Fighting foreclosures could pack political punch
UPDATED. See below.
Today, Gov. Martin O'Malley will personally urge lawmakers to pass a measure that would increase the options for homeowners on the verge of foreclosure. This will be his first appearance of the year before legislative committees. Political observers call it a savvy move for a Democratic governor who faces reelection in a year that comes amid a prolonged economic downturn. See our story in this morning's Baltimore Sun.
We'll watch the hearings today to see how lawmakers feel about the proposal and gauge its chances of becoming law.
Some key points in the legislation:
* Before a foreclosure action can be filed in court, lenders are required to submit proof that they tried to modify the loan.
* If the borrower believes that he or she was wrongly denied loan modification, the lender must agree to a mediation session, which the court will organize.
The proposal also imposes a $100 fee to be paid by lenders whenever they file for foreclosure.
One potential problem: The court system, which would contend with a potential flood of foreclosure mediation sessions, isn't supportive of O'Malley's proposal as written. They cite the legislation's costs and lack of clarity as some of the reasons why. Court officials also point out that the proposal is "inherently unfair" in that it forces borrowers to show up in person for mediation but allows lenders to phone in.
A fiscal and policy analysis that became available this morning further explores costs.
Revenues could increase by about $200,000* next year, thanks to the $100 fee. But the analysis also speculates that court expenses could go up by $800,000 or more to establish a mediation program. (The analyst notes that he's just guessing because the court system failed to supply him with any real numbers.)
We aren't expecting to hear from the court system today. An official told us yesterday that they'd simply be submitting written testimony in opposition to the bill, not testifying at the hearings.
* Aides to the governor believe the legislative analyst grossly underestimated the potential revenue, saying it is likely to be $1.6 million or more per year. The analyst appears to have wrongly calculated revenue based on anticipated mediation sessions. However, the governor's proposal calls for the $100 fee to be assessed on ALL foreclosure filings, regardless of mediation.