The foreclosure crisis has touched every state and continues to be a drag on the national economy. House prices have fallen nationally an average of 33 percent from their 2006 peak, resulting in about $7 trillion in household wealth losses. At the same time, an unprecedented number of households have lost their homes to foreclosure or are close to losing their homes.The most recent data available from RealtyTrac shows that one in every 706 housing units in nationwide received a foreclosure filing in October 2012.

October 2012 Foreclosure Heat Map

Source: RealtyTrac

While the foreclosure crisis was ignited by a number of factors, including a housing bubble and weak demand due to high unemployment and heightened uncertainty, a white paper released by the Federal Reserve earlier this year points to three key forces originating from within the housing market itself:

• A persistent excess supply of vacant homes on the market, many of which stem from foreclosures;
• A marked and potentially long-term downshift in the supply of mortgage credit;
• And the costs that an often unwieldy and inefficient foreclosure process imposes on homeowners, lenders, and communities.

States have been extremely responsive to the foreclosure crisis and have been at the forefront of finding solutions.  Those solutions have included legislation, the creation of task forces to study the problem and offer recommendations and the implementation of a number of programs, including education-focused initiatives.

Notable Foreclosure-Related Legislation, 2012

California           

• S.B. 1006: Creates a deposit fund for the receipt of certain direct payments from the National Mortgage Settlement. Allows the Director of the Department of Finance (DOF), in accordance with legislative intent, to offset General Fund (GF) expenditures during the 2011-12, 2012-13, and 2012-14 fiscal years.
• A.B. 278: This bill makes changes to California’s non-judicial foreclosure process to provide stability to California’s statewide and regional economies and housing market by facilitating opportunities for borrowers to pursue loss mitigation options.               
• S.B. 900: This bill makes changes to California’s non-judicial foreclosure process to provide stability to California’s statewide and regional economies and housing market by facilitating opportunities for borrowers to pursue loss mitigation options.               
• S.B. 1069: This bill prohibits a lender from receiving a deficiency judgment for any loan, refinance, or other credit transaction that is used to refinance a purchase money loan, applies only to credit transactions occurring on or after January 1, 2013, and does not apply to the principal amount of any new advance, as specified.  
• S.B. 825: Existing law, until Jan. 1, 2013, requires that any notice to quit regarding a housing unit served within one year after a foreclosure sale include a separate cover sheet that contains an additional notice to renters. Existing law sets forth the content of this notice, which provides the tenant with specified information regarding tenants' rights. Existing law provides that, under certain circumstances, the cover sheet need not be served, as specified. The bill extends the operation of these provisions until Dec. 31, 2019.             
• A.B. 1599: This bill requires a foreclosing financial institution to provide the borrower with a copy of a recorded Notice of Default (ND) or recorded Notice of Sale (NS) that contains a summary of the respective notice that is translated into Spanish, Chinese, Tagalog, Vietnamese, and Korean, codifies the contents of that summary and requires the Department of Corporations (DOC) to translate the summary and post the translation on their Internet Web site.     
• A.B. 2610: This bill, which is part of the “California Homeowner Bill of Rights” sponsored by Attorney General Kamala Harris, is intended to provide additional protections to tenants living in foreclosed homes. This bill revises the requirement of existing law providing 60 days’ notice to instead provide, in the case of a month-to-month lease or periodic tenancy, for 90 days’ notice for tenants in a foreclosed property. This bill provides that new owners of a foreclosed property must honor a tenant’s lease, except in certain cases such as if the new owner will occupy the property as his/her primary residence. In those cases, the new owner must give the tenant a 90 days’ notice to vacate. The bill revises the notice that is sent to tenants when the property is noticed for a foreclosure sale to reflect these changes. This bill also permits a tenant in a foreclosed property to file a post-judgment claim of right to possession, as specified.    
• S.B. 980: Existing law, until Jan. 1, 2013, prohibits any person who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform residential mortgage loan modifications for mortgages and deeds of trust secured by real property containing four or fewer dwelling units, or other forms of mortgage loan forbearance for a fee paid by the borrower, from demanding or receiving any pre-performance compensation, requiring collateral to secure payment, or taking a power of attorney from the borrower. Existing law makes the violation of those provisions a crime and, with respect to an attorney, cause for imposition of discipline. This bill extends the operation of those provisions until Jan. 1, 2017.    
• S.B. 1191: This bill extends the sunset date on the state’s prohibition against collecting up-front fees in connection with mortgage loan modifications and other forms of mortgage loan forbearance, from January 1, 2013 to January 1, 2017.   
• A.B. 1950: This bill deletes the sunset date on two provisions of a 2009 bill that prohibited collecting up-front fees in connection with offers to help borrowers obtain mortgage loan modifications or other forms of mortgage loan forbearance; extends the statute of limitations from one year to three years on specified, real estate-related misdemeanors; and makes a technical and clarifying change to the Real Estate Law.        
• A.B. 2314: This bill provides certain purchasers of foreclosed residential properties 60 days to remedy code violations before being subject to enforcement actions and eliminates the sunset on existing provisions requiring an owner of a foreclosed, vacant, residential property to maintain the property.           

Colorado            

• S.B. 30: Concerns administrative matters related to a foreclosure sale; relates to an electronic payment to an account of a public trustee, evidence of debt, cure statements, Rule 120 hearing notices, confirmation deed recording fees, bankruptcy proceedings, confirmation deeds and deeds of trust, excess proceeds from a foreclosure sale, assignment of a lien, the execution and recording of a confirmation deed, and the release of a deed of trust recorded in the wrong county.

Connecticut      

• H.B. 6001: The act makes it easier for applicants to qualify for the state’s emergency mortgage assistance program (EMAP), which provides short-term loans to homeowners experiencing financial hardships beyond their control.

Delaware           

• H.B. 231: This bill makes it clear that the Superior Court can allow for non-profit legal service providers to perform the function of the HUD-certified housing counselors in the mediation process. Legal Services Corporation of Delaware has been authorized to serve in that role by Superior Court Administrative Directive No. 2011-2 and this bill allows the Superior Court to preserve that role.

Georgia

• H.B. 110: Provides for vacant and foreclosed real property registries; provides for definitions; provides for required elements of a form for such registrations; provides for exemptions from registration; provides for maximum fees and penalties for registration and failure to register; provides for appellate rights.
• S.B. 333: Provides that notices of sales made on foreclosure under power of sale shall be provided to all debtors.            

Hawaii 

• H.B. 1875: Implements the 2011 recommendations of the mortgage foreclosure task force, and other best practices, to address various issues relating to the mortgage foreclosures law and related issues affecting homeowner association liens and the collection of unpaid assessments. Repeals the non-judicial foreclosure process under part I of chapter 667, HRS. Makes permanent the mortgage foreclosure dispute resolution program and the process for converting non-judicial foreclosures of residential property into judicial foreclosures.
• H.B. 2375: Requires the office of consumer protection to educate consumers about fraudulent activities that may be committed against homeowners who face property foreclosures, liens, or encumbrances, as appropriate. Establishes criminal penalties and a mandatory fine for certain violations of the mortgage rescue fraud prevention act.        

Idaho   

• H.B. 703: Relates to the National Mortgage Settlement Agreement and appropriates and transfers $500,000 from the General Fund to the Consumer Protection Fund upon receipt of an estimated $13.3 million in settlement proceeds provided for in the March 12, 2012 National Mortgage Settlement Agreement and remitted to the General Fund; contingent upon receipt of those settlement proceeds, an additional $500,000 is appropriated from the Consumer Protection Fund to the attorney general to help distressed Idaho homeowners with assistance, counseling, and legal aid services.

Illinois 

• S.B. 1259: Amends the Code of Civil Procedure to define a "short sale" as the sale of real estate that is subject to a mortgage for an amount that is less than the amount owed to the mortgagee on the outstanding mortgage loan. Provides that in a foreclosure of residential property, if the mortgagor presents to the mortgagee, which is a banking organization or corporation, a bona fide written offer from a third party to purchase the property in foreclosure which is for an amount that constitutes a short sale, and the mortgagor requests that the mortgagee approve the short sale, then the mortgagee must respond within 90 days and must agree to the short sale unless there is a reasonable justification to not do so.
• S.B. 3287: Provides relief in mortgage foreclosure proceedings for military personnel in military service.

Indiana

• H.B. 1141: Establishes the mortgage foreclosure multistate settlement fund which consists of: (1) money that is received by the state under a multistate agreement related to litigation concerning mortgage foreclosure activities and that is designated by the attorney general for deposit in the fund; (2) appropriations made to the fund by the general assembly; and (3) grants, gifts, and donations intended for deposit in the fund.
• H.B. 1238: Provides a procedure that allows: (1) a creditor in a mortgage; or (2) an enforcement authority with jurisdiction in the location of the mortgaged property; to petition the court having jurisdiction over an existing mortgage foreclosure action to find that the mortgaged property is abandoned.

Kentucky            

• H.B. 265: Provides notwithstanding KRS 48.005, any funds received by the Commonwealth from the National Mortgage Settlement shall be deposited in a restricted account and shall not be expended without appropriation authority granted by the General Assembly.
• H.B. 62: Amends KRS 382.110, relating to the recording of deeds and instruments, requires a mortgage holder to file a deed in lieu of foreclosure with the county clerk within 45 days of the execution of the instrument's execution; amends KRS 382.990 to assess a penalty in the form of a violation of law for any mortgage holder who fails to file a deed in lieu of foreclosure pursuant to Section 1 of the Act; amends KRS 142.050, relating to the assessment of a transfer tax on property, exempts filing deeds in lieu of foreclosure filed pursuant to Section 1 of this Act from the transfer tax.  
• H.B. 396: Creates a new section of KRS Chapter 426 to create an expedited sale mechanism for foreclosures involving vacant and abandoned real property; amends KRS 517.060, relating to the offense of defrauding a secured creditor, to include situations where collateral is intentionally damaged and to increase the penalties for the offense.           
• H.B. 1: Provides that National Mortgage Settlement proceeds received by the Office of the Attorney General not to exceed $4 million over the 2012-2014 fiscal biennium shall be transferred to the Cabinet for Health and Family Services, General Administration and Support budget unit, to be expended only for upgrades to and operation of the KASPER system in accordance with this Act.

Louisiana            

• H.B. 467: Provides for notice to occupants of seized property.
• S.B. 752: Authorizes municipalities to enact ordinances relative to abandoned properties.            

Maryland           

• H.B. 1373: Requires the Department of Labor, Licensing, and Regulation to establish and maintain a Foreclosed Property Registry for specified property; requires specified foreclosure purchasers to register specified residential property and to pay registration fees; authorizes a local jurisdiction to enact a local law to impose a civil penalty; requires a local jurisdiction to give specified advance written notice before taking specified actions; establishes the Foreclosed Property Registry Fund
• H.B. 1374: Establishes a pre-file mediation process between a secured party and a mortgagor or grantor before the commencement of foreclosure actions under specified circumstances; provides that a mortgagor or grantor is not entitled to participate in mediation after the filing of foreclosure actions except under specified circumstances; establishes procedures and notices for participation in a pre-file mediation; authorizes a county or municipal corporation to charge a specified fee to issue a specified certificate.       
• S.B. 123: Requires the purchaser of specified residential property at a foreclosure sale to provide a copy of the court order ratifying the sale to the local supervisor of assessments within a specified period of time; specifies exceptions; requires the supervisor of assessments to provide a receipt to the person providing a copy of the ratification order.

Massachusetts 

• H.B. 4323: Prevents unlawful and unnecessary foreclosures; provides procedures for the notice and public publishing of a foreclosure sale that includes a form that may be used by the mortgagee. Requires the taking of all reasonable steps at avoiding foreclosure prior to foreclosure sale publication including mortgage modification. Authorizes the use of short sale or deed-in-lieu of foreclosure; establishes a task force to study mortgage mediation programs. Requires mediation final outcome tracking.

Michigan            

• S.B. 1160: The bill enacts the Homeowner Protection Fund Act to create the Homeowner Protection Fund for the deposit of money allocated to the state from consent judgments in United States v. Bank of America Corp. and authorizes expenditures from the fund consistent with those consent judgments. Provides that the state treasurer is the administrator of the fund and administer it in consultation with the department of Attorney General. The treasurer must direct investment of the fund and credit to it interest and earnings from investments. Money in the fund at the close of the fiscal year will remain in the fund and not lapse to the general fund.

Minnesota         

• H.F. 1515: Extends the effective dates of provisions of statutes originally enacted in 2010 that established special rules for evictions when a tenant is remaining on property subject to foreclosure or termination of a contract for deed. Provisions due to expire on December 31, 2012, would be extended to 2014.

Oregon

• S.B. 1552: Requires beneficiary or beneficiary's agent under residential trust deed to send notice of mediation and enter into mediation with grantor for purpose of agreeing to foreclosure avoidance measure.

Pennsylvania    

• S.B. 1433: Provides for the Homeowner Assistance Settlement Act. Establishes a fund for the purpose of funding the Homeowner's Emergency Mortgage Assistance Program and provides for the effect of noncompliance with the notice requirements of the homeowner's emergency mortgage assistance program and for allocations from the fund.

Rhode Island    

• S.B. 2533: This act stays or prohibits the foreclosure on property owned by persons in the military under certain circumstances.

Utah     

• S.B. 42: Bars an action to recover a deficiency following a short sale of single-family residential property unless the action is commenced no later than three months after the short sale.
• H.B. 164: Requires a beneficiary or servicer to appoint a single point of contact upon determining that a loan secured by a trust deed on owner-occupied residential property is in default. Requires notice to a default trustor before a notice of default is filed; allows a default trustor to make application for foreclosure relief if the beneficiary or servicer offers foreclosure relief. Establishes duties of the single point of contact during the three-month period following a notice of default and makes provisions applicable if a default trustor applies for foreclosure relief.             
• H.B. 280: Extends a repeal date from Dec. 31, 2012 to Dec. 31, 2014, for provisions requiring a notice for residential rental property that is being foreclosed.           
• S.B. 281: Modifies the duties of the attorney general, creates the Mortgage and Financial Fraud Unit within the Office of the Attorney General to investigate and prosecute mortgage and other financial fraud throughout the state. Authorizes the attorney general to administer the Mortgage and Financial Fraud Unit. Creates the Mortgage and Financial Fraud Investigation and Prosecution Restricted Account and makes technical changes.              

Vermont             

• H.B. 403: This act reorganizes and consolidates the statutory provisions regarding foreclosure of mortgages. The act does not make a great number of significant substantive changes to current law that affect the rights of borrowers or lenders.Rather, the act restructures and modernizes existing foreclosure statutes to improve clarity and ease of use for the parties, practitioners, and the judiciary. In particular, the act unifies the currently disconnected statutory mortgage foreclosure provisions into three distinct subchapters that correspond to the three types of foreclosure available to lenders: strict foreclosure, judicial sale foreclosure, and nonjudicial sale foreclosure.
• H.B. 781: Provides that any funds received in fiscal year 2012 or 2013 from the national mortgage foreclosure settlement that are deposited into the fees and reimbursement special fund (#21638) in the office of the attorney general shall be transferred to the general fund except for any amount the settlement may require to be directed to the department of banking, insurance, securities, and health care administration.  

Virginia               

• H.B. 1110: Allows a plaintiff in an unlawful detainer action to submit copies of the lease under certain circumstances.

Washington      

• H.B. 2614: Limits deficiency judgments pertaining to residual debts following short sales of owner-occupied residential property secured by deeds of trust. Requires notification to sellers involved in short sales. Amends the Foreclosure Fairness Act regarding foreclosure mediation, amends the Deeds of Trust Act regarding notices of sale, provides a process to rescind a trustee sale in limited circumstances and provides for foreclosure and mortgage counseling.

West Virginia   

• S.B. 551: Relates to prohibitions on primary and subordinate mortgage loans.
• S.B. 360: Creates a procedure for deeming personal property abandoned following a transfer of real property by tax sale or foreclosure. Requires notice to the owner of personal property remaining on real property after the previous owner has vacated. Creates a procedure for notice and removal of personal property within a 30-day period, giving the purchaser of real property the authority to remove personal property after proper notice and waiting period. Prohibits waiver of notice requirement prior to vacation of property.         

Wisconsin          

• S.B. 307: Under current law, in most mortgage foreclosure actions involving a home or other real property, if a homeowner (borrower) fails to pay the money he or she owes to the issuer of his or her mortgage (lender), a court may enter a judgment of foreclosure against the borrower and order that the property be sold at public auction in order to satisfy the debt the borrower owes to the lender.  After the court has issued a judgment of foreclosure, the borrower may stop the sale of the home by paying off, within a certain period (redemption period), the amount he or she owes to the lender. Under current law, abandoned properties have a two-month redemption period, while most other properties have a redemption period of either six or 12 months, depending on whether the sale of the home will satisfy the debt owed to the lender. This bill shortens the redemption period for abandoned properties from two months to five weeks.