Virginia must prevent unnecessary foreclosures and Del. Bob Marshall (R-Manassas) has introduced smart and targeted legislation to do just that. We all know housing continues to be a drag on the economy. Foreclosures are supposed to help the market correct itself by moving people who cannot pay out, and moving people who can pay, in. The widespread practice of dual-tracking is preventing Virginia’s housing market from recovering. This practice of “dual-tracking” is when lenders continue to pursue foreclosure even though the homeowner is in the middle of a loan modification to have their monthly payment reduced. Currently, homeowners are being foreclosed upon even though they can pay to stay in their home.
In a recent survey, a staggering 87% of housing counselors in Virginia said that their clients were foreclosed upon even though they were in the middle of a loan modification process. This means that as we speak, homeowners who can pay to stay in their homes and are in the middle of the loan modification process can be foreclosed upon. To strengthen our housing market, we must prevent unnecessary foreclosures. Vacant homes are already devastating neighborhoods and housing values all over Virginia. Every unnecessary foreclosure further depresses home prices, adds to the housing inventory and destabilizes a family.
Delegate Marshall’s bill, HB 822, is very simple. It prevents any Virginia homeowner from being foreclosed on if they’ve applied for a loan modification unless:
a) They get rejected for their loan modification
b) They get approved for a loan modification, but default again
This is the smartest foreclosure reform bill I have seen because it prevents unnecessary foreclosures by helping the market distinguish between good foreclosures and bad foreclosures. A good foreclosure is one where the market repossesses a home from a non-paying borrower. That home can be put back into the market and sold, often at a discount in the current environment, to a paying customer. A bad foreclosure is one where a homeowner, who can pay to stay in the home, still loses their home. Virginia’s economy cannot afford any more unnecessary foreclosures. Every paying Virginia homeowner should be given the chance to have their loan modification approved or rejected PRIOR to any foreclosure.
You can read the full text of Delegate Marshall’s HB 822 online. This bill will be heard in the Civil Subcommittee of the House Courts of Justice Committee. It is important that all members of this committee hear from you how important it is to prevent unnecessary foreclosures.