The number of Maryland homeowners requesting foreclosure mediation is trickling in at a small fraction of what was expected in the first three months of the new program.
The state expected about 4,360 homeowners to request mediation on defaulted loans in the 12 months ending July 1, 2011, according to the Maryland Department of Legislative Services. But in the last three months, only 130 borrowers took advantage of the new state
law, according to the state’s Office of Administrative Hearings.
Maryland officials said they expected a slow start — but not this slow.
“We knew there would be a lag starting up,” said Bernie Kohn, spokesman for the Department of Labor, Licensing and Regulation, which helps oversee the law’s implementation. He said requests started to pick up last month, just as major national banks began halting foreclosures after lending officials admitted they approved thousands of foreclosures without reading the documentation.
Maryland’s law, which took effect July 1, requires lenders to file documentation
proving they tried to modify a loan before forcing residents out of their homes and pay a $300 fee for every foreclosure notice issued. If homeowners request mediation, judges review the paperwork
and decide whether to bring all parties together to rework a new loan agreement. Borrowers must pay a $50 fee if they request mediation.
When the bill was passed in April, the Department of Housing and Community Development expected to collect nearly $11 million in fees from mortgage lenders in 2011 and $218,000 from homeowners — a portion of which would help courts with the cost of mediation.
“Either the program is not being taken advantage of or it’s not working,” said Dan Caplan, a senior mortgage consultant for Monument Bank in Bethesda. He warned that the program could be used to slow the foreclosures process for homeowners who are “delaying the inevitable.”
“The longer this [foreclosure crisis] lingers, the harder it is going to be before a full recovery,” he said. “We need to get through this mess and be done with it — put it behind us — rather than drag it out.”
Calverton foreclosure lawyer Jeff Nadel said he has attended a number of mediation sessions and in almost every case,
the homeowner was unable to afford the newly worked compromise.
“Mediation just isn’t as needed as people say,” he said. “It is a noble concept, but whether or not it is doable, in reality, is a separate matter.”
National loan modification programs helped 680,000 homeowners avoid foreclosure in the last four months of 2009, according to a report by the Office of Thrift Supervision. But more than half of those homeowners redefaulted on their loans within six months, the report shows.
