Kaine Seeks Help for Borrowers Facing Foreclosure

RICHMOND, Feb. 26 -- Gov. Timothy M. Kaine (D) is planning to announce Wednesday a proposal aimed at regulating high-risk mortgage lenders and stemming the surge of foreclosures that could cause tens of thousands of Virginians to lose their homes over the next two years.

The plan, which was introduced in the General Assembly on Monday at Kaine's request, would require certain lenders to warn borrowers when they are at risk of foreclosure and give them a grace period and some resources to get back on track with their payments.

The aim is to prevent them from losing their homes, said Gordon Hickey, a Kaine spokesman.

"The plan is to just provide them with counseling and a little extra time to work out some sort of agreement so they won't be foreclosed," he said.

Kaine's proposal comes a week after Maryland Gov. Martin O'Malley (D) announced similar regulations. Kaine is proposing Virginia's legislation this week in the hopes that the General Assembly will approve it before its scheduled adjournment March 8.

Foreclosure rates around the nation have spiked in the past year, fueled by a nationwide rash of risky loan schemes, such as subprime loans designed for people with blemished credit or salaries insufficient to support the borrowing. The number of homes facing foreclosure around the country jumped by 57 percent in January, compared with a year ago, a mortgage research firm reported this week.

The Center for Responsible Lending, an advocacy organization, estimates that before the mortgage crisis ends, 62,174 homes will be lost to foreclosure in Virginia.

Under the legislation, lenders who engage in high-risk lending schemes would be required to give borrowers 10 days' notice of a change in the terms of their loan. The lender also would have to provide contact information for three mortgage counseling agencies. In addition, the lender would be required to grant borrowers who request it a 30-day grace period before starting the foreclosure process.

Currently, Virginia has one of the fastest foreclosure processes in the nation, said Helen O'Beirne, director of the Center for Housing Leadership at the nonprofit group Housing Opportunities Made Equal in Richmond.

In extreme cases, O'Beirne said, borrowers can lose their homes in as few as 30 days after a missed payment. But if they receive credit counseling, many can avert foreclosure. About 70 percent of borrowers who receive mortgage counseling through her organization manage to keep their homes, she said.

"I think it's great that the governor recognizes the sense of urgency and sent a bill down this session so folks can start getting help," O'Beirne said.

The measure is the first recommendation of the Virginia Foreclosure Task Force, a group of industry representatives, consumer advocates, policy experts and researchers appointed by Kaine last year to suggest solutions to the mortgage crisis.

The legislation was written in an effort to target borrowers who are getting the kinds of loans that are resulting in the greatest number of foreclosures, said Patrick O. Gottschalk, the state's secretary of commerce and trade and the task force's chairman. It's the first in a series of recommendations the group expects to make, he said.

"A lot of times, people are not contacting their lenders, even if they have past-due notices," Gottschalk said. "Also, they're not seeking the help of counselors, which they should."

The legislation has the support of several mortgage and banking industry groups and consumer advocacy organizations, he said.

Staff writer Anita Kumar contributed to this report.