The Maryland legislature has enacted House Bill 472, which substantially overhauls the requirements for foreclosing on residential real property. As a result, lenders face a more complicated, costly process.
Effective July 1, 2010, lenders must meet new requirements before a foreclosure sale of owner-occupied residential property used as a primary residence. The aim is to ensure that homeowners are informed of and given an opportunity to participate in mortgage modification and loss mitigation programs. The new requirements include the following:
- Before instituting a foreclosure action, the lender must send the homeowner a notice of intent to foreclose that includes an application for loss mitigation programs, a description of the eligibility requirements, instructions for completing the application, and a telephone number to call to confirm receipt of the application.
- Before a foreclosure sale, the lender must file a loss mitigation affidavit, certifying completion of loss mitigation analysis and explaining the denial of a modification or other form of loss mitigation. Notably, a final loss mitigation affidavit is not considered complete if the reason for the determination of ineligibility is the lender's inability to establish communication with the homeowner or obtain all documentation and information required to conduct the loss mitigation analysis.
- The lender must provide the homeowner with paperwork for the borrower to request foreclosure mediation through the Maryland Office of Administrative Hearings. Although the lender is entitled to file a motion to strike the homeowner's request for mediation, the presumption is that the homeowner is entitled to mediation. A representative of the lender must be present at a mediation and have authority to settle the matter or be able to readily contact a person with authority. The mediation will generally be held within 60 days of the Office of Administrative Hearings receiving the homeowner’s request.
- If the mediation fails, the homeowner may file a motion to stay the foreclosure sale, specifying the reasons loss mitigation should have been granted.
These new requirements will increase the cost to the lender and lengthen the time frame for foreclosing on residential real property in Maryland. Lenders must ensure that their foreclosure counsels' forms are tailored to comply with the new provisions and be prepared to present all borrowers facing foreclosure with loss mitigation options. Furthermore, lenders will need to be represented at mediation sessions by someone familiar with loss mitigation procedures and laws, including the Home Affordable Modification Program (HAMP). The Maryland statute is part of a national trend in which several states and cities have imposed new requirements that must be satisfied before a residential mortgage lender may proceed with a foreclosure.