Maryland has implemented non-mandatory mediation into its foreclosure process, in an attempt to keep Marylanders in their homes and paying their loan obligations. The bill, signed by Gov. Martin O'Malley in the final hours of the 2010 legislative session, toughens the foreclosure rules and requires everything to stop if the borrower desires mediation.
Many of the details concerning the program are yet to be worked out, including where the mediations will be located. The program will be administered by the Office of Administrative Hearings (OAH), and mediation conferences are required to be held within 60 days of the OAH's receiving a borrower request.
Homeowners who request mediation may utilize the help of housing counselors and must provide documentation such as pay stubs, tax returns and bank statements. The documentation must be provided no later than 20 days before the scheduled date. The program is an ‘opt-in’ program and is not mandatory. As such, it is similar to the program that Nevada implemented.
The purpose of the meeting is to give borrowers an opportunity to work on modifications and other alternatives. This legislation was a high priority for O'Malley, who stated that the law ‘will protect homeownership by giving every family the ability to bring these faceless mortgage servicing giants to the table before a family can be thrown out of their home in a foreclosure action.’
This new mediation program is part of the rewriting of Maryland's 100-year-old foreclosure law. In 2008, the legislature enacted legislation that extended the foreclosure timetable from approximately 35 days to 150 days. Despite the enacted legislation, there were 43,248 foreclosure filings in 2009, which represented a 33.7% increase from the previous year. The state is ranked 13th nationwide in foreclosure filings, according to RealtyTrac.
Filing fees have been increased by an additional $300 over and above the current fee for lenders submitting new foreclosure actions to the various courts. Borrowers may also be responsible for paying an additional $50 fee if they opt for mediation. However, borrowers may be eligible for a reduction or waiver of this $50 fee under the Maryland legal services guidelines. The state is estimating that between 11% and 15% of its foreclosures will go through this new process.
The process, as amended by this legislation, now requires that a statement be sent to borrowers recommending that they seek housing counseling services, along with the notice of intent (NOI) to foreclose. The NOI must also include the name and telephone number of the secured party, the mortgage servicer (if applicable) and an agent of the secured party that is authorized to modify the terms of the mortgage loan.
Additionally, the NOI must include the name and license number of the Maryland mortgage lender and mortgage originator, if applicable, as well as the amount required to cure the default and reinstate the loan, including all past-due payments, penalties and fees.
Finally, the NOI must include the telephone number and Internet address of the nonprofit and state government resources available to assist, as identified by the Commissioner of Financial Regulation, as well as an explanation of the Maryland foreclosure process and timeline (again, as prescribed by the commissioner) and pre-addressed envelopes.
Attached to the NOI, lenders or their attorneys must include a loss mitigation application, along with instructions and a telephone number to confirm receipt of the submission. Additionally, a description of the eligibility requirements offered by the secured party must be included. Unfortunately, many of the forms required do not yet exist, and it would behoove all lenders to immediately develop a loss mitigation application, if they do not already have this document. Moreover, because the NOI must include the forms that have not been finalized, counsel may not be able to file any new NOIs after May 14, which may serve as a de-facto moratorium.
Filing of the foreclosure action remains similar to current law, except that if the loss mitigation analysis has been completed, a final loss mitigation affidavit in the form prescribed by regulation must be included. If the loss mitigation has not been completed, a preliminary loss mitigation affidavit in the form prescribed by regulation must be included. If a preliminary loss mitigation affidavit is filed, a foreclosure cannot be held until at least 30 days have passed since the filing of the final affidavit. Additionally, the final affidavit cannot be filed any earlier than 28 days after the order to docket or complaint is served on the borrower.
Various new notices are also now required. However, the mediation provisions do not apply to borrowers who do not occupy the property as their principal residence. If a lender determines that a borrower is not eligible for relief, a borrower may file a request with the court to hold foreclosure mediation after setting forth eligibility facts. If a borrower files a request for mediation, the property cannot go to sale until at least 15 days after the mediation conference is held.
Mediation is a trend that is being adopted by many states. Lenders and servicers will have to operate under the new legislation as a routine matter.
Ronald S. Deutsch is a principal in the Maryland-based law firm Cohn, Goldberg & Deutsch LLC. He can be reached at (410) 296-2550.