Lawmakers Consider Bills Aimed At Easing The Housing Crisis

Monday, 09 February, 2009

The nation’s housing crisis has raised a wave of proposals in the state Capitol that supporters say will help homeowners and renters threatened with being turned out of their homes because of unfair or predatory practices. But though some proposals enjoy wide support, critics argue that others could do little for struggling borrowers and make it harder for future home buyers to get loans.

The proposals, driven by Milwaukee-area Democrats whose districts face the most serious foreclosure rates, could have big effects for the whole state, including requiring mediation and a delay period before lenders can foreclose on homeowners and imposing more state oversight on mortgage brokers. “In these times that you have now, people being turned out of their homes -whether they’re owners or they’re tenants - is a real issue,” said Sen. Lena Taylor, D-Milwaukee.

The proposals come as Wisconsin sees a sharp increase in foreclosures, though the losses here are still modest compared too many other states. Further complicating the issue is the question of whether state leaders should act immediately to try to slow down foreclosures or wait to see what actions Congress and President Barack Obama may take. In January, Wisconsin averaged about 115 foreclosure filings a day, up 15 percent from 100 a day in January 2008, according to Phil Crawford, president of foreclosurealarm in Madison. Dane County also saw a sharp increase for the month, 7.3 a day in January of this year, up 30 percent from 5.6 per day in January 2008.

The foreclosures affect more than just homeowners. Brenda Konkel, executive director of the Tenant Resource Center in Madison, said that landlords in foreclosure proceedings don’t always inform tenants, who then face the possibility of being evicted by the new owners with little notice. Within the last year and a half, she said, the center has gone from receiving one or two calls a year from tenants worried about a landlord foreclosure to one or two a week.

To respond, Taylor wants to require landlords to notify their renters of any foreclosure preceding that could affect those tenants. The draft bill also allows tenants to stay in their apartments for up to two months after the transfer of the property and withhold rent up to the amount of their lost security deposits.

. Lawmakers are also talking about how to help homeowners such as Mechelle Wynn, 43, of Janesville. Wynn said a mortgage broker damaged her and her husband’s credit scores by seeking financing from too many mortgage companies. With their credit damaged, Wynn said the couple ended up having to take out an adjustable-rate loan through another broker at 12.85 percent interest. They have since struggled to make payments. Wynn said she favors a proposal being pushed by bankers to increase state regulation of mortgage brokers.
“We have to live with the effect of that every day,” she said of the damage. Kurt Bauer, president and chief executive of the Wisconsin Bankers Association, argued that a segment of brokers was more responsible for saddling borrowers with loans they couldn’t afford. Brokers are licensed by the state, but banks are currently more tightly regulated and subject to regular examinations by state officials. Erin Krueger of the brokers group the Wisconsin Mortgage Professionals Association, declined comment since she hadn’t yet seen any proposal.

The chairman of the Assembly Committee on Financial Institutions, Rep. Jason Fields, D-Milwaukee, said he believed mortgage brokers should face more regulation from the state. But he added it shouldn’t be so great that it leaves the majority of reputable brokers unable to compete in the market. “That’s the balancing act we need to do,” said Fields, whose committee will hold a hearing on the state’s foreclosure troubles Wednesday.

Rep. Jon Richards, D-Milwaukee, has a widely supported proposal aimed at cutting a scam in which struggling borrowers are convinced to turn over the rights to their home to a purchaser or consultant who promises to help them avoid foreclosure. Richards said his proposal would help homeowners who are then unfairly turned out of their home. In the mediation proposal, Taylor would force lenders to negotiate in good faith with a borrower facing foreclosure. Modeled after a plan adopted by Minnesota in 1986 during the farm foreclosure crisis there, the proposed mediation could lead to changes in the terms of the loan to make it easier for borrowers to make payments.

The measure would also delay a foreclosure for 90 days after a homeowner-requested mediation, with another 60 days added if the lender was found to not have negotiated in good faith. The state bankers lobby is talking with Taylor but is concerned the proposal could make it riskier for banks to make loans if it means forcing banks to make changes in the terms of those loans, Bauer said. “One of our concerns is that you’ll add a burden on the banks, the good actors,” he said.

State leaders should wait to see what steps Democrats in Congress take to slow foreclosures before moving forward, Wisconsin Realtors Association head Bill Malkasian said. “It’s rolling out at a pace that I’ve never seen in 30 years,” Malkasian said of the federal proposals. “I know everybody is very anxious and there’s a human side to it, but give it a little time.”

Source: http://www.lacrossetribune.com/