Legislative Updates

Letter from Virginia Governor Tim Kaine to Mortgage Lenders and Servicers regarding compliance with SB797. Click here

All three of these bills have been enacted and signed by the Governor. All three bills take effect July 1, 2008.

SB 797- Senator Puckett

Governor Kaine, with the assistance of the Virginia Foreclosure Prevention Task Force and Senator Puckett, had SB 797 introduced in the General Assembly. This bill requires that, in the case of certain “high-risk mortgage loans” as defined in the bill, the lender or servicer must provide, at least 10 days before acceleration of such loan due to monetary default, written notice to the borrower that specifies the following: (i) an itemization of all past due amounts, (ii) other charges to be paid to bring the loan current, (iii) a statement that there may be options to avoid foreclosure that borrower may discuss with the lender or servicer or HUD approved counseling agency, (iv) the address and telephone number of the lender or servicer that will work with borrower to avoid foreclosure, (v) the name, address and telephone numbers of 3 or more HUD approved counseling agencies, (vi) the date by which the borrower is to reply to the notice, (vii) a statement that, if the borrower contacts the lender or servicer by such date to request additional time to pursue the options to avoid foreclosure, the lender or servicer will provide an additional 30 days from the date of such telephone contact before sending notice of acceleration of the loan, (viii) if the borrower so contacts the lender, the borrower shall be required to make a good faith effort in working with the counselor, lender or servicer on ways for repayment of the loan and to provide his monthly income and expenses to the counselor, lender or servicer, and (ix) if borrower fails to so contact the lender or servicer, the lender or servicer may accelerate the loan. The bill also provides that: (i) the Secretary of Commerce and Trade shall maintain a list of HUD-approved counselors; (ii) a lender or servicer shall not be required to provide more than one 30 day-extension in connection with the same loan; and (iii) failure to send the notice or to provide the 30 days’ forbearance shall not affect the validity of the foreclosure sale, and any such inadvertent failure shall not impose any liability on the lender or servicer. The provisions of the bill will expire on July 1, 2010.

HB 408- Delegate Oder

This bill amends the Virginia Consumer Protection Act to prohibit the following fraudulent acts or practices in the case of owner-occupied primary dwelling units: (i) a supplier of services to avoid or prevent foreclosure is to be paid a fee prior to settlement of the sale of the property, (ii) the supplier of the services does not make the mortgage payments (if the supplier has agreed to do so) and applies the rent payments for his own use, (iii) the supplier of the services represents that the seller has the option to repurchase the residence after the supplier takes title, unless there is a written contract providing for such option on terms and at a price stated therein, or (iv) the supplier of the services advertises or offers any of the above described prohibited services. The substitute bill also provides that any provision in the agreement for mandatory arbitration shall be null and void.

HB 1487- Delegate Suit

The bill amends the Mortgage Lender and Broker Act by (i) removing the part of the definition of a mortgage loan that has required the property securing the loan to be owner-occupied and adding an exemption for residential property for occupancy by more than four families; (ii) requiring every member, senior officer, director, and principal of an applicant for a mortgage lender or broker license to consent to national and state criminal history records check, the results of which shall be provided to the SCC; (iii) requiring licensed mortgage lenders and brokers to conduct criminal background checks on employees who may have access to or process personal identifying or financial information from a member of the public; and (iv) requiring licensed mortgage lenders and brokers to ensure that employees are properly trained in applicable state and federal mortgage lending laws and regulations. The bill authorizes the SCC to suspend or revoke a mortgage lender's or broker's license upon failure promptly to pay when due reasonable fees to a licensed appraiser for appraisal services performed, in accordance with the contract and regulatory requirements, in connection with the origination or closing of a mortgage loan for a customer of the mortgage broker or lender. The bill provides for the SCC to refer to the Attorney General for investigation, injunctive relief and damages (including attorneys’ fees and costs) any violations by licensed mortgage lenders and brokers of the provisions governing interest rates, late charges, prepayments, and loan acceleration in Articles 3 through 12 of Chapter 7.3 of the Code and the provision in § 6.1-422.1 prohibiting “flipping” of mortgage loans. The bill also authorizes the Attorney General to enjoin violations by licensed mortgage lenders and brokers of RESPA to the extent authorized by §§ 8 and 6 therein. In addition to the above amendments to the Mortgage Lender and Broker Act, the bill directs the Virginia Housing Commission to study all new federal legislation pertaining to mortgage lending and brokering and to determine if such legislation requires changes to Virginia law.