Taking action

Crawling out of the hole

The Virginia General Assembly passed a bill this year that legislators hope will slow the foreclosure freight train, which plowed through 25,000 homes in the third and fourth quarters of 2007.  Congress' Joint Economic Committee estimated that foreclosure could claim another 26,000 homes in Virginia by the end of 2008.

Gov. Tim Kaine formed the Virginia Foreclosure Prevention Task Force in November to address the problem.  Members of the task force, including state government officials, bankers, mortgage lenders and leaders of non-profit organizations worked together to design a foreclosure prevention bill. 

The bill allows borrowers a 30-day grace period to work out their payments after receiving the final repayment notice.  It is also providing funding to educate homeowners on mortgage borrowing and repayment.  The bill expires July 10, 2010.

Del. Terrie Suit, R-Virginia Beach, also introduced legislation that will address predatory lending.  Suit’s bill calls for background checks on employees of mortgage brokers to ensure they are properly qualified and do not have criminal records. 

These background checks will apply to Virginia mortgage lenders as well as those out of state.  Susan Gass-Kohtz, president of the Mortgage Centre brokerage firm in Lexington, said she can get mortgages for the lowest income people from subprime lenders in California.

In order for mortgage lenders to practice in Virginia, they will have to submit their employee records to the State Corporation Commission for approval.  If Virginia’s fair business practice laws are violated, the SCC can charge $2500 for each violation, whether it was committed in-state or not.  If the mortgage lender does not comply, the SCC can revoke its business license.  Del. Ben Cline, a Republican representing the Rockbridge area, agrees with cracking down on "fly-by-night operators."

"These background checks are new, they are strong and they should go a long way toward making sure that we clean up the industry and clean up any unscrupulous behavior," Cline said.

But stopping irresponsible lending is only half the battle, Cline said. Homeowners have to be educated in order to make good decisions, he said.  Free clinics are being offered in June in Richmond, Virginia Beach, Roanoke, Chantilly and Woodbridge.  These 90-minute information sessions are the result of Kaine’s foreclosure prevention initiative. 

Cline thinks those steps are enough for now. His advice:

"Take small steps and see if we can address the problem incrementally, rather than using an axe to kill a gnat."