I have been watching this legislation over the past few weeks. I have read arguments for and against it. I am attaching an article against, please read and give your feedback.
Written by Mark
Arizona may require lender's who are foreclosing on loans they did not originally make (a non-originating beneficiary) to document how the loan was transferred from the original lender to them.
Arizona Senate Bill 1259 is awaiting approval by the House after a 28 to 2 senate vote passing the matter about a week ago. The bill would require:
1. A non originating beneficiary on a deed of trust, to record a summary document that contains past names and addresses of prior beneficiaries, the date, recordation number and a description of the instrument that conveyed the interest of each beneficiary.
2. The summary document to be recorded at the same time and place that the notice of trustee's sale is recorded and that a copy be attached to any notice of trustee's sale that is required.
3. Failure to properly record the summary document that demonstrates evidence of title for the foreclosing beneficiary as of the date of the trustee's sale will result in a voidable sale.
4. Any person with an interest in the trust property can file an action to void the trustee's sale for failure to comply and would be entitled to an award of attorney fees and damages, to include an award of attorney fees for any injunction or other provisional remedy related to the claim.
In essence, if signed into law the bill will require lender's that didn't originate the loan to produce the full chain of assignments at the time the foreclosure is recorded to establish ownership, or risk the foreclosure sale being voided. An argument for a similar type requirement was recently shut down in a California court decision in which MERS came out the winner. Not surprisingly, MERS reportedly hired a lobbyist to contest this Arizona bill.
An interesting aside is that State Senator Michele Reagan, who sponsored SB 1259, has had her own battles with her lender over alleged predatory lending practices. In fact, Senator Regan's lawyer in the litigation was quoted to say "It makes Michele mad that the bank servicers will not disclose to a borrower the true noteholders." We've seen increasing anger over the actions taken by banks, and it should come as no surprise to see a backlash like this one.
The reality is that all too often our legislators, like Senator Regan, continue to pursue worthless stop-gap band aids rather than focusing on the real problem - negative equity. This bill may temporarily halt a few foreclosures, but what does it ultimately solve? The homeowner will still be underwater and the bank will still have a non-performing asset. Unless the goal is to provide homeowners free rent at taxpayer expense (don't forget that the majority of home loans are now backed by the federal government), or perhaps dish banks a little well deserved pay-back (that ultimately we'll pay for anyway in increased fees or further bailouts), what is it that Arizona legislators really expect to accomplish with this bill?
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