Gov. Martin O’Malley announced a sweeping plan Monday to combat an unprecedented number of foreclosures, speaking from the front lawn of a Prince George’s County woman who nearly lost her home to a scheming lender.
In 2005, Thelma Floyd’s husband was injured and could no longer work. The family couldn’t keep up with its mortgage, and with foreclosure looming on the horizon, a lender persuaded the family to sign over their title in exchange for refinancing. The lender, who is currently under investigation, disappeared with title in hand, and Floyd had to fight to keep her home.
“If something sounds to good to be true, it probably is,” Floyd said.
O’Malley’s proposals would prevent others from following in Floyd’s footsteps. Under the plan, conveying property titles in exchange for refinancing would be banned. The Democratic governor also proposed that lenders ensure borrowers can afford the loans, not just in the first few years, but when premium rates go up later.
He would also make Maryland the second state in the union, after California, to require lenders to file monthly reports on what they’re doing to assist homeowners who have defaulted on their loans.
“We have heard time and time again that no one wins in a foreclosure,” O’Malley said. “Well, if that is the truth, then we need the information.”
Prince George’s County had the most foreclosures in Maryland in the first nine months of 2007 — 4,187 — and an estimated 25,000 homes are expected to go into foreclosure throughout the state in the next two years.
O’Malley would like to enhance a $100 million program that provides interest-free loans to residents with credit scores of at least 600 on the scale of 850 who are facing foreclosure. He also plans to provide $1 million to nonprofit organizations to better educate borrowers on their rights and best borrowing practices.
Members of the mortgage industry approve of many of the new regulations but worry that at least one new requirement would put an undue burden on small businesses.
An O’Malley proposal would require brokers to demonstrate their net worth, possibly through an audit. That could cost small lenders thousands, Maryland Association of Mortgage Brokers Executive Director Thomas Shaner said.
At a glance
Other O’Malley proposals include:
» Banning prepayment penalties for all subprime loans.
» Preventing felons convicted on charges related to financial crimes in the past 10 years from acquiring a lending or brokering license.
» Requiring brokers and lenders to show a net tangible benefit to the borrower when refinancing.
» Informing borrowers of initial “teaser” interest rates and those that apply in the future.
