Bar News - June 15, 2012
Law to Affirm Attorneys’ Role in Mortgage Matters
NOTE: This version is revised from the article published in the print edition of the Bar News.
A new law signed last month by Gov. Lynch restores the right to legal representation for NH homeowners with mortgage problems.
The signing of HB408 ends nearly three years of confusion, frustration and legislative near-misses to lift the restriction imposed by a 2009 state law. The new law, which took effect on May 29, 2010, clarifies the attorney exemption from licensing requirements imposed on those who assist consumers in obtaining or renegotiating mortgages under the NH SAFE Act, RSA 397-A, passed in 2009.
"We are pleased that lawyers now can assist consumers with mortgage modifications," said Connie Boyles Lane, an Orr & Reno attorney and former chair of the Real Property Law Section, who has played a lead role in efforts to fix the problem, first in discussions with regulators and then in crafting legislation. "It had been an unfair situation for consumers – the lenders had access to representation, but under the 2009 statute, most consumers could not obtain independent legal representation."
Attempts in the 2010 and 2011 sessions of the legislature to overcome those restrictions faltered for a variety of reasons. The bill introduced this session won the support of Banking Commissioner Ronald Wilbur and also benefited from a long-awaited clarification on the language of the federal SAFE Act issued by the US Department of Housing and Urban Development. The state version of the SAFE Act was modeled on an initial model statute issued by HUD, but with slight but significant differences in wording. The initial model rule led Wilbur’s predecessor at the Banking Department to interpret that, except for pro bono representation or where there was ongoing representation in an "ancillary" matter, attorneys were barred from representing economically troubled homeowners in renegotiating mortgages unless they complied with onerous, and in some ways contradictory, licensing requirements.
Real estate attorneys and property owners also objected to RSA397-A, the NH SAFE Act, because it was preventing many seller-financed transactions from taking place. The sellers, even though they were not lenders by occupation but only to facilitate the sale of their own properties, were also considered subject to the mortgage licensing provisions of the SAFE Act. That issue has also been addressed by HB247, which also has been signed into law. The new law adds exemptions to the licensure law for persons who negotiate no more than 3 or fewer residential mortgage loans in a calendar year.
Attempts to fix the SAFE Act were foiled first by confusion over how it applied to attorneys, and then by absence of guidance from HUD, which took two years to issue final implementation regulations.
Lane, then-chair of the Real Property Law Section, collected input on the impact of the law from members of the real estate bar and arranged for discussions among regulators and attorneys over how the NH SAFE Act was being interpreted. The Real Estate Section brought its concerns to the NHBA Board of Governors, which endorsed efforts on both national and state levels to correct the problem. The ABA formally commented to HUD that an attorney exemption needed to be more clearly worded, and in NH, Lane and several Real Property Law section members worked with John MacIntosh, the Bar’s legislative representative, to write curative legislation. Initially, these efforts were resisted by the Banking Department and organizations representing lenders. But in the 2011 session, HB 408, introduced in the NH House of Representatives by Rep. Marie Sapienza, a general practice attorney in Salem, seemed acceptable. It passed, thanks to support from Rep. David Hess, a member of the NH House leadership and a retired attorney from Hooksett, and NH State Senator Matt Houde, who introduced similar legislation in the Senate and then helped obtain the accord of the Senate to the House version.
If you have an interest in these cases, please consider joining the NHBA Lawyer Referral Service. If you are already a member of LRS and would like to join (or rejoin) the consumer law panel assisting clients with mortgage modification matters, please contact Robin Brown, LRS Coordinator, 603 715-3236.