- The Washington Times - Wednesday, February 6, 2008

ANNAPOLIS (AP) — Alarmed by a skyrocketing foreclosure rate, Maryland lawmakers started work yesterday on a package of bills aimed at slowing the number of homeowners losing their houses.

The number of foreclosure actions in Maryland went from 3,500 in 2006 to 23,000 last year. In some neighborhoods, the foreclosure rate has risen more than 1,000 percent in the past couple of years.

“The situation is continuing to erode,” said Raymond Skinner, secretary of the Department of Housing and Community Development.

A state Senate committee heard testimony yesterday on three bills aimed at reforming the mortgage lending industry. The measures are backed by Gov. Martin O’Malley, a Democrat, as a way to prevent what some call corruption in the home-lending business.

“The problem is getting worse, and it may continue to do so,” said Tom Perez, secretary of the Department of Labor, Licensing and Regulation. Mr. Perez told lawmakers that the industry needs tougher oversight to prevent future foreclosure waves.

The bills would, among other things, direct a new crime of mortgage fraud at unscrupulous lenders. The measures would make it harder to make certain risky loans and would extend the minimum amount of time for a foreclosure to be completed after a homeowner falls behind on mortgage payments.

The bills also call for a ban on most reconveyances, by which homeowners facing foreclosure unwittingly sign away their homes to lenders promising to help them out of debt. The plan would ban prepayment penalties, charging homeowners for paying off loans early.

“Our current system is too much of an assembly line with no quality control,” said Mr. Perez.

He said the foreclosure trend was caused in part by weak government enforcement of consumer protections.

Lawmakers said they are almost certain to take up some mortgage reforms this session in response to the foreclosure trend, joining many other state legislatures. But senators spent hours hearing concerns from lenders and real estate agents about parts of the bills.

Several industry officials testified against a proposed ban on “foreclosure rescue transactions” such as reconveyances. They also raised questions about the mortgage fraud proposals.

For example, the bills could make notaries public subject to fraud prosecution. Industry workers called for revisions making clear that notaries public would be protected from prosecution if they have little to do with the transactions.

Another major objection was to a revision that only one legal notice, not three, would have to be published before a foreclosure can be completed. Two newspaper publishers testified against the plan.

Lenders told lawmakers that the mortgage reforms need a lot more attention before they become law.

“The devil’s in the details, as they say,” said Steve Lovejoy, of the Mid-Atlantic Financial Services Association. Mr. Lovejoy said the bills are rife with technical errors and provisions that would inadvertently hurt the industry.

“We think the concepts are great. They just don’t do what they want,” he said of the bills.

Yesterday’s hearing was just the first crack at evaluating the mortgage reforms, and the bills likely will be changed before senators vote on them. But legislative leaders say the mortgage bills are a top priority this term. Senators were handed charts yesterday showing the rising number of foreclosures in their own districts.

“I think we’re geared up and ready to go,” said Sen. Brian E. Frosh, Montgomery Democrat and chairman of the committee that heard the mortgage bills.

FORECLOSURE BILLS

Highlights of foreclosure bills considered yesterday by a Maryland Senate committee:

Mortgage fraud: Creating a crime of mortgage fraud.

Rescue scams: A near-ban on schemes that claim to save homeowners from foreclosure but seldom do.

Legal notices: Reducing the number of legal notices required before a foreclosure can be completed.

More notice: Longer time before foreclosure action could be final.

“No-doc” loans: Making it harder to get home loans without proof of income.

SOURCE: Senate Bills 216, 217, 218

LOAD COMMENTS ()

 

Click to Read More

Click to Hide