Mortgage bankers are skeptical of Maryland Gov. Martin O’Malley’s plan to require lenders to notify the state when homeowners are in danger of losing their houses through foreclosure.
Mr. O’Malley said earlier this week his “emergency regulations” would give the state an opportunity to offer homeowners assistance. Mortgage lenders said it would burden them with unnecessary governmental red tape.
Lenders wonder whether more regulation would result in higher costs for them and their customers.
“Of course it could,” said Malcolm Hollensteiner, president of the Mortgage Bankers Association of Metropolitan Washington.
With foreclosure rates doubling in Montgomery and Prince George’s counties last year, Mr. O’Malley said lenders share the blame because they failed to respond adequately to borrowers who want to refinance risky adjustable rate mortgages.
He asked mortgage company representatives to meet with him next week to discuss options for reducing Maryland’s high foreclosure rate.
The lenders say the solution is cooperation, not more regulation in a state that already heavily regulates the mortgage industry.
“We are concerned that more legislation and more regulations will impact the ability of people to obtain financing,” Mr. Hollensteiner said. “The legislation is already on the books to protect the consumers and the lenders’ interests. A lot of this is not going to be changed by more legislation. It’s going to be changed by more outreach on lenders’ parts and more consumers reaching out and calling their lenders, then the lenders working with them to help them.”
The state assistance could include Bridge to Hope loans that let homeowners borrow money at no interest when they default on mortgage payments. The state also can refer homeowners to housing counselors to suggest financial rescue strategies.
The national Mortgage Bankers Association says Mr. O’Malley is trying to reinvent existing programs, such as the Hope Now alliance formed by the Bush administration in October.
The U.S. Treasury Department organized the alliance by bringing together mortgage lenders, investors and nonprofit housing counselors to help subprime borrowers modify their loans. The alliance represents about 90 percent of mortgage servicers who collect and process loan payments.
This week, the alliance said its members agreed to adopt guidelines for a 30-day freeze in foreclosures to allow borrowers to modify loans.
“I understand the governor’s concern,” said Paul Richman, vice president of state government affairs for the Mortgage Bankers Association, a real estate finance industry trade group. “I’m not sure of the necessity of this proposal. It’s already being done through the Hope Now alliance efforts. It looks like what the governor is hoping to do is to recreate that on the local level.”
In other news …
The D.C. Council this week approved the $170 million Park Morton redevelopment plan for lower Georgia Avenue.
It would replace 174 public housing units with 523 subsidized and market-rate residences.
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