mortgage, but, currently in Virginia, foreclosure does not require any 3rd party review or any other independent check on the accuracy of the lender’s claim. Were it otherwise, this “mistake” might have been avoided.
Perhaps more disturbingly, Terry and Donna Hunt’s lender has tried to foreclose on their home in Amelia County three times despite the fact that they had never missed a payment on the loan. Not only have the foreclosure proceedings taken a toll on the family, but also the small business owners’ credit has been destroyed by the foreclosure attempts, making it impossible to make the personal guarantees necessary to run their business.
In addition to the anecdotal evidence of Virginia’s faulty foreclosure system, there is data to back it up. Since 2006, there have been more than 200,000 foreclosures in the state, and there have been more than 60,000 in just the last year. In addition, Richmond had the 11th largest increase in foreclosures last year with a staggering increase of 26.79 percent. Unfortunately numbers alone do not tell whether a foreclosure was wrongful, but a recent study from the University of Iowa that reviewed 1700 recent bankruptcy cases found:
“A majority of mortgage claims are missing one or more of the required pieces of documentation for a bankruptcy claims. Fees and charges on claims often are poorly identified and do not appear to be reasonable. The bankruptcy data reinforce concerns about the overall reliability of the mortgage service industry to charge homeowners only the correct and legal amount of the debt and to comply with applicable consumer protection laws.”
This study explains the stories of many Virginians like Mr. Rasuli and the Hunts. Unregulated lenders are wrongfully foreclosing on Virginians’ homes because Virginia’s foreclosure system, championed by the banking lobby, does not provide adequate protections for paying property owners.