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Maryland Foreclosure Taskforce Issues Report

While traditionally, Maryland has not been the most homeowner-friendly state in terms of its foreclosure procedures, things have gotten far worse with the deepening of the mortgage crisis. According to State officials, Maryland has jumped from No. 40 to No 15 in foreclosures nationally. A recent article in The Washington Post summarizes the recommendations of the Maryland Homeownership Preservation Task Force. (I haven’t been able to read the full report yet, and my comments below are based on the Post’s summary. If it proves that the summary is wrong or incomplete, I’ll revise this blog.)

It’s always nice to look as if you’re doing something in response to a problem. It’s even nicer to actually do something. Unfortunately, the task force’s recommendations sound a lot more like window dressing than actual improvements in the current foreclosure system in Maryland.

This group, established by Governor O’Malley in June 2007, was asked to:

  • Identify and assess available financial resources (public and private) to assist homeowners in inappropriate mortgages and recommend, if appropriate, additional programs or financial products to minimize the number of new foreclosures in Maryland.
  • Review ongoing outreach, counseling, and educational programs and activities that focus on foreclosure prevention and recommend changes or enhancements as needed.
  • Review the current laws and regulations in Maryland governing the mortgage industry and the foreclosure process and recommend appropriate changes including legislative actions, if warranted.

A list of the Task Force members may be found here. The membership is broad-based, which means that it included both representatives of the financial industry largely responsible for creating this mess, as well as several who have fought to try to fix things.

According to the Post, the findings (which have not been released as of this date) include, “[R]equiring lenders to verify that borrowers are able to repay their loans; designating and training a point person in each state’s attorney’s office to prosecute mortgage fraud cases; and prohibiting lenders or mortgage holders from beginning foreclosure action until 90 days after a borrower’s default.”

Frankly, these recommendations aren’t terribly significant. “Requiring lenders to verify that borrowers are able to repay their loans.” What a novel concept! Having a “point person” in the AG’s office is nice, provided that there is sufficient funding to let him or her go after mortgage fraud. And since lenders generally don’t refer foreclosures to their attorneys until 60 days after default, and the foreclosure usually doesn’t occur until more than 45 days after the referral, it’s unknown why this is felt to be an improvement.

In other words, it looks like pretty much of the same in Maryland as far as foreclosures go.

There are three changes that could actually improve things for Maryland homeowners who run into trouble:

  • Changing the incredibly short notice provisions allowed under Maryland law. Increasing these short timeframes to something that would actually give people time to try to remedy the situation would be a vast improvement.
  • Changing the “judicial foreclosure” process. Currently, there is no requirement that someone whose home is about to be foreclosed upon actually receive notice of the foreclosure. Sending a letter by certified and regular mail to the “last known address” of the owner, along with advertising in a paper few people actually read, is all that is required. Requiring personal service of the notice of foreclosure would be one way to ensure that people are truly notified that they are about to lose their homes.
  • Changing the redemption period. Once the gavel falls and the auction is over, the homeowner’s right to catch things up, either through bringing the loan current, working out a forbearance agreement, or filing a Chapter 13 bankruptcy, ends. This is so even though Court approval of the sale, called “ratification,” won’t happen for another 30-45 days. Letting the homeowner redeem the property during this time would help expand the too short time limits and give people a chance to hold onto their homes.

Several state lawmakers said they plan to offer bills during the coming legislative session to address the problem. Hopefully they will propose actual and substantive change, instead of just looking like they’re doing something.

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  1. From Maryland Foreclosure Taskforce Report—Boon or Bust? : Bankruptcy Law Network | Nov 17, 2007

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