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State LawsDeprive Homeownersof Basic Protections
 John Rao and Geoff Walsh
NATIONAL
CONSUMER LAW
CENTER INC
®
——————————————
▲
 February 2009
FORECLOSINGA DREAM
 
ACKNOWLEDGMENTS
The authors would like to thank Carolyn Carter,Elizabeth Renuart, Margot Saunders, Eric Secoy,and Tara Twomey of NCLC for valuable guid-ance, feedback, and editorial assistance inthe preparation of this report. Particular thanksto Rick Jurgens, Mary Kingsley, and ShirlronWilliamsfor research and to Julie Gallagher forgraphic design.This report was funded in part by the FordFoundation. We thank them for their supportbut acknowledge that the findings and conclu-sions presented in this report are those of the au-thors alone, and do not necessarily reflect theopinions of the Foundation. ABOUT THE NATIONAL CONSUMER LAW CENTER The National Consumer Law Center
®
, a nonprofitcorporation foundedin 1969, assists consumers,advocates, and public policy makers nationwideon consumer law issues. NCLC works toward thegoal of consumer justice and fair treatment, par-ticularly for those whose poverty renders thempowerless to demand accountability from theeconomic marketplace. NCLC has providedmodel language and testimony on numerousconsumer law issues before federal and state pol-icy makers. NCLC publishes an 18-volume seriesof treatises on consumer law, and a number of publications for consumers. ABOUT THE AUTHORS
 John Rao
is an attorney with the National Con-sumer Law Center, Inc. who focuses on consumercredit and bankruptcy issues. He is a contribut-ing author and editor of NCLC’s
Consumer Bank-ruptcy Law and Practice
; co-author of NCLC’s
 Foreclosures
;
 Bankruptcy Basics
;
Guide to Surviving  Debt 
; and contributing author to NCLC’s
Student  Loan Law
. He is also a contributing author to
Col-lier on Bankruptcy
and the
Collier Bankruptcy Prac-tice Guide
. He serves as a member of the federal Judicial Conference Advisory Committee onBankruptcy Rules, appointed by Chief Justice John Roberts in 2006. He is a Fellow of the Amer-ican College of Bankruptcy, secretary for the Na-tional Association of Consumer Bankruptcy  Attorneys, and former board member for the American Bankruptcy Institute.
Geoff Walsh
has been a legal services attorney for over twenty-five years and is presently a staff attorney with National Consumer Law Center inBoston. Before that, he worked with the housingand consumer units of Community Legal Serv-ices in Philadelphia and was a staff attorney with Vermont Legal Aid in its Springfield, Vermont of-fice. His practice has focused upon housing andbankruptcy issues, particularly foreclosures of mortgages in government-subsidized housingprograms. He is a contributing author to NCLC’s
 Foreclosures
.
 
I. Executive Summary 
In recent months, a wave of foreclosures hasswept millions of American families from theirhomes. The magnitude of this crisis defies easy comprehension: more than 8 million Americanfamilies are expected to lose their homes to fore-closure in the next four years. Much has beenwritten about the financial and economic causesof this disaster. Much less notice has gone to an-other factor that has accelerated and multipliedthis grave loss of homes and savings: antiquatedstate laws that in some ways afford fewer protec-tions to homeowners than to renters.
State foreclosure laws tilted against homeowners
This report examines the laws that govern mort-gage foreclosures in the 50 states, and evaluateshow well the laws of a given state protect home-owners facing foreclosure. Regulation of mort-gage foreclosures has always been a fundamentalprovince of state laws. Now, as families, commu-nities and states face an onslaught of financialand social problems caused by the rising tide of foreclosures, states need to craft laws that canmaximize the number of their residents who willbe able to keep their homes.Provisions in existing foreclosure laws thathurt homeowners include:
In 30 states and the District of Columbia,mortgage holders who allege that homeownershave fallen behind in their payments
can by-pass the courts and move directly to takeaway and auction off homes
. This denieshomeowners due process protection com-parable to that given many tenants. It alsoplaces upon homeowners the heavy burden toget a judge to review the mortgage holder’sclaims and stop the foreclosure.
In every state but California and Connecticut,mortgage holders
can move directly to fore-closure without being required by state law to consider or discuss ways to avoid loss of the home
with homeowners, such as throughmodification of the terms of the loan.
In every state but Massachusetts, New Jersey,and Pennsylvania, a mortgage holder whoclaims a homeowner has fallen behind inpayments
can immediately impose defaultfees and costs
that reduce the chances thatthe homeowner can catch up by making thepayments owed.
In 29 states, a mortgage holder has
no obli-gation under state law to stop foreclosureeven if the homeowner
, just before the househas been sold,
comes up with the money 
tocatch up on the owed payments and all in-curred penalties and fees.
In 33 states and the District of Columbia,there is
no requirement that homeownersbe personally served
with a foreclosure no-tice or legal documents that start a court fore-closure case.
In 36 states and the District of Columbia,mortgage holders
can pursue so-called “defi-ciency judgment” claims
against homeown-ers even after the foreclosed home has beensold at auction. These claims, seeking to re-
FORECLOSING A DREAM
State Laws Deprive Homeownersof Basic Protections
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