Republican Delegates Recommend Killing Foreclosure Reform

Today, the House of Delegates Civil Law Subcommittee recommended 4-3 to “table” Senator Petersen's bill (SB 163) to protect Virginia homeowners from the use of fraudulent documents in a foreclosure.  The recommendation thus prevents the bill from being heard (and voted upon) by the full House of Delegates Courts committee in 2012.

Republican delegates Iaquinto, Loupassi, Habeeb, and Farrell voted against the bill.  Democratic delegates Toscano, McClellan and Johnson voted for the bill.

SB 163, which created a civil cause of action for homeowners against banks which used a forged document to obtain a foreclosure, enjoyed a range of political support that spanned the political spectrum.  

Paula Nachman, President of Virginia Tea Party Patriots Federation, stated at the hearing:  "We support this bill. [Banks] use fraudulent documents for only two reasons: One, because they don't have the right document; and two, because its the only way to win."

"If a regular citizen comes into court and tries to commit fraud by using a fraudulent document, a forgery, they're going to go to jail. All we're asking for here is for compensatory damages in a civil action. I don't know if that's too much to ask."

Senator Petersen noted that Virginia was the epicenter of the foreclosure crisis on the East Coast.   Prince William County alone has seen 16,000 foreclosures in the past four years.  As recent independent research showed, a great number of these were obtained after the documents had been signed by “robo-signers” operating out of warehouses in Florida or Minnesota.  

According to HOME (Housing Opportunities Made Equal), Virginia ranks eighth in the United States for number of homes which are “underwater,” i.e. the home is worth less than the mortgage.   "A full one-third of all Virginians with mortgages are underwater" said Brian Koziol, housing policy and research analyst with HOME in an article in the Richmond Times-Dispatch last Thursday. 

The Virginia Bankers Association testified against Senator Petersen's bill:  "This [bill] will encourage more litigation and will increase the costs to the mortgage industry, which ultimately is born by the 93% of Virginians of mortgage holders [who are not foreclosed on]."

In cautioning about “litigation,” the Bankers Association did not directly reference the $26 billion national settlement for foreclosure fraud recently entered by the five major national banks.  That settlement (for which Virginia will receive $500 million) was caused by “litigation” brought against those banks.  

Petersen summarized:  “SB 163 is prospective.  It simply tells banks to stop using fraudulent documents to foreclose on law-abiding Virginia homeowners who are current on their payments.  Currently, there is no consumer protection for these innocent homeowners, who must use their funds to simply stave off a bogus foreclosure action.  That’s not right.”

The 4-3 vote is a recommendation.  However, unless the full House Courts Committee brings the matter back up in the 2012 session, the bill will die.

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Senator J. Chapman "Chap" Petersen (www.FairfaxSenator.com) represents Virginia's 34th Senate district, located in Fairfax County. The district includes the City of Fairfax, the Town of Vienna, portions of Fairfax, Oakton, Dunn Loring and Centreville. Currently serving his second term in the Virginia Senate, Senator Petersen has previously served as Delegate and City Councilman for the City of Fairfax. For the 2011 session, Senator Petersen sits on the Agriculture, Conservation and Natural Resources, General Laws and Technology, and Privileges and Elections Committees.

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