AZ Rep.- David Lujan
Democrats in the Arizona House of Representatives introduced the “Foreclosure Rescue for Arizona Act (HB 2765), a bill designed to prevent fraud and ostensibly help families remain in their homes.
In a press release dated February 22, 2010, House Democratic leader David Lujan said, “Foreclosure Rescue for Arizona not only will combat fraud and bad actors preying on homeowners, but also it will help get our economy back on track. Arizona ranks second in the nation in foreclosures, and these bills protect the safety and financial health of hard-working Arizonans.”
The bill has numerous provisions including measures that protect homeowners who are facing foreclosure from scam and fraud, a 60 day relief period for homeowners who are in foreclosure and in danger of losing their homes, and a provision that allows homeowners subject to foreclosure to remain in their homes as renters.
Additionally, the bill encourages parties involved in foreclosure proceedings to restructure loans, and will prevent a foreclosure and delay a sale for up to one year if the lender fails to negotiate in “good faith” with the delinquent borrower. The bill also creates a mandatory foreclosure mediation program supervised by the Arizona Supreme Court.
“This package of bills could not come at a more critical time for our state,” said Rep. Rae Waters, D-Ahwatukee (District 20). “Arizona is on the wrong track and we must work to enact legislation that strengthens our housing market and the financial well-being of our communities. Those steps include fighting scams and fraud and encouraging lenders and borrowers to work together for the best possible outcome.”
Of course, this latest “feel good” attempt at solving the continuing foreclosure crisis will ultimately have the opposite effect. By continuing to destroy 100 years of contract law, misguided bills such as this one drive away potential mortgage lenders who can’t be certain if the remedies provisions of a legal contract can be enforced.
The Arizona legislature has absolutely no business in interfering in the contract process. Just as bondholders legal rights were trampled in the Lehman Brothers and General Motors bankruptcies, interfering or prohibiting a lender from exercising their valid foreclosure options will only hurt future borrowers as qualification standards are raised to accommodate the elevated risk of loss by the lender. Meanwhile, the available pool of mortgage money will shrink as investors look for safer havens that are not subject to court and government interference.
Perhaps one day as a society we will understand that the responsibility for a purchase or investment rests with the individual, not the government. Contracts are supposed to be read prior to signing and this includes the default and remedies sections.