It is apparent that the specific provisions of House Bill 470 were unclear to the editorial board. Judging by the recent pushback to the bill, which has now been withdrawn, it seems Kentucky bankers are the only ones concerned with protecting consumers.
Non-judicial foreclosures help local governments, lenders and citizens by reducing foreclosure costs and putting property back on the market more quickly, lessening the risk of vacancy and vandalism in our communities.
This encourages homeownership by stabilizing property values and protecting neighborhoods.
In addition, the deed of trust system presented by the legislation is beneficial to defaulting borrowers in a number of ways.
First, the non-judicial process is 100 percent voluntary for the consumer. The consumer needs only to tell the lender that he does not want to use the non-judicial process. That places the onus back on the bank to file a traditional, judicial foreclosure action.
Additionally, if the consumer utilizes the foreclosure process under the bill, the bank cannot seek a deficiency judgment against the defaulting borrower. That means that the bank can only recover its debt up to the amount raised by the sale of the house.
Unlike in a traditional judicial foreclosure, the borrower can rehabilitate his or her financial situation without the cloud of this lingering debt — which can result in significant savings for a defaulting borrower.
Also, contrary to what was in the editorial, the minimum amount of time that it would take to foreclose under the proposed legislation was not 120 days, but 230 days (which is because of a federally mandated 120 day cooling-off period before enforcement can begin after default).
Finally, the defaulting borrower will receive not one, not two, but a minimum of four notices regarding the process, the option to go to judicial foreclosure, the right to demand a modification hearing and the recommendation of seeking advice of an attorney and homeownership counseling.
If the borrower is in default with no legal defense, it in incomprehensible that anyone would saddle the borrower with legal bills and a deficiency judgment, rather than allow them to walk away debt free. If the borrower has a defense, they can and should enforce their right to judicial foreclosure.
Lastly, the editorial tears at heartstrings with a plea to oppose this bill since "any number of things beyond a family's control ... car wreck, serious illness" can place the home at risk.
I agree that unforeseeable events place the home at risk, but by utilizing this foreclosure process, the borrower would walk away debt-free, with no enduring stress of future collections.
Isn't that the more appealing option than going through the stress of a foreign and complex judicial action that still results in the loss of the home?
Kentucky bankers supported HB 470 because we read, and understand, the implications before drawing conclusions.