Homeowners were trying to talk to their lenders about what they could do at the same time lenders were telling their attorneys to proceed with foreclosure. Frequently, homeowners were frustrated with lenders, feeling they could not get straight answers to questions.
“People have been trying to work with banks, but the banks don’t want to work with them,” said J. Cameron Halford, a Fort Mill lawyer who usually represents homeowners in foreclosure cases.
The lack of straight answers, Halford said, is because lenders have not been properly trained on how to do a federal Home Affordable Modification Program application. “It leads,” he said, “to the breakdown in communication.”
Kimball said banks recently seem more willing to work with lenders.
“Increasingly the lender is becoming more proactive, trying to keep people in their house. The banks don’t want to own any more homes,” he said.
Lloyd Hendricks, chief executive officer of the South Carolina Bankers Association, said banks in the state will comply with the Toal’s order.
Sometimes homeowners find themselves in court, baffled over why they were called there, Kimball said. Homeowners thought they were doing everything they needed to do, unaware foreclosure was proceeding.
The expectation is that Toal’s order will give homeowners a second chance to avoid foreclosure, and to “potentially alleviate the already strained court system processing the cases,” Toal wrote. The order covers residential, owner-occupied properties only.
The reality, however, is the order – which covers cases in foreclosure as of May 9 and any new cases – will slow a system even more, Kimball said. He said he already has a backlog of between 600 and 700 cases awaiting information from lenders.
Toal’s action will also mean suspending foreclosure sales for June, he said.
It is the third time foreclosure proceedings have been delayed in recent years. In 2009, Toal halted foreclosure sales on properties guaranteed by the federal Freddie Mac or Fannie Mae loan programs to give homeowners a chance at federal mortgage assistance programs. Last year, South Carolina and 22 others states saw a temporary halt as lenders wanted to make sure they had properly handled mortgage and foreclosure documents.
Each time there was a delay, York County’s foreclosure statistics fell, only to rise the next month, according to statistics from RealtyTrac, a foreclosure listing service in California.
It is unclear whether giving homeowners another chance to pay their debt, or modify their loans, will forestall foreclosure. Kimball said most lenders will not modify a loan for an unemployed person. Even for the employed, a modified loan can result in payments the homeowner can’t meet.
“There is also a debt owed, and people lose sight of that,” he said. “My job is to see everyone’s interest is protected.”
Also, almost all of the factors that contribute to foreclosures – the economy and lenders’ criteria for borrowing – are beyond Toal’s control.
Kimball projects foreclosures will continue to rise in York County this year, eclipsing the last two years. He keeps numbers for the fiscal year, which runs from July to June. In the 2008-2009 fiscal year, there were 1,284 foreclosures. The number dipped the following year to 1,248. It is on track this year to exceed 1,300, he said.
In the 2008-2009 fiscal year, 569 homes were sold at foreclosure sales. The number increased to 717 the next year. So far there have been 445 foreclosure sales this year.
A home that is foreclosed, but not sold, becomes property of the lender.
According to RealtyTrac, there have been more than 4,500 notices of default, home auctions and lenders owning properties in York, Lancaster and Chester counties since the economy started faltering in January 2008. Almost half of the foreclosures have been in Rock Hill, with 1,130 in the Fort Mill, Lake Wylie and Clover zip codes.
Toal’s order makes one change that may clear up some of the confusion. Homeowners will deal directly with a lender’s attorney, rather than its loan service office.
“The debtor should be able to communicate through the bank’s lawyer,” Kimball said.
Halford said homeowners in foreclosure should also get an attorney. “There are defenses to foreclosure, but you won’t find them without an attorney.”
Reading and responding to foreclosure paperwork is also critical, Kimball said. When the foreclosure process starts, homeowners are mailed a notice of default. They have 30 days to respond.
If a homeowner doesn’t respond, it is an admission of what the lender alleges: that the lender owns the loan, the amount that’s owed, and any other fees sought.
If a homeowner sends in even the simplest response, there is a hearing, Kimball said.
Kimball estimated that 90 percent of York County homeowners getting a notice of default do not file a response.
While Toal’s order will create more work for attorneys, and slow down the process, the difficulties are outweighed by the circumstances, Halford said.
“There needs to be a slowdown. There are too many people in arrears.”