The Foreclosure Ledger

The Minneapolis City Council on Friday passed a resolution for a 90-day moratorium on foreclosures, making it the largest city yet to demand that servicers voluntarily freeze the foreclosure process to give borrowers time to negotiate better loan terms, according to drafter of the resolution, the Association of Community Organization for Reform Now. The resolution also asks for the top 25 subprime lenders to work with families to modify loans with affordable terms, allow renters to remain in homes that have been foreclosed on, and to regularly report to the city how they are managing foreclosed properties.

“Thousands” of subprime borrowers in Maine may be able to refinance to more conventional fixed-rate loans through a $125 million Mortgage Relief Fund established by the Federal Reserve Bank of Boston, Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America, state Gov. John E. Baldacci announced.

The fund is for borrowers who are current but are experiencing difficulty making payments and expect more difficulty when rates reset. Other eligibility requirements call for the borrower to have a house worth more than the mortgage balance, reside in the property, and be able document current income, according to the fund Web site.

The governor also noted he joined Taylor Caswell, regional director of the U.S. Department of Housing and Urban Development, in October to announce a housing counseling grant to Maine State Housing Authority.

Thousands in Massachusetts would not be eligible for a program like Maine’s, considering foreclosure deeds in the state numbered 7,653 last year — up 148 percent from the level in 2006 and 600 percent above that in 2005, The Warren Group reported. In December alone, deeds in Massachusetts amounted to 683, more than doubling from a year earlier.

Reported auction announcements of 14,604 last year in Massachusetts rose 119 percent from the previous year.

The Assembly Committee on Banking and Finance approved legislation from California Democrat Assembly members Ted Lieu, Karen Bass and Alberto Torrico to help address the current foreclosure problem and reform mortgage lending practices to prevent further fuel on the crisis.

Lending reform legislation will ban yield spread premiums, negative amortization loans, and prepayment penalties on certain loans. For certain high-risk and high-cost loans, it will require borrowers to receive financial literacy counseling and for lenders to verify the consumer’s ability to repay for the entire life of the loan, Lieu said in a Web-cast report.

Other legislation will increase the number of counselors and require that when lenders issue a Notice of Default to borrowers, they also send one to a counseling agency. Additionally, lenders will be required to set up an ombudsman to handle borrower complaints, Lieu said in a Web-cast report.

Mortgage default notices filed against California borrowers totaled 81,550 last quarter — jumping 12 percent from the linked quarter and 115 percent annually to the highest level in more than 15 years, DataQuick Information Systems announced. Most of the defaulted loans were originated between August 2005 and October 2006.

“We’re in a severe crisis,” Lieu said in the Web report. “But this is not just a crisis, it’s an accelerating and exploding crisis.”

AB 69 by Lieu will require lenders to report how they’re helping borrowers who face possible foreclosure, AB 180 by Bass will keep “foreclosure consultants” from using predatory methods to take advantage of borrowers, and AB 529 by Torrico will have lenders provide more and earlier notifications of expected mortgage payment hikes, according to an Assembly Web report.

On a national level, to ensure borrowers in delinquency and foreclosure are provided reliable and consistent information from highly-trained professionals, the National Industry Foreclosure Counseling Standards were released Friday. The standards are a set of training and performance benchmarks designed to increase the professionalism, consistency and quality of service delivered by organizations and counselors assisting borrowers, NeighborWorks America announced.

The standards, an integral component of the National Industry Standards for Homeownership Education and Counseling and National Industry Code of Ethics and Conduct launched last May, were created by a group of leaders from lending institutions, community development organizations, real estate, mortgage insurance companies and the secondary mortgage market.

The “Advisory Council thoughtfully developed these performance standards-keeping in mind how they will strengthen the confidence homeowners will have when discussing the details of their personal financial situation with a counselor,” said council member NeighborWorks in the announcement.

Missouri Governor Matt Blunt recently announced legislation aimed at curbing abuse by foreclosure consultants and providing delinquent borrowers with information about avoiding foreclosure. Under the plan, servicers would be required to inform borrowers at risk of foreclosure about a special hotline, 888.246.7225. The hotline would operate within the Consumer Credit Section of the Department of Insurance, Financial Institutions, and Professional Registration.