- The Washington Times - Wednesday, February 20, 2008

ANNAPOLIS (AP) — Maryland Gov. Martin O’Malley yesterday said that loan servicers need to improve customer service or face sanctions from state regulators.

Mr. O’Malley, who like other governors is pursuing efforts to stem rising foreclosures, told reporters that customer service is so bad at some companies that handle loans that he has summoned them to Annapolis later this month to get promises their service will improve.

Letters have been sent to about a dozen loan servicers, which are companies that collect mortgage payments. Mr. O’Malley and state regulators say those servicers must do a better job helping answer questions from homeowners or face state penalties or even being banned from doing business here.

“We really need them to come to the table,” Mr. O’Malley, a Democrat, said of the loan servicers, standing next to a chart showing a dramatic rise in foreclosures across Maryland. Nearly 10,000 homes statewide were in foreclosure proceedings last fiscal quarter.

Mr. O’Malley’s summit proposal showed the difficulty state regulators are having finding ways to slow foreclosures. Home loans sold by banks and other lenders are often bundled with other loans and resold to loan servicing companies, leaving some homeowners unsure which company holds their mortgage. The confusion worsens when a homeowner falls behind on mortgage payments to an out-of-state servicer.

“We’ve received complaint after complaint,” said Tom Perez, secretary of the Department of Labor, Licensing and Regulation, which oversees loan servicers. “They won’t answer the phone. It’s basic stuff like that.”

It was not clear what Mr. O’Malley and regulators expect the servicers to promise in terms of customer service, but the governor conceded his job addressing the state foreclosure rate is tricky without talks with servicers.

“We cannot help people stay in their homes if all we get is recordings when we call loan servicers,” said Mr. O’Malley, who complained that service companies are often “some 1-800 number in Topeka, Kansas.”

Mr. O’Malley’s customer service summit, scheduled for Feb. 26, is part of his agenda on mortgage reform. The governor has several bills pending in the legislature to address the housing market’s woes. Among other things, the administration wants to make mortgage fraud a crime and to lengthen the amount of time before a home can be foreclosed.

Mr. O’Malley said the state also has started two loan programs to assist people who have fallen behind on their payments.

Finally, the administration plans to step up enforcement of the lending rules already in place. Four new mortgage investigators have been hired, and Mr. Perez told reporters that his agency is investigating a Florida loan servicer and could pursue sanctions.

That servicer, Ocwen Financial Corp. of West Palm Beach, Fla., did not immediately return calls for comment on the Maryland investigation. Mr. Perez said other loan servicers faced state investigations after consumer complaints.

“We have the ability to fine them. We have the ability to issue penalties. We have the ability to yank licenses,” Mr. Perez said.

The governor said he was confident the loan servicers would send representatives to his summit, though Mr. O’Malley conceded the companies would not be punished if they don’t attend. So far, Mr. O’Malley said, no servicers have said they’ll come.

“Help us meet this challenge head-on,” Mr. O’Malley said.

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