SALEM, Ore. — Until the knock on the door, Ginny Real thought her loan modification was on track, that she and her husband would be able to reduce their mortgage payments and stay in the Salem home they bought 24 years ago.
But her bank had lost the paperwork, she said she was told, and last June she received a hand-delivered letter saying their home had been sold and the couple had 10 days to leave.
Oregon lawmakers are considering several measures aimed at helping homeowners like Real who are trying to avoid foreclosure. But while most lawmakers agree that homeowners are struggling, there are very different ideas about the best way to help them out, and foreclosure legislation will face a tough slog in the Legislature this year.
"This is happening to good people who played by the rules, like Patrick and me," Real told a state Senate committee on Monday. "I wish there had been some laws in place that would've stopped this from happening."
She was one of more than a half-dozen homeowners who described frustrating experiences trying to rework mortgages and avoid foreclosure.
Two foreclosure measures are likely to advance to votes in the full Senate, perhaps as soon as this week.
Senate Bill 1552 would require lenders to meet with borrowers and a professional mediator before they could foreclose, with the goal of finding a way to avoid a foreclosure. The legislation is modeled after similar laws in California, Nevada and Washington, proponents say.
Senate Bill 1564 would outlaw a practice known as the "dual track" process, where lenders work on loan modifications and foreclosure processes at the same time. It also would allow homeowners in some circumstances to sue for damages under the Unlawful Trade Practices Act.
Proponents hope they'd slow the foreclosure process and force lenders to work more closely with homeowners in search of more affordable loan terms.
"We want to sit down and negotiate with this bank and move on with our lives," said Karen McCarthy of Madras, who has tried to work with a lender on behalf of her life partner. "We don't want to lay down and let them walk all over us."
Opponents worry about piling more regulations on financial institutions, particularly small ones. Sen. Larry George, R-Sherwood, said he's concerned that tough banking regulations would be so costly for small lenders that they'd sell themselves to larger institutions.
Lenders say they've always worked with struggling homeowners on loan modifications and they don't need the government to force them to mediate. Oregon's existing laws provide more flexibility, and the proposed changes would be costly without improving the situation for homeowners, said Paul Cosgrove, a lobbyist representing banks.
"It's the policy and the practice of lenders to work with borrowers as much as possible," said Harold Scoggins, a lawyer who represents the Northwest Credit Union Association. "No one — the lender, the borrower — wants a foreclosure to happen. Everyone loses when that happens."
The lenders have allies in the state House, where Republicans have blocked foreclosure measures backed by Democrats, some of them similar to the legislation moving in the Senate.
There's not enough evidence that the proposals would help out homeowners, said Rep. Gene Whisnant, R-Sunriver, who co-chairs the committee that oversees foreclosure legislation and must sign off on bills that move through it.
"It's not that I don't believe the banks have made mistakes or the government has made mistakes — we have," Whisnant said. "It's about, is the corrective policy going to make it better or worse?"