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Laboratories of Democracy and the Commissioners of Uniformity

posted by Alan White

States have passed a variety of changes to foreclosure laws and court rules in response to the foreclosure crisis, including new notice and mediation requirements to stimulate workouts between lenders and borrowers.  Some of these laws have been found effective in reducing foreclosures.  Subprime mortgages with delinquent payments are much more likely to end in foreclosure sales in nonjudicial foreclosures states, while states with both judicial foreclosure and strong consumer protections, like New York and Pennsylvania, have modification rates well above the national average (Download Delinquent Subprime Loan Outcomes by State Excel table.)

On the other hand, nonjudicial foreclosure is faster and cheaper, which can be an advantage when dealing with abandoned properties.   States also vary considerably in the amount of time homeowners have to cure a default before foreclosure, or redeem a property after foreclosure.

The Uniform Law Commission, who bring you the Uniform Commercial Code and other model state laws, is launching a project to consider drafting a uniform foreclosure law for the 50 states.  The study group consists of professors, judges, and lawyers, but notably absent is any member who could be regarded as a consumer or homeowner advocate or even sympathizer.  Interested parties may request to participate as observers, and I am told that observers have had some influence on these uniform law projects in the past.  Of course, whatever the ULC drafts does not become law until a state legislature chooses to adopt it.

In the case of foreclosure notices, ADR, redemption, and the judicial/nonjudicial debate, my own view is that uniformity among states is neither likely nor especially desirable. Nevertheless, this ULC project bears watching.




I've participated in these things. Observers can have clout, if:
1. The observer is backed by a strong interest group. Consumer observers had a fair amount of clout in the Article 9 process, for example, because of their perceived veto power (although they were stonily ignored in the UCITA process); or
2. The observer is a well-respected technician. You can carry the respect in with you, or earn it at the drafting meetings by your performance. The clout is limited, however, to matters perceived as technical. Of course, some "technical" matters can involve big policy issues; and
3. The observer can afford to go to drafting sessions, which are held all over the country. This links back to #1, although I've known some pro se observers who have their own resources, and fall into the "respected technicians" category.

In 2002, the National Conference of Commissioners on Uniform State Laws drafted the Uniform Nonjudicial Foreclosure Act which failed miserably. Every state voted it down.

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