Sen. Chap Petersen, D-Fairfax, won approval this morning in the Senate Courts of Justice Committee of his Senate Bill 838, which would require the recordation of assignments of debts secured by a deed of trust.
The measure was defeated Thursday night on a 4-3 vote in the committee’s civil subcommittee but passed handily on a 9-4 vote in the full committee. The full committee typically adopts the recommendations of the subcommittee without allowing anyone to speak, but Sen. John Edwards, D-Roanoke, who chairs the subcommittee, said the committee should hear proponents and opponents of the measure because of the closeness of the vote and the extensive discussion in the subcommittee.
Tom Domonoske, a consumer lawyer from Harrisonburg, said the measure is necessary to “restore some integrity to the process.”
“People are being placed in foreclosure who are not in default,” but the real issue is fixing a broken process, he said. Much of the concern centers on problems with the Mortgage Electronic Registration Systems, or MERS, which many lenders use to keep track of loans when they are assigned.
Guy Tower, speaking for the real estate section of the Virginia Bar Association, said, “The system is broken now, we believe, and needs to be fixed.”
Matt Bruning, a lobbyist for the Virginia Bankers Association, said the measure would change the basic concept of treating the note secured by real estate as a negotiable interest, which is personal property rather than real estate. Travis Hill, a lobbyist for the Virginia Mortgage Lenders Association, said the bill would “make Virginia unique in a market that requires uniformity” and make notes less negotiable. Both Bruning and Hill emphasized that federal law already requires property owners to be notified when notes are reassigned.
Sen. Fred Quayle, R- Portsmouth said he favored the concept but voted against it because “the danger I see is not fully understanding the consequence.”
Petersen had the final word before the vote. “This is a bill whose time has come. The mortgage-backed security industry damned near bankrupted this country.”
He also won approval of SB 837, which would create a civil cause of action against a person who knowingly uses a false document in support of foreclosure.
Both bills were amended in subcommittee, but the amended bills were not available immediately.
They still must clear the full Senate before the House of Delegates would consider them. Similar foreclosure reform measures died in committee in the House.