Legislative Responses to the Foreclosure Crisis in Nonjudicial States

The context for foreclosure prevention and mitigation hinges critically upon whether a state operates in a judicial or nonjudicial regime. Nonjudicial foreclosure regimes allow mortgage lenders to foreclose on homes without substantial court supervision. In these states, the time from the borrower receiving an initial notice of foreclosure to the date of the completed foreclosure sale tends to be substantially shorter than in states with judicial foreclosure systems. Moreover, nonjudicial foreclosure regimes tend to offer borrowers fewer legal protections and make it more difficult for homeowners to slow or intervene in the routine foreclosure process. For example, many of the more well-known efforts to reduce foreclosures, including mediation programs in which lenders must meet with borrowers in the presence of a mediator, have occurred in judicial states. This report examines legislation affecting the mortgage foreclosure process adopted in states with nonjudicial foreclosure processes from January 2005 through May of 2010. Little is known about how policymakers in nonjudicial states have responded to the foreclosure crisis. In general, borrowers in nonjudicial states are at a significant disadvantage when compared to those in judicial states and, short of changing to a judicial foreclosure regime, efforts to reduce foreclosures run up against a different set of constraints and challenges. The primary purpose of this report is to understand how policymakers in nonjudicial states have attempted to respond in terms of legislative modifications to the foreclosure process in the face of the national foreclosure crisis. We do this by analyzing state legislative activity during the study period. In particular we identified all legislation enacted during this period that concerns the regulation and administration of the default and foreclosure process for single-family residential mortgages. We quantify and classify this legislation, and identify states that were relatively active in this area during the study period. We then focus on eight of the most active states, describing some of the key provisions adopted in these states.