Q&A: Md.'s foreclosure mediation program
If you're a Maryland homeowner struggling with your mortgage, you might be curious -- extremely curious -- about the state's newly passed foreclosure mediation law. It takes effect for foreclosure cases filed on or after July 1.
Raymond A. Skinner, the state's secretary of housing and community development, offered details in a recent interview.
Question: What will change for homeowners and lenders?
Answer: What we’re trying to do is to put in place a process which is really kind of the last step before foreclosure can proceed. And it gives the homeowner a chance to sit down face to face with their lender or servicer with a neutral third party to see if something can be worked out before actually going to foreclosure. The law builds on what we had done in 2008, when we changed the foreclosure process and added more time and more notice for borrowers.
Q: What steps does the law add?
A: When the lender ... sends the notice of intent [to foreclose] to the borrower, they’ve got to include some additional things now under this new law. They must include a loss-mitigation application with instructions for how to complete it and where to send it. ... They also have to include information about various loss-mitigation programs, including the federal Home Affordable Modification Program -- the HAMP program -- and also specific information about the lender’s loss-mitigation programs. … In addition, they've got to send information about the state programs -- our HOPE program with the HOPE hot line number and the website.
Q: What comes next?
A: Before they can file an order to docket [a foreclosure case in the court system], they’ve got to file a loss-mitigation analysis. And basically, it’s an affidavit where the lender certifies that they’ve exhausted all loss-mitigation procedures or processes, and they could not find a way to give this particular borrower any kind of relief. And they’ve got to explain the reasons why they could not provide any relief.
Q: They have to be specific?
A: They have to be very specific. … At the same time, when they file that order to docket and provide the analysis, they have to give the borrower a "request for foreclosure mediation" form. Then the borrower has 15 days to file the request for mediation with the court. And again, when the lender sends the information to the borrower, the request for mediation form, they have to give instructions for how to fill out the form and where to send it.
Q: How will the mediation itself work?
A: The request for mediation would be filed with the Circuit Court. The court would then refer it to the Office of Administrative Hearings. Under the law, the mediation must be conducted within 60 days of the Office of Administrative Hearings receiving it from the court. They’re administrative law judges, and they hear appeals [of] various decisions of state agencies, and they also have some kind of mediation program now.
The mediation is just an opportunity to sit with a neutral third party. They are not decision-makers. They can work with the two parties and get the parties to agree to some outcome, but they don’t have any legal powers to dictate an outcome. So the parties have to agree.
Q: What happens if they don't agree?
A: If an agreement is not reached at that point, the lender can schedule the foreclosure sale. But they have to wait 15 days after the mediation to schedule a foreclosure sale. At that point, clearly, if the borrower is not satisfied with the outcome, an agreement is not reached and they think there’s some plausible reason, then they can go to the court. … But that’s sort of it for the foreclosure mediation process.
Q: What's the cost?
A: The lender has to pay $300 at the order to docket stage. ... It’s a $50 fee for the homeowner to request mediation. Both of those fees that the lender would pay and the homeowner would pay go into a fund … for the additional administrative law judges that OAH would hire, as well as pay for continuing our counseling network.
Q: Is there any reason for lenders to work something out in mediation?
A: We’re really hopeful it doesn’t even come to mediation. There are built-in incentives. ... Recently, the Obama administration has enhanced the HAMP program and provided additional incentives for lenders to do loan modifications under the HAMP program. We’re hoping the combination of that plus the additional barriers this law puts in place, in terms of having them file this affidavit and certify what they’ve done, as well as the fee, will really force lenders and servicers to get more serious about loan modification upfront. … Really get serious about looking for options for loan modifications or other types of things, such as doing short sales, a deed in lieu, anything to avoid foreclosure. ...
We think the lenders can be much more consumer friendly and customer friendly in terms of how they work with borrowers in the loss-mitigation process.