Gov. Martin O’Malley threw his weight behind emergency legislation helping homeowners on the verge of foreclosure in a rare appearance before House and Senate committees Tuesday.
“We must do everything in our power to put the brakes on this foreclosure train,” O’Malley said before the House Environmental Matters Committee. “The fact of the matter is, foreclosures [in Maryland] are 40 percent higher now than they were last year.”
O’Malley’s bill would require lenders to prove they tried to modify a loan before issuing a foreclosure notice. It also would require lenders to provide homeowners with all the information and paperwork they would need to contest the lenders’ decisions, and pay a $100 fee for every foreclosure notice issued.
That paperwork would be sent to Maryland courts, where a judge would determine if lenders fairly considered loan modification. If a judge rules against a lender, the company would be required to work out the terms of the loan with the homeowner.
The Maryland Judicial Conference opposes O’Malley’s bill because of all the paperwork it would pour into the courts, according to written testimony from Executive Secretary Frank Broccolina. The Department of Legislative Services estimated that the extra work would cost courts about $800,000 a year, to be partially paid for by an estimated $200,000 in revenue from the fee imposed on lenders.
But O’Malley said he expects to bring in about $1.6 million in revenue from the $100 fee; if the cost to the courts is higher than the fee revenue, O’Malley said he would consider raising it.
During the Senate hearing, banking representatives pleaded with lawmakers to adjust the bill by reducing some of the work for lenders and delaying the bill’s start to June 1.
Jeff Nadel, a Calverton foreclosure lawyer, said immediate implementation “would throw things into havoc.”
U.S. Rep. Elijah Cummings, D-Md., meanwhile, said immediate implementation was crucial.
“This bill will keep people in their homes,” Cummings said. “Think about the children. The one thing children need is stability.”
A group of foreclosure lawyers, however, said the legislation doesn’t help the housing crisis and allows people to remain in houses they can’t afford.
A few lawmakers have said they agree. Del. Luiz Simmons, D-Montgomery County, said O’Malley is “doing the admirable thing in mitigating the problem, but [the bill] only slows down the foreclosure process. It’s not going to stop foreclosures. … It’s just buying time.”
