As General Counsel for nationwide property preservation and field services company Safeguard Properties, Linda Erkkila’s broad scope of management covers regulatory issues that impact Safeguard’s operations, pro-active risk mitigation, litigation and claims management, and counsel related to mergers, acquisition and joint ventures. Her practice spans more than 15 years, and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory mandated public disclosure, corporate governance compliance, risk assessment, and merger and acquisition activity. Linda recently spoke with DS News about proposed fast-track foreclosure legislation in Safeguard's home state of Ohio. The bill, known as Ohio HB 134, has passed unanimously in the Ohio House and is awaiting vote in the state Senate.
How do you think the fast-track foreclosure law will impact the housing market?
First and foremost, lenders have to avail themselves of the statute for there to be any impact. That may sound like stating the obvious, but there are multiple states that enacted fast-track foreclosure statutes that are not used by lenders, and those tend to be cases where the statutes are not well crafted and provide little or no benefit to the lender, or where the procedures are overly cumbersome.
Ohio’s bill is well-drafted and, assuming lenders take advantage of and use the statute if enacted, the housing market should slowly start to improve as properties start to turnover and values slowly creep up. The inventory of abandoned and blighted houses that sell at a discount will go down, and a more traditional housing market can be restored.
How do you think it will impact the industry in Ohio?
A traditional housing market, and by that I mean normally functioning housing market, is a keystone to any state’s general economic health. Ohio has had its share of struggles, but Ohio also has a great deal to offer in critical and sophisticated industries, such as healthcare, education, aerospace, and bioscience. Getting Ohio’s housing market on an upward, positive trend coupled with continued growth in those industries can only bring positive overall economic impact in Ohio.
Do you think there is any downside to this law?
I see no apparent downside. When you reach a point where someone stops paying the mortgage, has abandoned the home and is not responding to any of the lender’s outreach efforts, there is no benefit to prolonging the inevitable. At that point, the communities in which the abandoned properties are located suffer, as do the local governments and court systems due to the overall strain that these properties put on communities, governments and court systems. To be clear, lenders want to keep borrowers in their homes, and they take many steps prior to foreclosure to make that possible. When those efforts fail and the property is abandoned, efforts have to shift to protecting the property and the surrounding neighborhoods and communities.
How do you find the balance between not dragging out the foreclosure process but at the same time making sure borrowers have been given all the loss mitigation options?
If you set timelines and milestones for responsiveness by borrowers, absolutely deference should be given to providing the borrowers the opportunities they need to modify their loans. A decent indicator of a borrower’s desire to work through a loan modification is whether the borrower continues to occupy the property. Once a borrower stops paying the mortgage and vacates the property, and is not responding to outreach, foreclosure is likely the inevitable outcome. Again, to be clear, the best outcome for a lender is to work out a loan modification with the borrower to keep the borrower in the property. To the extent there are foreclosure statutes that set forth timelines for outreach to give the borrower the opportunity to stay in the property, those opportunities take precedence. That is the better outcome. But when you get to the point where all that fails, efforts need to be redirected to protecting the community.
How do think this will affect foreclosure laws in other states?
Eight states already have fast-track foreclosure statutes. As I mentioned, some work well and some do not. Over time, I expect states that have yet to propose fast-track foreclosure statutes to look at those states which have successfully enacted statutes and for which lenders have taken advantage of and states have benefited from, and model bills after those successful states. I think Ohio will be among those states that are viewed as having a model statute if it is enacted and if lenders take advantage of it.
A critical component of a good fast-track foreclosure bill is establishing a practical and responsible definition for determining whether a property is “vacant or abandoned” to properly identify properties eligible for fast-tracking foreclosure. The Ohio bill sets forth logical and relevant factors for making that determination. Some statutes only target severely deteriorated properties, and that falls short of the goal of early intervention. Ohio’s basis for determining abandoned properties is solid, and that sturdy foundation enhances the bill’s suitability and purpose.
Do you think more similar legislation will follow?
If other states see positive economic impact, then yes and, again, those states will look to model their bills after those that have been successfully implemented and have yielded clear positive economic results. Again, these statues are aimed at rebuilding and reenergizing neighborhoods, communities and economies, and there still many states across the country suffering from the mortgage crisis, even seven years later. If fast-track foreclosures prove to be a viable part of multiple states’ recuperation, then I expect other states to follow suit and stick with this trend. Then, if over time, the fast-track legislation is not yielding results, there may be alternative types of companion or different legislation.
If you could add anything to this fast tracking bill in Ohio, what would it be?
Compared to other fast-track state legislation, I think Ohio got it right. The bill takes a very logical and straightforward approach to fast-tracking foreclosure on abandoned properties. Again, the Ohio bill provides clear and concise direction for identifying vacant and abandoned homes, which is a critically important first step in the process. The downfall of these statutes are usually timelines that cannot be reasonably met and forms and documents that cannot be reasonably obtained, so we will have to see how implementation eventually plays out, but, again, Ohio appears to at least have gotten the first step correct by crafting a bill with a practical process for fast-track foreclosures.