Foreclosure Notices

New!! 1.20.2016  As of early 2016, PNRC is beginning to see some nasty fights on removing foreclosure notices from newspapers – and there’s the potential for more. PNRC has developed an editorial and a set of talking points which can be tailored for your state-specific needs. Both can be found below.

While we hope you’ll find the editorial worth publishing in your newspaper, we do ask that you please contact us first so we can provide you with the latest version.

When using the talking points, simply replace the sections in red and use these talking points in your conversations with state legislators.

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PNRC’s Foreclosure Editorial

By Tonda F. Rush
Co-director of the Public Notice Resource Center

A character identified in The Big Short movie only as the “Tattooed Renter” protests the unfairness in the world when he learns that he is about to be booted out of his home because the landlord has not paid the mortgage. 

“Man, I paid my rent,” he cries. 

Would that matter when the sheriff came around? Not one bit. When the mortgage defaults, the banks want the keys. 

The memory of millions booted to the curb after the crash of Lehman Brothers has faded into memory for many. It is barely even an issue in the Presidential debates. Then along came the movie, to remind us a lot that went wrong then could still go wrong. 

Dodd Frank made some reforms. But if the mortgage isn’t paid, the hard-working father and mother who paid their rent still lose their home. 

That is one reason why transparency in foreclosures makes sense. And why newspapers object when legislatures try to pull a curtain of obscurity around foreclosures. Some bills, for example, would post public notice only on an obscure website used primarily by lawyers. 

What do foreclosure notices do? They give the public a window into what is otherwise a closed legal process. Foreclosure notices alert family, friends and neighbors that a foreclosure is about to happen. They protect senior citizens who rely on family members to look out for their best interests. They protect home values in neighborhoods only just recovering from the abusive lending that led to the Great Recession. They act as a public watchdog over shady lenders. They put an uncomfortable – but necessary – spotlight on irresponsible borrowers.

If the Great Recession taught us anything, it’s that foreclosures affect all aspects of our economy, at a global, national and neighborhood level.

Although foreclosures can occur in public lawsuits, more often lenders require a borrower to write the courts out of the process as a condition of getting the mortgage. A trustee for the mortgage holder can force and execute a foreclosure sale after a default. Some states permit up to 1,000 days to give residents a maximum opportunity to keep their homes after a bank declares a default. Some states allow less than a quarter of that time, making effective notice even more of an imperative.

The public notice is an important part of a scary process that can end with the family goods on the curb. 

It gives residents time to assemble help to redeem the property. 

It provides notice beyond the required letter to the borrower. In The Big Short, the tattooed renter’s landlord probably got the letter, but the renter was was kept in the dark. Landlord could be pocketing the rent but not paying the mortgage. A public notice gives renters or some watchful friend or family member or neighbor of those renters a clue about the impending sale.

If the foreclosure happens, greater notice would give more buyers a chance to find out about the sale.  When a foreclosed house sells, the proceeds go to retire the costs of the foreclosure, to pay back taxes and the lender and then, only if there is money left over, does any money go to the homeowner. More buyers create a greater chance that the homeowner walks away with at least some equity. 

The notice introduces some transparency into a closed system. Consumer groups, neighbors, scholars and historians who care about what goes on in this arcane world of securitized lending get a window — a small window, but still a window. 

But some will say no one reads printed newspapers any more. Shouldn’t these things be on line? 

First, they’re wrong. Most people who consume newspaper news read it in print. So said the Pew Research Center in January 2016. (You are probably one of them right now.) For those who want public notices on websites, the newspapers that run them in print put them online if they have websites, and most do.

There is more to public notice than publishing. The printed notice is kept and archived, so when a dispute comes up years later, the authentic notice can be found. Unlike the fickle digital world, print doesn’t change.  

Yes, some will say, but the newspapers just want the revenue. True that. Newspapers do need revenue if they are going to cover the news. But the circuit court website isn’t free. It has to be built, maintained, archived and authenticated when the notices are needed for evidence. Whether the newspapers can do the notice more cheaply than the courts is a question to answer after an honest study of the court site and ALL of its real costs — including marketing its links – are counted. 

One thing is for sure. You just read this editorial. And I’ll bet you haven’t been on the a government website all day. 

Mortgage lenders have a point. When they lend money and it isn’t paid back, they have to free up that property so they can put the money back into circulation — even if the loan is immediately sold into secondary markets, as most are. Someone somewhere has money tied up in that property. Not all the defaults in The Big Short were by innocents. Loads of people took out loans during that period that they well knew they couldn’t afford. The foreclosure process is a regrettable but necessary tool to keep the loan markets fluid.

Obscurity, however, is also regrettable and completely unnecessary. Court websites are for lawyers. People who want to know what is going on look at the newspaper.  

Tonda Rush is an attorney and public policy adviser in Northern Virginia. Her firm, American PressWorks, Inc., manages the Public Notice Resource Center in Falls Church, whose mission is to inform the public about the importance of public notice. 

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PNRC’s Foreclosure Talking Points

Notifying Residents of Foreclosure Actions

Almost all states require significant notice to the public before courts or foreclosure trustees can take the extreme action of kicking people out of their homes. The poignant images of the millions of people who lost their homes as a result of fraudulent practices of Great Recession are vivid today. Although foreclosures have slowed since the peak of 2.8 million in 2010, there were still more than a million foreclosure filings in 2015, according to RealtyTrac.

In (State), foreclosures may occur through {power of sale clauses agreed to by borrowers when a loan is executed (often without providing the borrowers a choice) or by court action.  (this provision must be adapted for each state.}  Lenders may require a very short period of notification. (State) law guarantees a scant three days of public notice when lenders insist upon a short notice period, and it can allow a lender to seize a property in only a few months. (State’s) foreclosure period is [shorter/longer] than mostSome states permit up to 1,000 days to give residents the maximum opportunity to keep their homes.

A short period means that effective and broadest possible notification to the general public is essential to provide borrowers (and innocent renters) a fair chance to save their homes or move before they are kicked out.

The Consumer Financial Protection Bureau and the Federal Trade Commission have ordered significant changes in mortgage underwriting practices of past to help protect the public. But even when all goes well, many are still at risk of losing their homes when they lose jobs, suffer health setbacks or face rising interest rates that they did not expect. 

Public notice of foreclosures is an important tool for communities to protect residents and their homes.

    • It gives residents time to assemble resources to redeem the property before they are removed;
    • It provides notification beyond the personal service given to the owners. When renters have paid their rent, but owners have not paid the mortgage, the newspaper notice provides an extra avenue of information;
    • It invites buyers to the sale.  When the unfortunate sale finally happens, more readers of the notice lead to more possible purchasers and higher prices. The higher bid, the more money available to satisfy the mortgage company and provide residents with a portion of their equity.
    • It introduces transparency into the foreclosure process. Public outrage at the billion dollar bailouts of financial institutions, only recently rekindled in the movie The Big Short, puts policymakers on notice that faster, more secretive foreclosures only add to public cynicism and concern.

Newspaper notice combined with newspaper websites provide the maximum available and more affordable means of providing fairness to residents. {Add in state readership data.}