Alternative Dispute Resolution
The Maryland Foreclosure Mediation Law
Jeanne M. Ripley S
tatistics issued by the real estate firm CoreLogic indicate that the number of mortgaged residential properties with negative equity at 11.2 million,
making up roughly 24% of all mortgages. Moody’s Economy. com’s chief economist Mark Zandi estimates that roughly 15 million American homeowners owe their lender more than the fair market value of the home. Over 4.1 million of these have current market value of only half of their existing mortgage balance. And if the number of borrowers with less than 5% equity of 2.3 million are added to the mix, the overall numbers rise to 28% of all mortgages. Te majority of homeowners having negative balances are unlikely to be helped by any of the current small market gains, and those close to the edge are at risk.
Economy.com anticipates that this year’s foreclosures may well reach 2.4 million. Te data also suggest that as homes with negative equity increase, the number of foreclosures will increase proportionately. In 2009 there were 43,248 foreclosure filings in
Maryland, an increase of 33.7% over the previous year and giving Maryland a national ranking of 13th nationwide in filings according to RealtyTrac. Foreclosures in Maryland increased 5.3% during the second quarter of 2010 with a total filing of 15,637, a filing rate 67.8% higher than the same period in 2009. Te top four counties for the state of Maryland are Prince George’s County, whose defaults totaled 4,331; Baltimore City, whose defaults were listed at 2,066; Baltimore County, whose defaults were set at 1,854; and Montgomery County, whose defaults were listed at 1,583. Maryland currently ranks as the 11th-highest state for homeowner default in the nation as set forth in a report issued by RealtyTrac in August, 2010. It is anticipated that the number of foreclosures for the third quarter will be skewed decidedly lower in light of the foreclosure constraints
required by the new mediation law which went into effect July 1, 2010. On May 20, 2010, Governor Martin O’Malley signed
into law General Assembly House Bill 427 creating a statewide mortgage mediation program which went into effect July 1, 2010. Te goal behind the law was to provide that every
Maryland family facing foreclosure be given the legal right to mediate with their lender, furthering the aim that all homeowners eligible for loan modifications be able to obtain them, and that others be allowed to pursue alternative remedies to default or lessen the impact of the loss of their home. All foreclosure filings after that date became subject to the requirements contained therein. Te loan servicer is required to provide the homeowner with notice of intention to foreclose 45 days before initiating a non- judicial foreclosure. Tis notice must include a form for the homeowner to request “loss mitigation,” the industry term for activities related to nonperforming or delinquent loans. Te goal of this procedure is to keep as much of the original value of the loan as possible by modifying the terms of the original note’s interest, payment, principal or arrearage. Foreclosure filings for the month of July have slowed
substantially- many counties saw at least a 95% decrease. For example, Baltimore City, whose filings a year ago for July 2009 was 550 and filings of June 2010 was 890, saw filings of July 2010 in the amount of 31. Foreclosure attorneys have indicated that these filings do not reflect actual inventory, but the learning curve required by the new mediation statute. It
Trial Reporter / Fall 2010 31
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