By John Helmick
Published: April 27. 2013 4:00AM PST
Today’s foreclosures are a consequence of a problem created several years ago. Without a time machine to go back and solve the initial problem (whether it stem from the bank or the borrower), we are left to deal with the consequence. Considering this, it is difficult to expect the Legislature to easily change today’s foreclosure atmosphere. Despite this hurdle, the Legislature is working on passing some good legislation in an attempt to better the current foreclosure processes in Oregon.
Two bills this session focus on current foreclosure issues in a balanced and insightful way: Senate Bill 558 and House Bill 2929. These bills, coupled with a sincere focus on job creation, can make a dent in the future of foreclosures in Oregon.
SB 558 aims to balance the interests of the defaulting homeowner with the lender (that loaned money which was secured by the homeowner’s home). This bill is a prime example of compromise to try and come up with a foreclosure system with fewer delays while also providing the lender and the borrower a forum to explore whether there is any realistic way to avoid foreclosure.
This legislation requires the defaulting homeowner to seek the advice of a housing counselor before attending foreclosure mediation, and provides a clear list of the documents that both the lender and the homeowner are required to bring to the mediation. These requirements ensure a meaningful mediation to determine if there is a realistic method to avoid foreclosure.
This procedure also eliminates unnecessary delays in the processing of foreclosure of those homes that have been abandoned and contains safeguards that should prevent abuse of the system. Although not everyone agrees with the exact process outlined in SB 558 (which is still under construction), we can all agree that fewer delays in the foreclosure process are better, especially considering the number of “zombie homes” — homes that are abandoned and vacant — throughout Oregon that are the direct result of lengthy and drawn-out foreclosure process. These “zombie homes” are a hazard, and they attract criminal activity and depress neighborhood home prices.
Nationwide, 35 percent of homes that are foreclosed are these abandoned, zombie homes; in Oregon, that number of zombie homes is closer to 50 percent.
To revitalize our Oregon housing market and our neighborhoods, we need to get these zombie homes through the foreclosure process and into the hands of an investor that is going to put the energy and money into remodeling and rehabilitating these homes.
HB 2929 is a much less expansive bill, but it, too, balances interests of lenders and homeowners, decreasing delays by clarifying timelines in the current Oregon statutes and ensuring the trustees handling foreclosures are registered to do business in Oregon.
While these laws are an improvement to the process, the reality is that foreclosures today are driven by jobs, or more particularly by the lack of jobs in Oregon. Over the last few years, foreclosures were the result of loans being made that, frankly, should not have been made. But we have processed through most of these bad loans. Unemployment, underemployment and the relocation of families, to take a job elsewhere, are the primary causes of foreclosures today. Just track the change (both increase and decrease) in new unemployment insurance claims against the change in mortgages that are 60 days or more delinquent and you can quickly see that the two are highly correlated. If we want fewer foreclosures in 2014, we need more jobs in 2013. This is the real solution that will reduce the number of foreclosures.
— John Helmick is the CEO of Gorilla Capital in Eugene.