Demystifying the new foreclosure law
In early May, Gov. Neil Abercrombie signed Act 48 into law: legislation on mortgage foreclosure that basically creates a process to convert a "non-judicial" foreclosure to a "judicial" one, and provides dispute resolution.
What is the difference between judicial and non-judicial foreclosure? Well, in a judicial foreclosure process, a lender (the bank) will initiate a lawsuit by filing a complaint with the court, naming the borrower (the homeowner) as the defendant. As with any other legal trial, the court determines whether the lender may foreclose on the property, based on the documents and other evidence submitted.
In a nonjudicial foreclosure, the lender forecloses on the property without going through the court system. The lender may foreclose without a lawsuit because the mortgage document contains a “power of sale” clause that authorizes the lender to proceed with foreclosure after serving the borrower with a notice of default and intention to foreclose or notice of intent to foreclose.
Before this law was passed, lenders could simply foreclose on a property when the homeowner couldn't keep up with the mortgage payments by using a judicial foreclosure process or a nonjudicial foreclosure process. Now, if the lender chooses a nonjudicial foreclosure, Act 48 allows the borrower to request it be converted to a judicial one (if they meet certain requirements) to ensure they have a fair shake in having their side of the story heard.
It's a complicated new law to muddle through, and numerous news outlets have discussed its merits as well as its disadvantages to both the consumer and the overall impact on the real estate market.
Whether Act 48 works for you or not, you still need to understand it. As the courts are setting up to hear cases under this new law, the state Judiciary recently posted some rules, interactive form and a Frequently Asked Questions section up on their site. Click here to access the new section.
Some of the facts broken down for Act 48 include: how to start the foreclosure process, the differences between judicial and non-judicial foreclosures, what a conversion is, how to start the process and where to get legal advice.
You may also obtain information about the dispute resolution program at the Department of Commerce and Consumer Affairs website by clicking here.