AZ Bill To Declare F'closures Void When Bank Fails To Produce Full Chain Of Title Advances; Sponsor In Current Tussle w/ Servicer Over TILA Rescission

In Phoenix, Arizona, Bloomberg reports:

• Arizona may become the first state to require lenders to prove they have the right to foreclose by providing a complete list of any previous owners of the mortgage, under a bill passed yesterday by its Senate.

• The legislation, which is headed to the House after being approved 28-2 in the Republican-dominated Senate, would allow foreclosure sales to be voided if lenders that didn’t originate the loan can’t produce the full chain of title. Arizona permits nonjudicial foreclosures, meaning property can be seized from the homeowner without a court order.

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• “If you foreclose on somebody you should have to tell them who owns the property,” Michele Reagan, who sponsored Senate Bill 1259, said in a telephone interview. “People have the right in this country to face their accusers.” The Republican lawmaker is in litigation with her mortgage servicer, which she said won’t identify the owner of the loan.

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• The Arizona proposal was suggested to Reagan by her attorney, Beth Findsen, who said she also helped write the bill. Reagan and her husband, David Gulino, were sued by their servicer, Fort Worth, Texas-based Colonial Savings FA, after they told the bank in a July 2009 letter that they were rescinding the loan because it failed to disclose certain fees and that its underwriter inflated their income by 12 percent in violation of the federal Truth in Lending Act.

• Colonial Savings asked the court to declare that the couple isn’t entitled to revoke the loan. Reagan and Gulino filed their own suit, arguing that they were steered to an adjustable-rate mortgage they didn’t need and that Colonial Savings won’t tell them who owns their loan. Janet Walter, a spokeswoman for Colonial Savings, declined to comment.

• “It makes Michele mad that the bank servicers will not disclose to a borrower the true noteholders,” Findsen said. “She was taken aback that such basic information was not readily available.”

For more, see Arizona Bill Would Void Foreclosures Without Full Title History.