South Carolina homeowners who are facing foreclosure will get a brief reprieve starting Monday.

For the second time since the U.S. real estate market collapse began, the state Supreme Court has ordered a temporary halt in foreclosures on owner-occupied homes, aimed at helping borrowers work out loan-modification plans with lenders.

"We think this will help stem the foreclosure wave," said David Geer, executive director at North Charleston-based Family Services, which offers federally funded loan counseling.

Attorneys for lenders who want to foreclose will be required to certify that the borrower was given notice of their right to seek a loan modification, had a fair opportunity to respond, and the lender received and examined all documents and records required from the borrower to evaluate eligibility for foreclosure intervention.

Or they could certify after 30 days that the borrower refused to participate.

Only then could the foreclosure proceed.

"The goal of the order is to require communication between the lender and the borrower," said Charleston County Master-in-Equity Judge Mikell Scarborough. "It's quite often that those people are in court for a foreclosure hearing before they've received an answer about a modification."

South Carolina Bankers Association CEO Lloyd Hendricks said banks in the state will certainly comply with the court order.

Mike Connolly, director of special assets at First Federal, said that bank already works with customers early in the foreclosure process.

"Our policy has always been to embrace the spirit of assistance," he said. "One of the earliest steps in our collection process is to reach out to customers."

But industrywide, the lack of communication between lenders and borrowers has been a huge problem, according to Sue Berkowitz, attorney and director of the South Carolina Appleseed Legal Justice Center, an advocacy group for low income people.

"What has happened to a lot of consumers is, they think they are negotiating with their banks and going through the modification process, while their banks are talking to their lawyers and going through the foreclosure process," she said.

"And courts are hearing from consumers things like: 'I don't know why I have a hearing today, because my bank said they are working with me.' "

"Obviously, the court has recognized that there was a problem," Berkowitz said. "I think it could ultimately end up saving thousands of peoples' homes."

In the administrative order published Tuesday, state Supreme Court Chief Justice Jean Toal wrote that unresolved loan-mitigation efforts, which could be in the interest of the lender and the borrower, have led to an increase in foreclosure proceedings.

"The trial courts report that such breakdowns are largely the result of difficulty in communication between lender-servicers and debtors, and the fact that foreclosure actions are proceeding to conclusion without regard to ongoing loss mitigation efforts by the parties," Toal wrote in the order.

Toal also ordered a temporary halt to certain foreclosure proceedings in 2009. Some foreclosures also were halted temporarily last year, in South Carolina and 22 other states, by some of the nation's largest lenders, who wanted time to make sure they had properly handled documents for those legal proceedings, following widespread reports of improper procedures.

David Slade Staff Reporter The Post and Courier 134 Columbus St. Charleston, SC 29403-4800 843-937-5552

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