Think you’re not affected? Better think again. Over the past several years, the federal and state governments have sought to quell the “foreclosure crisis” that has overtaken the public discourse. States such as California have enacted legislation such as the homeowner’s bill of rights whose goal was to afford additional protection to delinquent borrowers. On the federal level, the Dodd-Frank Wall Street Reform and Consumer Protection Act likewise requires lenders and servicers to take additional steps once a borrower is in default.
Apparently feeling neglected with all of the activity on the state and federal levels, a considerable number of local jurisdictions throughout the country have gotten into the act and have enacted various registry ordinances, all of which create additional work and paperwork for the lender and more importantly may increase the costs involved in servicing the loan. The vast majority of these ordinances were enacted in order to prevent or limit blight in residential neighborhoods. Registration under some of these ordinances are triggered by the commencement of a non-judicial foreclosure, others are triggered when the property is vacant. Some of these ordinances apply solely to residential property; others are not as limited and apply to both residential and commercial property. Certain municipalities also require weekly or monthly inspections by the lender. In all cases, however, you as the lender may ultimately be liable for payment of registration fees, inspection fees, and in a worst case scenario, draconian penalties for failure to timely comply.
These municipal registry ordinances can be broken down into two major groups: those that require registration upon vacancy of the property (called vacant property registration or “VPR”) such as in the City of Alameda and those that require registration upon commencement of a foreclosure (called foreclosure registry ordinances or “FRO”) such as in the City of Los Angeles. During the CMA Summer Seminar, we touched on a whole host of different ordinances. Let’s look at a comparison of the two, keeping in mind that there are many different ordinances throughout California, and although we are focusing on the FRO for the City of Los Angeles, it too has a VPR.