For Immediate Release
Media Contact: Bob Cooper
(208) 334-4112

Date: April 18, 2011

Foreclosure Reforms to Take Effect September 1

(Boise) - A new state law to address foreclosure complaints by Idaho homeowners will take effect on September 1.  Attorney General Lawrence Wasden and the Idaho Bankers Association sponsored House Bill 331.

“Idaho citizens are facing foreclosure at an unprecedented level,” Attorney General Lawrence Wasden said.  “This legislation addresses the very complaints Idahoans have been sending to my office.  It will provide real help to thousands of distressed homeowners in Idaho, and it will help Idahoans better understand their rights, obligations, and options with respect to keeping their home.”

“I am grateful for the time, energy, and input of the Idaho Bankers Association,” Wasden said.  “When the problem and a solution were identified, they stepped up and, together, we crafted legislation to help Idaho’s homeowners in their most challenging circumstances.  “I want to thank Senator Dean Cameron and Representative Max Black for sponsoring the bill through the Legislature and Governor Otter for signing it into law.  I also want to express my appreciation to the Idaho Department of Finance for their input and assistance and to the Idaho Credit Union League for their support.”

“The IBA applauds the proactive attitude of Attorney General Wasden in response to complaints from troubled borrowers facing foreclosure; and his collaborative approach to developing legislation that included Idaho’s banking industry,” Dawn Justice, President and CEO of the Idaho Banking Association, said.

As Idaho’s housing crisis deepened, Idaho consumers filed hundreds of complaints with the Attorney General’s Consumer Protection Division.  Initially, the majority of these complaints alleged fraudulent or misleading activities by businesses offering loan modification or mortgage “rescue” services.  Since 2008, however, the Attorney General has received more than 300 consumer complaints alleging issues or problems with borrowers’ loan servicers.

The Attorney General’s Office conducted an in-depth review of mortgage-related complaints received between 2008 and 2010 to determine whether the allegations made in the complaints violate laws enforced by the Attorney General, and, if so, whether evidence exists to warrant further action.

In February 2011, Wasden released The Attorney General’s Report on the Idaho Housing Crisis and How Stakeholders Can Facilitate Cooperative Solutions. “The report is the result of this review and analysis,” Wasden said at the time.  “It includes an examination of the national events leading to Idaho’s housing problems, a discussion of the specific areas of concern demonstrated by Idaho’s homeowners, and presents suggestions regarding how stakeholders can work together to address Idaho’s housing crisis.”

The report also included suggestions for legislative, educational, and remedial actions that stakeholders might consider with respect to foreclosures in Idaho.

Shortly after Wasden issued the report, the Idaho Bankers Association contacted his office and offered to work with the Attorney General on legislation. House Bill 331 was the result of that collaboration.

Briefly, House Bill 331 does the following:

  • Requires a trustee pursuing foreclosure to mail written notice of re-scheduled foreclosure sales.  (Under existing law, when a foreclosure sale is postponed, a trustee may undertake a subsequent sale with no advance written notice to the homeowner.)
  • Requires lenders to provide a new written notice in cases involving potential foreclosure of a homeowner’s primary residence that:
    • details the obligations owed and the ramifications of foreclosure if the homeowner does not cure the default;
    • encourages homeowners to contact their lender to ask about any available loss mitigation programs, including mortgage loan modification; and
    • requires inclusion of a “modification request form” from the lender, which the homeowner may use to request a loan modification.

Under the new law:

  • The lender must respond to requests for modification within 45 days, and cannot proceed to a foreclosure sale until after the lender has responded to the homeowner’s loan modification request.  The lender is required to either meet in person or over the phone with the borrower, if the borrower requests such a meeting.
  • The lender must demonstrate its compliance with the notice requirements by filing an affidavit in the County Recorder’s Office in the county where the primary residence is located.  The notice must be filed at least 20 days before a foreclosure sale.
  • The Attorney General is given enforcement authority for violations.

The bill also creates a separate section within the Idaho Consumer Protection Act to address mortgage modification activities and fees allowed for such activities.  The new provision makes it a violation of the Idaho Consumer Protection Act to charge or receive any fee in connection with a mortgage loan modification unless licensed, or exempt from licensing, under Parts 2 or 3 of the Idaho Residential Mortgage Practices Act.

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