JUN 20, 2012
REO Reality

State Laws Validate Field Service Companies’ Work

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Legislation has been introduced in two states emphasizing the mortgage servicer’s right to protect its collateral interest, further validating the property preservation work field service companies perform on behalf of their mortgage servicing clients. One of the bills also includes a provision to accelerate the foreclosure process for abandoned properties.
 
Louisiana Senate Bill 752 was just signed into law by Governor Bobby Jindal on June 8. The new law addresses the maintenance of abandoned mortgaged properties and explicitly protects the rights of mortgagees, loan servicers and third party property maintenance companies from liability.
 
The bill states, “the mortgagee, loan servicer, and any third parties hired by them to perform maintenance on the property...shall not be liable to the mortgagor or the owner of the seized property or any other person for any financial or pecuniary loss or damage claimed to have been suffered by the mortgagor or owner of the property or any person by reason of the maintenance of the property.”
 
Similar to Louisiana’s new law, Illinois Senate Bill 2534 has been created to protect mortgage servicers and field service companies from criminal trespass laws. This validates the agreement already outlined in documents mortgagors sign when securing a mortgage loan. But the Illinois legislation also includes an important provision to accelerate the foreclosure process for vacant and abandoned residential properties.
 
SB 2534 allows for the acceleration of the foreclosure process upon a court’s approval. It also clarifies the definition of a vacant or abandoned property. If that property is no longer occupied by a mortgagor or tenant and meets two of the following criteria, it is considered abandoned and is eligible for the accelerated program:

· Building code violations
· Unfinished construction
· Disconnected utilities
· Boarded or broken windows or door
· Hazards like weeds or trash
· Vandalism or illegal activity
· Vacancy

Both bills validate the work field services companies do to maintain properties on behalf of their clients to maintain properties in their portfolios and reduce blight in communities across the country. As scrutiny has increased during the housing crisis, it has become more important to have such laws to support the work of field service companies and the rights of mortgage servicers to protect their collateral interests.

The accelerated foreclosure process for vacant and abandoned properties is another step in the direction of addressing the housing crisis. In some areas of the country, the foreclosure process can take more than two years. The longer abandoned properties sit vacant, the more susceptible they are to damage, vandalism and deterioration.
 
Under the new Illinois legislation, vacant and abandoned homes will move more quickly through the foreclosure process and into the hands of new owners who will protect and preserve the property’s condition and contribute to the vitality of the neighborhood. While other states are in the process of creating similar laws, more need to follow Illinois’ lead in helping the country move closer to protecting and restoring the housing market.

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