Removing Barriers Blog

Uniform Law Commission Approves Troublesome Uniform Home Foreclosure Procedures Act - July 22, 2015

Last week, the Uniform Law Commission, which drafts uniform laws for the states to consider and enact, approved The Uniform Home Foreclosures Procedures Act. The Commission began work on the Act in January 2012 in response to the wave residential foreclosures. While the drafters intended to streamline and standardize the foreclosure process, the Act contains sections that are troublesome to credit unions and other financial institutions. Particularly Section 705, which modifies the Holder in Due Course doctrine, thus making it nearly impossible for a creditor to defend itself against the types of claims the draft authorizes (fraud, material misrepresentation or breach of promise). In Section 305, the Act includes a Foreclosure Resolution Program that unfolds after the CFPB mandated foreclosure process, thus significantly extending the foreclosure process by giving the homeowner multiple opportunities at loss mitigation. 

It is unlikely that the Act will gain traction in the states given the recent decline in foreclosure rates. According to the the Mortgage Bankers Association's National Delinquency Survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 5.54 percent of all loans outstanding at the end of the first quarter of 2015. This was the lowest level since the second quarter of 2007.