Commentary: Md. foreclosure-prevention law just adds to housing market's woes

In contrast to the commendation of Maryland's new foreclosure mediation law ["Maryland takes a shot at slowing the flow of foreclosures," May 24] by Chad Williams, executive director of the Coalition for Homeownership Preservation in Prince George's County, I believe the measure is flawed, adds to delay in foreclosure and, as such, hurts homeowners, neighborhoods and the economic recovery in Maryland.

Previously, Maryland had one process for foreclosure, regardless of the type of property. Under that process, a foreclosure sale occurred approximately 150 days after the payment default.

In April 2008, the legislature initially changed the law by creating new procedures for the foreclosure of residential property. The goal of the law was to give homeowners in default more time to work something out with the lender. Under this revised procedure, a foreclosure sale will typically occur about 225 days after the payment default. The procedural changes have added between $250 and $750 or more to the cost of foreclosure.

Now, as of July 1, Maryland will add another category of "owner occupied" residential property and will require new procedures for foreclosures of this type of property.

The new law will protract an already lengthy process by adding several new procedures. Among other changes, if the lender cannot certify that all available loss mitigation has been explored when the case is filed, the lender is barred from proceeding with the case for another 28 days. If mediation is requested, the sale cannot go forward until, generally speaking, it has been completed, adding another 60 to 90 days to the process. While there is no space to give a timeline for all of the possible scenarios, if a final loss mitigation affidavit is not filed with the original action, the time period from payment default to sale extends to about 285 days where there is no request for mediation.

Moreover, the fee to file a foreclosure will rise to $425 from $125.

Now, while all of these legislative changes have been and are being implemented, budgets for court clerks have not been increasing and clerks are struggling to keep up with the caseload. In many counties, clerks are taking weeks and even months to docket papers that, in a perfect world, would be filed the same day they are first given to the clerk.

If a homeowner wants to reinstate his or her loan, it becomes that much harder to do so, with the additional costs and as a new payment becomes due each month.

However, the effects impact all of us. Homeowners who are underwater and who are in default do not keep up their properties. They do not pay homeowners association fees. They do not pay condominium association dues. In the name of giving an opportunity to a much broader class of defaulting homeowners than can possibly be helped, Maryland's government has added burdens to neighborhoods and community associations.

On a larger scale, huge market forces are at work requiring property prices to be reset. Foreclosure serves the essential economic function of assisting the readjustment, by legally terminating the ownership of those who cannot afford their properties and making them available in the market to those who can. It's not pleasant, but it is necessary. The government of Maryland cannot keep the national economy from going through the painful adjustment it must go through, no more than the little Dutch boy can forever keep the dam from breaking. The state can, however, delay that adjustment and make you pay the price for doing so.

So, if you are paying your mortgage, condo or homeowners fees -- and you see an unkempt property in your neighborhood that is depressing resales -- you can thank Gov. Martin O'Malley (D). He was the driving force behind the legislative changes, which will contribute to keeping your property values down and lengthening the time for the vacant or depressed property down the block to reenter the market and be sold.

Jeffrey B. Fisher, a real estate lawyer based in Prince George's County, represents mortgage lenders in Maryland and the District.