States Move Fast on Mortgage Aid

Wall Street Journal (04/04/08) P. A2; Simon, Ruth; Merrick, Amy
Believing that the federal government has failed to take adequate action to protect homeowners from foreclosure, several states have implemented measures or proposed legislation that take a more aggressive approach to the mortgage crisis. A bill introduced in Illinois, for example, will freeze foreclosures for up to 60 days for homeowners who seek housing counseling; and a measure taking effect in Massachusetts on May 1 will prevent foreclosures during a 90-day period given to borrowers to cure defaults. In Maryland, a new law imposes a 150-day moratorium on foreclosures to give borrowers time to cure defaults, mandates that mortgage servicers identify borrowers whose adjustable-rate loans will reset soon and halts late fees for borrowers seeking loan workouts. Meanwhile, lawmakers in Minnesota are considering legislation that would defer past-due mortgage payments for one year, allowing borrowers to pay the lesser of the initial monthly payment or 65 percent of the payment at the time of default and make up the deferred payments later on. Paul Richman, the Mortgage Bankers Association's vice president of state government affairs, says the group supports measures that enhance communication between lenders and borrowers, provided these efforts are "not being used to create unnecessary and frivolous delays in the legal process." However, MBA does not support moratoriums on foreclosure proceedings.