O'Malley weighs more measures to slow Maryland foreclosures

By Ovetta Wiggins
Washington Post Staff Writer
Thursday, December 31, 2009

The conviction in Laura Holbrook's words masks the fear she has lived with for a year: "I won't be homeless with five kids," she says.

Holbrook has worked with a lawyer and housing counselors, fighting to keep her Gaithersburg home. She says she prays daily that she and her children, ages 4 to 15, will be able to remain -- despite the foreclosure notices she has received, the photographers who routinely snap pictures of the house for her lender and the prospective buyers who unabashedly survey the property.

"It's been so stressful," Holbrook said. "It's not even embarrassing. . . . You feel like you are floating and don't know when you are going to pop and go to the ground."

Stories such as Holbrook's and an increase in people facing foreclosure have prompted Gov. Martin O'Malley (D) to ask the General Assembly to find new ways to help beleaguered homeowners. During the legislative session that begins next month, O'Malley plans to unveil an agenda that includes a mediation program modeled on successful efforts in Philadelphia and Connecticut. He has assembled a group of his legislative staff, housing counselors, lawyers, bankers and mortgage servicers to shape a plan.

In the past two years, Maryland has toughened oversight of the mortgage-lending industry, prohibited prepayment penalties and extended the time before a home goes into foreclosure.

With foreclosures still growing, O'Malley decided more needed to be done. In the third quarter of 2009, Maryland had 14,803 foreclosure events -- a homeowner received a default notice, had a home put up for auction or had the bank take possession of the property. That's up 58.8 percent from the second quarter and 85.6 percent from 2008, according to state figures.

The governor's plan is still being worked out. But according to some of those involved in the process, the basic framework is this: Homeowners who live in their property and receive a foreclosure notice could not have their home put up for auction until they are deemed ineligible for a loan modification. If they are considered ineligible, they could challenge the decision with a settlement conference.

The group has also discussed requiring lenders to give borrowers written calculations that explain why they are ineligible for a modification. That is mandated for those using the federal foreclosure prevention program, but it is not otherwise part of the foreclosure process in Maryland. The group also realizes that loan modifications won't be feasible for everyone, so planners are considering "soft landings," or affordable rental options for owners who lose their homes.

A Maryland mediation program would "bridge the huge gap" for those who are eligible for the federal foreclosure prevention program but are denied modifications because the lender says they failed to provide a document or meet other criteria, said Mary Hunter, a lawyer with the nonprofit Housing Initiative Partnership, which does housing counseling in the state's foreclosure hotbeds of Prince George's and Montgomery counties.

Saving homes

Philadelphia introduced an aggressive mediation program in April 2008 by instructing the city sheriff to delay the auction of hundreds of homes.

"We literally pulled homes off the sale block," said Court of Common Pleas Judge Annette Rizzo, who led the effort.

The program, run by the court system, requires homeowners and a representative from the lender to meet face to face, Rizzo said.

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