10 States Pass Foreclosure Legislation;
Community Development Groups Lead Charge for Change

WASHINGTON, DC - Jan.3, 2008 - Without a federal solution to the staggering foreclosure problem, states, at the urging of community development groups, are taking action and passing foreclosure-prevention legislation, according to a national group representing local organizations that work with low and moderate-income populations.

The National Alliance of Community Economic Development Associations (NACEDA) represents 27 state, city and regional associations of community economic development associations, comprised of a network of 2,000 community development corporations

Overall, 10 NACEDA member states now have seen passage of foreclosure bills: Massachusetts, Indiana, Rhode Island, Arkansas, Connecticut, Minnesota, North Carolina, South Carolina, Texas and Illinois. Bills are pending in New Jersey, Michigan and New York.

A recent survey from NACEDA showed that foreclosures are the number one problem facing their communities, with outright mortgage fraud, questionable lending practices and job loss all contributing factors. NACEDA's member organizations are key participants in state level initiatives designed to help families save their homes, including state legislation, to curtail abusive lending practices among other remedies.

NACEDA Chair Diane Sterner said, "States are taking legislative action on this vital issue with the assistance of NACEDA's members, who represent thousands of local organizations across the nation that are on the front line of this problem. They serve as that key 'trusted advisor' to state legislatures and assist in finding a solution to this devastating foreclosure problem."

In addition to these foreclosure legislation initiatives, seven states have launched a mandatory process that could also assist in curbing foreclosures, according to the Washington Post. The Internet-based system more thoroughly licenses and tracks mortgage brokers through a uniform application and database. Mortgage brokers will not be able work in a new state after being banned in other states. Consumers will likely have access next year. The initial participants are: Idaho, Iowa, Kentucky, Nebraska, New York, Rhode Island and Massachusetts.

Massachusetts Law Sets Standard

Massachusetts also has one of the strongest new foreclosure preventions laws, An Act Protecting and Preserving Homeownership. Provisions include:

• Creation of the country's first Community Reinvestment Act for mortgage companies;
• $3 million for the Division of Banks to monitor and oversee lenders;
• Requirement that loan originators be licensed; and
• Requirement of third-party in-person counseling for first-time home loan borrowers seeking subprime adjustable loan rates.

One of NACEDA's members, the Massachusetts Association of CDCs (MACDC), was an essential part of the development and passage of this legislation. The bill is based on language conceptualized from MACDC and its Foreclosure Prevention Coalition partners. MACDC says the Coalition will monitor the implementation of the law to ensure that it is making a difference for families and communities. Community development groups took leadership roles in enacting this legislation and they will be central to its implementation, according to MACDC Executive Director Joe Kriesberg.

"We support Rep. Barney Frank (D- Mass.) and others who are trying to pass Federal legislation, but we cannot wait to see whether or when Congress and the President will agree on foreclosure legislation. We have to take action now," said Kriesberg. "We are hoping that the extension of the CRA to mortgage companies here will lead to an extension at federal level. Hopefully, as more states take these actions that bring about a positive impact, the federal government will take notice and act accordingly."

Although foreclosure rates nationally have been falling, there are several states where they are rising, including Ohio, Michigan, Indiana, California, Florida, Nevada and Arizona. Subprime rate loans in the last four states are responsible for much of the foreclosures, according to the Mortgage Bankers Association of America. NACEDA's recent survey asked twenty member states about foreclosure prevention activities. While 50% of respondents said job loss was a primary reason for foreclosure in their communities, ALL respondents said that poor mortgage products with escalating rates and other inappropriate lending products were a factor in foreclosure in their communities.

"In Indiana, a person could have a criminal record, including felony convictions, and there was no oversight responsibility that would prevent this person from being a mortgage broker," said Christie Gillespie, former Executive Director of the Indiana Association for Community Economic Development (IACED), "our legislature passed legislation this year to address this."

The state legislature has passed a bill providing funding for a foreclosure-counseling network, counseling training, a help hotline and a foreclosure study committee. There was also separate legislation that placed additional regulations on mortgage brokers, who must now have a minimum bond, requirements for continuing education and provide evidence of no criminal record.

In Michigan, where foreclosure rates are among the highest in the nation, several bills are in draft to regulate mortgage brokers, police mortgage fraud and create a rescue fund pool. Members of the Community Economic Development Association of Michigan (CEDAM) and their member CDCs are monitoring closely legislation that would make changes to consumer laws to regulate mortgage brokers and reduce predatory lending practices that are being considered by Michigan legislators.

"The heroic actions of NACEDA's member organizations will help turn the tide on foreclosure,' said NACEDA Executive Director Jane DeMarines. 'State and national legislation is desperately needed to address predatory lending practices and protect borrowers."

NACEDA supports community development corporations to help them better serve their communities. NACEDA acts as a convener of the CED field and helps to shape and pursue a national CED agenda, with a focus on representing the needs and views of CED practitioners.