Personal Perspective: Mortgage Foreclosure Legislation Provides Reform and Relief in State

By Liz Bobo



In June of 2007, Gov. Martin O'Malley created the Maryland Homeownership Preservation Task Force to address the growing mortgage foreclosure crisis in our state. As a result of the work of this task force, the Maryland General Assembly passed the following four bills and the governor subsequently signed them into law.

This major foreclosure reform lengthens the foreclosure process, giving homeowners more time to negotiate with their lenders and save their homes. It also bans prepayment penalties for subprime loans and assures a borrower's ability to repay a loan by verifying sources of income. Additionally it increases licensing requirements, requires a lender to wait 90 days after default before filing the foreclosure action, and bans the conveyance of real property in the foreclosure rescue process.

In the House of Delegates, these bills were assigned to the Economic Matters Committee and the Environmental Matters Committee. Financial institutions, now well aware of the dire situation existing in Maryland and across the country, which is hurting them as well as the consumers, worked cooperatively with the legislature in crafting these bills.



House Bill 360/Senate Bill 217

Real Property - Maryland Mortgage Fraud Protection Act

(Emergency measure effective on April 3)

These laws create a new, comprehensive mortgage fraud statute with criminal penalties. These measures facilitate the investigation and prosecution of fraud in the residential mortgage arena where traditional "theft by deception" cases have fallen short as too cumbersome and difficult to explain to juries.



House Bill 361/Senate Bill 218

Protection of Homeowners in Foreclosure - Prohibition on Foreclosure Rescue Transactions - Enforcement

(Emergency measures effective on April 3)

These laws strengthen the current laws that protect homeowners against unscrupulous people who try to conduct "foreclosure rescue transactions." The measures also enhance the enforcement powers of the Commissioner of Financial Regulation in this arena.



House Bill 363/Senate Bill 270

Credit Regulation - Mortgage Lending and Other Extensions of Credit

(Bills take effect June l, 2008)

These bills make several changes to the laws governing mortgage lending by Maryland banks and Maryland mortgage brokers. The types of mortgage loans impacted by these bills are small loans, open-end loans, closed-end loans and secondary loans.



House Bill 365/Senate Bill 216

Real Property - Recordation of Instruments Securing Mortgage Loans and Foreclosure of Mortgages and Deeds of Trust on Residential Property

(Emergency measures effective on April 3)

These laws amend current statutes dealing with the recordation of mortgages and the process for the foreclosure of mortgages on residential property. The laws codify the industry's best practices and lengthen the overall timeframe for the conduct of a foreclosure (from 15 days to 150 days) while also giving the homeowner more notice and opportunities to retain the homeowner's residence during this timeframe.



The General Assembly web site, www.mlis.state.md.us, contains the full text of these bills. The Commissioner of Financial Regulation in the Department of Labor, Licensing and Regulation, Sarah Bloom Raskin, has the responsibility for oversight and enforcement of these new public policies.

Since the legislature wrapped up in Annapolis on April 7, mortgage delinquencies continue to increase across the region. The importance of financial literacy is being discussed, and efforts are being made toward this goal by financial institutions and the real estate industry across the state.

It is also clear from the extent and depth of the number of foreclosures and the terms of the loans being foreclosed upon that more than consumer education was lacking in the past several years. Government was not sufficiently vigilant, and we are now paying a very high cost for that neglect.

The poster case for the injustice wrought by our failure in this area is Richard Atta Poku, a hard working immigrant from Ghana, who, through no fault of his own, lost the home in Columbia in which he and his family lived. We in government and the financial industries must dedicate ourselves to seeing that this does not reoccur.



State Delegate Liz Bobo (D) represents Maryland District 12B. She serves on the Environmental Matters Committee and co-sponsored each of the above bills. She can be reached at 410-997-2626.