Your thoughts on Bill 30-0054

Your thoughts on Bill 30-0054
Senator Graham has asked VITAR to testify before the Rules Committee on May 20 regarding Bill 30-0052 (It's very short and reprinted below in its entirety). We want to know your opinion of the bill and of VITAR recommending an amendment.
Our analysis shows the bill needs to address one crucial issue -- recognizing that people mortgage their homes for many reasons beyond the basic purchase or to make home improvements.
For example, entrepreneurs frequently use the equity in their homes to start businesses by granting mortgages to commercial lenders. People also mortgage their homes for pressing personal reasons - to send children to college or pay medical bills.
As presently worded, however, the bill flatly states that a creditor cannot force the sale of a home if the debt was not incurred for the home's purchase or its improvement.
In our view, this would effectively eliminate a homeowners' ability to tap their equity for other good and valid reasons since no lender will issue a mortgage that is not enforceable in case of default.
For many people their home's equity constitutes their primary "savings account", and they should be able to borrow against it should a compelling need arise. Our thought is that it should be amended to state that any home mortgage is enforceable, regardless of the purpose of the loan.
This would still preserve the bill's primary purpose of protecting a person's home from a forced sale when they default on debts other than their mortgage, for example, a car or tuition loan where the home is not used as collateral.
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(Number to left is line number on that particular page in the original bill. Editor)
BILL 30-0052
Sponsor: Senator Clifford F. Graham
An Act establishing comprehensive protection against forced sale for homestead property other than sales upon foreclosure of mortgage indebtedness, the proceeds, of which were used to acquire or improve the homestead property.
1 WHEREAS, it is determined that the protection of homestead against forced sale in
2 circumstances not presenting a foreclosure of mortgage indebtedness, the proceeds, of
3 which were used to acquire or improve the homestead property is a matter of public policy;
4 and
5 WHEREAS, in the current state of economic crisis prevailing within the Virgin
6 Islands and the United States it is increasingly of concern that homestead property may be
7 subject to forced sale and should be provided additional and specific protection as
8 contemplated herein; Now, therefore,
9 Be it enacted by the Legislature of the Virgin Islands:
10 SECTION 1. Title 28, chapter 23 Virgin Islands Code is amended by adding a new
11 Section 531A, to read as follows:
PAGE TWO
1 §531A Homestead Property Exemption
2 (a) Notwithstanding any provision to the contrary, there shall be exempt from
3 forced sale under process of any court, and no judgment, decree, writ or other execution
4 shall be made upon or be a lien upon a "homestead", as such term is defined herein, other
5 than as follows:
6 (1) a lien for the payment of real property taxes and assessments
7 thereon; and
8 (2) obligations contracted and incurred for the purchase, improvement or
9 repair of a homestead; obligations contracted and incurred for the house, field and
10 /or labor performed on the realty comprising the homestead.
11 (b) For purposes of this section the term "homestead" shall mean the following
12 property owned by a natural person who is a legal resident of the Virgin Islands:
13 (1) real property consisting in the aggregate not more than five (5) acres
14 of contiguous land and improvements existing and situated thereon, comprising the
15 residence of the owner or the owner's family; and
16 (2) personal property situated within the property described in (1) up to
17 a maximum value of twenty-five thousand dollars ($25,000.00).
18 (c) For purposes of this section the term "natural person" shall include a trustee
19 of and with respect to a trust established by the owner or a member of the owner's family
20 who has a relationship to the owner described in Section 128(a)(8) of Title 33 Virgin
21 Islands Code.
22 (d) For purposes of this section the term "residence" shall include the ancillary
23 production thereon of livestock, agricultural or dairy products.
PAGE THREE
1 (e) For purposes of this section the term "legal resident of the Virgin Islands"
2 shall mean a person who has been domiciled in the Virgin Islands for not less than six (6)
3 months.
4
5
6 (f) The exemption provided by this section shall inure to the surviving spouse
7 or persons who are heirs at law of the owner.
8 Bill Summary
9 The proposed statute would provide unlimited homestead protection to families
10 against financial misfortune. Under the proposed statute the burden would be upon the
11 creditor to argue against homestead protection. Such protection is consistent with a sound
12 public policy to promote the stability and welfare of the Territory by securing the home of
13 a householder from forced sale that could reduce the individual and family to destitution.
14 The proposed statute goes beyond the protection currently provided by Section 531 of Title 28
15 to protect the homeowner against foreclosure by non-judgment liens that did not arise in
16 connection with the acquisition, maintenance or improvement of the homestead. The
17 proposal would also specifically protect personal property situated on the homestead, such
18 as furniture and similar property.
19 Proposed new Section 531A is based generally upon the provisions of Article X,
20 Section of the Constitution of the State of Florida. Many other states have similar
21 protection for their citizens. Virgin Islands residents deserve no less. The proposal would
22 not interfere with the creditor rights to a foreclosure judgment of creditors' who financed
23 the purchase, construction, improvement or repair of a homestead, such as banks or sellers
24 holding a purchase money mortgage interest. Nor would the proposal apply with respect to
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4
5
6 property tax assessments and liens based thereon. The proposal has a reasonable 1 residency
2 and residential ownership requirements. Although the proposal limits the homestead
3 protection to owners who are natural person, the term natural person is specifically defined
4 so as to permit the homestead property to be held in trust by a trustee who is a family
5 member with respect to the owner.

Contact your senators about this bill. Legislation should not be forthcoming from our Senators regarding how we can use our equity in our homes. Banks make that difficult enough without their adding their spin and hindering Homeowners.