As a record number of Maryland homeowners face foreclosure, lawmakers Tuesday began considering consumer protections in the first reform of state lending regulations in more than two centuries.
A state Senate committee heard hours of testimony Tuesday on bills that would prevent scams many supporters said are prevalent in the home lending business. Gov. Martin O?Malley-backed proposals include criminalizing mortgage fraud, allowing more time before foreclosures are finalized and requiring foreclosure notices to be personally served.
“They are appropriately aggressive, they are surgical,” said Tom Perez, secretary of the Department of Labor, Licensing and Regulation. “We did not approach this with a meat ax, we approached it with a scalpel.”
Foreclosures have increased in all Maryland counties and totaled more than 23,000 last year, compared with 3,500 in 2006. Analysts said the worst is ahead, estimating 25,000 subprime mortgages will go into foreclosure by the end of next year.
Mortgage lenders and real estate agents said they were concerned about proposals that would essentially ban “rescue” transactions such as reconveyances ? in which homeowners sign awaytheir homes to lenders for debt relief.
Steve Lovejoy, a lawyer with the Mid-Atlantic Financial Services Association, said the draft criminal statute for mortgage fraud may be too broad ? making everyone from lenders to notary publics subject to prosecution.
“It?s really closing a lot of legitimate avenues a borrower may have for help,” Lovejoy said. “I think we have to tread carefully.”
One bill would cap attorney fees to relieve costs for homeowners already scrambling to make delinquent mortgage payments. Another would stretch the current foreclosure process ? which could potentially wrap up in 15 days ? to a minimum of 90 days.
That proposal drew support from advocates who represent struggling homeowners, including Gregory Cane of the Baltimore-based Public Justice Center.
“It?s a sad state of irony when you get more notice for a simple civil debt, like an unpaid bill at the mechanics or a department store, than you do if you?re about to lose your home,” Cane said.
