The foreclosure crisis that began in 2007 has forced state and local governments to develop a first response capacity to meet a national crisis. States seeking to control foreclosures have always faced certain limitations in enacting laws that limit or impair contract rights. These limits arise primarily under the Contracts Clause of the United States Constitution. Other provisions of the U.S. Constitution, such as the Takings Clause, as well as terms of state constitutions may set additional limits. This article will examine the degree to which various constitutional provisions may limit the ability of states to control mortgage foreclosures. Overall, my conclusion is that under their police power, states have broad authority to limit enforcement of mortgage obligations. This article will trace the history of state laws that have sought to alleviate the harsh effect of foreclosures in the past, beginning with the significant controversies that arose over state foreclosure laws during the Great Depression of the 1930s. Later sections will review trends in recent state legislation. During the current crisis, state and local efforts have focused on foreclosure mediation and conference laws, as well as laws to control servicer conduct, so as to encourage a full consideration of loss mitigation options. Overall, I conclude that recent state laws enacted in response to the foreclosure crisis have been relatively mild and have not approached the true limits of states’ authority to control mortgage foreclosures. . .
