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Maryland bill provides foreclosure mediation for homeowners

By Ovetta Wiggins
Washington Post Staff Writer
Thursday, April 15, 2010; B05

Beginning this summer, Maryland homeowners at risk of losing their properties will have another option to stave off foreclosure.

The Maryland General Assembly this week approved a mediation program that will give homeowners a chance to meet with lenders and an administrative law judge to discuss ways to stay in their homes.

The bill, proposed by Gov. Martin O'Malley (D), takes effect July 1, and should be fully implemented by mid-August.

"This is an opportunity for those who fall through the cracks," said Del. Doyle L. Niemann (D-Prince George's), a sponsor of the bill, referring to homeowners who have requested loan modifications but still find themselves facing foreclosure. "Many people say they don't get a response from their lender. They talk to different people on the phone when they call or their paperwork gets lost."

Under the legislation, the lender is required to send an application for a loan-modification or loss-mitigation program to the homeowner -- which the homeowner can use to seek help -- at least 45 days before a foreclosure action is filed in court. The bill requires the lender to pay a $300 fee for a foreclosure filing.

A loss-mitigation analysis -- to determine whether the homeowner is eligible for assistance -- must be done 30 days before a foreclosure sale.

Within 15 days of receiving the lender's final loss-mitigation affidavit, which states the reasons for denial of a loan modification, the homeowner can request a foreclosure mediation by filling out a form that will accompany the affidavit. The form and a $50 fee must be mailed to the Circuit Court where the foreclosure action was filed and to the lender's foreclosure attorney.

"If the borrower says yes to mediation, everything stops at the Circuit Court level," said Chief Administrative Law Judge Thomas E. Dewberry, who leads the Office of Administrative Hearings (OAH), which will handle the mediations. The OAH has 60 days to hold a mediation.

Dewberry said many of the details about how the program will be run remain to be worked out, including where some mediations will take place. Dewberry said OAH is trying to find room in Circuit Court buildings and other locations. He said homeowners will probably go to the sessions with housing counselors and with pay stubs and other documents.

"Mediation is not a conflict," he said. "It's a meeting of the minds, trying to come up with a resolution. I don't think this will fall on complex legalities. My understanding is that the mortgage companies want to work these things out. They don't want empty houses or to be in the real estate business."

O'Malley organized a work group to prepare the legislation last year. But many of the details had not been decided before this year's Maryland legislative session began in January. Instead of mandatory mediation, which had been discussed early on, the work group presented lawmakers with a bill that allows homeowners to "opt in."

Nevada has a similar program. Philadelphia has a more aggressive program that requires mediation before any foreclosed house is sold.

The legislation is part of Maryland's effort to deal with the foreclosure crisis, which has affected every community across the state.

The state enacted legislation in 2008 that made the most egregious mortgage schemes subject to criminal prosecution, extended the foreclosure timetable from 15 to 150 days and prohibited prepayment penalties and transactions in which homeowners are tricked into signing over their houses to third parties.

O'Malley, who proposed the bills, has also pushed during the past two years for increased outreach to beleaguered homeowners.

Despite those efforts, foreclosure filings have continued to rise.

In 2009, there were 43,248 foreclosure filings, a 33.7 percent increase from the previous year, according to the state Department of Housing and Community Development, which uses Realtytrac to track foreclosures. The state is ranked 13th nationwide in foreclosure filings, according to Realtytrac.

Phillip Robinson, a lawyer and executive director of Civil Justice Inc., which provides legal services to low- and moderate-income residents, said he is pleased that Maryland continues to be at the forefront of efforts to keep homeowners in their homes.

"It will help some of the people, not all, but it will make a positive difference," he said.

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