Utah Law Gives Owners Some Protection in Forclosure

Gov. Gary Herbert has signed into law the only bill to emerge from the Legislature that attempts to deal with the thousands of home foreclosures expected in Utah this year.  

One in every 273 homes in Utah had a foreclosure filling in February, the fourth highest in the nation, according to RealtyTrac, a California company that collects Real Estate data.  It said that 3,488 properties had some kind of foreclosure notice filled last month. 

SB261 allows homeowners who were illegally foreclosed on to seek damages. It also requires that homeowners be given written notification that a foreclosure sale is proceeding despite any reduced payment agreement and are liable for damages if they do not. 

The Legislation was pushed by the Utah Attorney Generals office, which is in a legal fight with ReconTrust, the foreclosure arm of Bank of America that had thousands of foreclosures pending  in Utah at the end of 2010.  The G.A's office filed a brief recently in a foreclosure case pending before the 10th circuit court of appeals in which it argued that ReconTrust could not legally foreclose on properties in Utah. 

The new law allows some homeowners to try and recover attorney fees and damages of at least $2,000 for illegal foreclosures or failure to properly notify homeowners of a sale.

"These are important steps but they're small; steps in attacking what we perceive to be the problems that are being caused by out-of-state foreclosing companies that are not following Utah laws and not providing notice of what their intentions are" said John Swallow, chief deputy in the Attorney Generals Office.

Marco Fields, founder of Teems Utah, a group that advocates for homeowners facing foreclosure, said that although the legislation does provide for financial penalties for banks and others who conduct foreclosures illegally, last minute changes blunted it's effectiveness.

"The unfortunate compromise is that bill created a scenario that while there is a penalty imposed on illegal behavior, it does not invalidate the sale of the home", Fields said. 

"We have to go back to the stakeholders  , the title companies in particular and find a different solution.  If the foreclosure sale was illegally done not only should there be a penalty but the foreclosure sale should have been be invalid.  If it's an illegal foreclosure, it's an illegal foreclosure."

But Swallows said the bill included monetary penalties because title companies were concerned that anything more could cloud titles and endanger insurance on subsequent transactions.

Fields is among homeowner advocates, mediators, attorneys and others who are forming a coalition with which they hope to formulate new legislation that could be considered at a special session of the Utah Legislature.

Salt lake Tribune
Tom Harvey