Bar News - May 20, 2015
Real Property Law: Legislative Developments in Residential Foreclosures
By: Stephanie Bray
A homeowner who falls behind on her mortgage gets reminders of her delinquency in her monthly mortgage statements. Maybe the homeowner is trying to apply to modify the loan, but is getting the runaround. Maybe the homeowner is told, “Don’t worry, we won’t foreclose while your application is under review.” Maybe the homeowner is just in denial.
Then, the homeowner gets the certified letter, the one from a lawyer’s office. It is the undeniable signal that the foreclosure is really going to happen, and is going to happen on a date certain. It is the signal that whatever the homeowner has been doing so far isn’t working.
That certified letter is required by RSA 479:25. It must notify the homeowner as to who is the “mortgagee or his assignee” conducting the sale, information which may come as a total surprise to the homeowner. It must notify the homeowner of the date that the sale will happen. Finally, it must notify the homeowner that “you have a right to petition the superior court… to enjoin the scheduled foreclosure sale.”
Only 25 days’ lead time is required for this letter, and in most cases, 25 days’ lead time is what is given. Twenty-five days is one of the shortest foreclosure notice periods in the United States. It isn’t much time for a homeowner to reassess her position, determine what her legal rights are, and petition the superior court to enforce those rights.
The federal Consumer Financial Protection Bureau (CFPB), in 2014, promulgated regulations aimed at improving the process of servicing home mortgages and dealing with delinquencies. One of the main features of the CFPB regulations is a “no-double tracking rule”: If the homeowner submits a complete loss mitigation application at least 37 days prior to the scheduled foreclosure sale, the servicer has to call a time-out on the foreclosure track, while it evaluates the application. 12 CFR §1024.41.
Unfortunately, this rule does not mesh well with RSA 479:25. A homeowner who receives a foreclosure notice 25 days ahead of the sale, and realizes that she needs a housing counselor, is already too late to take advantage of the CFPB rules. This anomaly puts New Hampshire homeowners at a disadvantage, compared to their counterparts in other states.
RSA 479:21-a (2014) established a commission to study New Hampshire’s foreclosure laws. One of the commission’s charges was to “[r]ecommend how to align New Hampshire laws with new federal foreclosure regulations so as to minimize cost and confusion and promote fairness for all parties.” This commission met throughout the fall of 2014. It recommended, among other things, that the foreclosure notice required by RSA 479:25 be extended, in cases of residential properties, from 25 days to 60 days.
More recently, Senate Bill 158 has moved this recommendation into the legislative arena. The bill, as originally introduced, would extend the required notice period for residential foreclosures from 25 to 60 days. A companion bill, Senate Bill 50, would require a residential foreclosure notice to spell out the mortgagee’s name, address, and that of its agent for service of process – information that, to date, has been perplexing for even counsel to obtain.
SB 50 would also require the notice to contain a toll-free number, maintained by the New Hampshire Banking Department, that a homeowner can call for information and referrals for services. The two bills, together, would give distressed homeowners the tools to seek help to avoid foreclosure, and time to use those tools effectively.
SB 50, regarding the notice content, was approved by the NH Senate and is now at the NH House Committee on Commerce and Consumer Affairs. SB 158, regarding the notice length, has generated more controversy.
The New Hampshire Bankers’ Association opposed the longer notice, arguing that small local banks are already struggling to comply with the new federal regulations that are designed to protect consumers. In part to allay this concern, SB 158 as originally drafted contained a “carve- out” exempting New Hampshire-based banks from the longer notice requirement. However, the NH Bankers’ Association simultaneously pointed out that a carve-out that favored New Hampshire banks might not pass muster under the US Constitution’s Commerce Clause.
SB 158 passed the Senate Commerce Committee 4-1, but it did not have the votes to pass the full Senate, and was re-referred to committee, in part to deal with the constitutional issue. It was the subject of a “working subcommittee meeting” on April 28. As of this writing, it is possible that a compromise could be reached that would eliminate the carve-out and extend the notice period to 45 days. The result could, in the words of the charge to the Foreclosure Study Commission, “minimize cost and confusion and promote fairness for all parties.”
Stephanie Bray works at New Hampshire Legal Assistance, where she is the director of NHLA’s Foreclosure Relief Project. She was a member of the Foreclosure Study Commission established by RSA 479:21-a (2014).