Lt. Governor Brown Promotes Foreclosure Mediation as New Tool for Distressed Homeowners
Administration’s legislative package will encourage mortgage loan modifications
FORT WASHINGTON, Md. (March 15, 2010) – Lt. Governor Anthony G. Brown revealed details this morning of the O’Malley-Brown Administration’s efforts to establish a foreclosure mediation process during an event at the Ebenezer African Methodist Episcopal Church in Fort Washington. Proposed legislation will require mortgage loan servicers to use the time period prior to filing of a foreclosure action to work with homeowners to achieve loan modifications. Lt. Governor Brown was joined by Maryland Department of Housing and Community Development (DHCD) Secretary Raymond A. Skinner, Maryland Department of Labor, Licensing and Regulation (DLLR) Secretary Alexander M. Sanchez, area housing counselors, pro bono attorneys and local faith leaders.
“Despite resources like the federal Home Affordable Modification Program and other loss mitigation options, many homeowners who may be eligible for loan modifications do not receive them,” said Lt. Governor Brown. “This legislation will provide homeowners a chance to explore any and all options to find a positive resolution and remain in their homes.”
“Maryland has already enacted some of the most sweeping reforms in the nation to manage the ongoing foreclosure crisis,” said Governor O’Malley. “Our proposed foreclosure mediation legislation builds on those existing reforms, mandating that lenders work directly with homeowners to achieve loan modifications. These lenders played a role in causing the problem, and this bill will encourage them to play a larger role in the solution.”
Under the proposed legislation, the Notice of Intent to Foreclose that is sent by the lender to homeowners will be enhanced with additional information and materials, including: a loss mitigation application with instructions for completion and follow-up; the Maryland HOPE hotline number; a detailed foreclosure timeline; explanation of the eligibility requirements for the lender’s loan modification program; and additional loss mitigation and soft landing options such as short sales, deeds-in-lieu, and/or keys for cash.
The legislation would also prohibit lenders from filing a foreclosure action without prior completion of a loan modification review, requiring the lender to include an affidavit documenting completion of the review, reasons for denial, or demonstrating that a review could not be completed because the borrower failed to participate in the review process. Lenders also must document that other loss mitigation alternatives were considered.
Homeowners who have not received the loan modification and loss mitigation analysis to which they are entitled will be able to receive foreclosure mediation by filing a “Request for Foreclosure Mediation” form that the lender would be required to provide. An impartial facilitator will conduct the foreclosure mediation. A lender representative must be available for the mediation and must have the authority to bring about a resolution. The homeowner’s housing counselor may also attend.
In order to ensure sufficient housing counseling services to support the mediation program and defray judicial costs for implementation, the legislation requires the lender to pay a significant fee upon the filing of a foreclosure action.
The legislation will provide a new tool for homeowners under the State’s Home Owners Preserving Equity (HOPE) initiative, a multi-faceted approach to implementing strategies that promote and preserve homeownership. Under HOPE, the State enacted legal and regulatory reforms to overhaul the foreclosure process and timeline, allowing homeowners more time to seek counseling and find solutions. The Initiative also established a statewide network of nonprofit housing counseling agencies which provide free information and assistance. To augment the housing counselors, the Maryland Judiciary created a pro-bono attorney network that has enlisted and trained approximately 988 volunteer lawyers to aid at-risk homeowners. Since the summer of 2007, the State has provided over $5.5 million in assistance to the counseling and legal assistance networks. Through the end of February 2010, housing counselors have aided more than 35,500 homeowners and helped approximately 11,000 avoid foreclosure. In June 2009, Maryland was recognized by NeighborWorks, Inc. as one of the top five states in the country in terms of clients served through the National Foreclosure Mitigation Counseling Program.
“There are no words to express our gratitude to the HOPE housing counselors and attorneys,” said DHCD Secretary Skinner. “Since the beginning of the HOPE Initiative, they have been outstanding partners in Maryland’s fight against foreclosure, and we look forward to strengthening that partnership as we move to implement this mediation plan.”
In addition to legal and regulatory reforms and its support of the HOPE housing counseling network, the State has actively partnered with local governments like Montgomery and Prince George’s counties to leverage resources and work with local and regional banks to provide alternative refinancing options for distressed homeowners. Maryland was also awarded nearly $22.5 million from the U.S. Department of Housing and Urban Development’s Neighborhood Stabilization Program (NSP). In March 2009, the State awarded $18.9 million in NSP assistance through Maryland’s Neighborhood Conservation Initiative to 17 municipal and county governments and housing authorities. These funds are intended to assist with activities designed to stabilize targeted communities that have been severely impacted by the foreclosure crisis.
In the fall of 2008, Governor O’Malley also announced the establishment of a framework of operations with six of the State’s largest servicers to create a streamlined and transparent loss mitigation process and to ensure that these servicers, which hold 23 percent of the home loans in Maryland, provide the highest quality of service to homeowners. The State also promoted the HOPE Initiative’s resources and assistance through a statewide marketing campaign, using the tagline “Mortgage Late? Don’t Wait!” to highlight the MDHOPE hotline (877-462-7555) and website (www.mdhope.org). This campaign included television, radio, print, transit and movie theater advertising, as well as direct mailings to over 680,000 homeowners in foreclosure hotspots throughout the State. Through this marketing campaign, the State significantly raised awareness among homeowners about the HOPE Initiative.
“Maryland leads the nation in working to provide homeowners every opportunity for to remain in their homes,” said DLLR Secretary Sanchez. “We want to continue to do everything possible to make sure that foreclosure is the last resort, utilized only after all other options are exhausted.”
The Maryland Department of Housing and Community Development works with partners to finance housing opportunities and revitalize great places for Maryland citizens to live, work and prosper. To learn more about DHCD’s programs, visit www.mdhousing.org. News updates also are available by following DHCD on Twitter (www.twitter.com/MDHousing) and Facebook (www.facebook.com/MDHousing).