ASSOCIATED PRESS
Calling Maryland’s rising foreclosure rate an “unprecedented crisis,” Gov. Martin O’Malley yesterday pitched a package of mortgage reforms aimed at reducing foreclosures by cracking down on scam lenders and giving delinquent homeowners more time to save their homes.
“These are really, really tough times, especially for working families,” Mr. O’Malley said, standing outside a Landover home in foreclosure proceedings.
Maryland has seen a history-making wave of foreclosures in the past two years. During one quarter of 2007, foreclosures statewide went up more than 300 percent from the previous year. Some counties saw a rise of more than 2,500 percent.
The governor’s plan would put stricter regulations on mortgage brokers and create a new crime of mortgage fraud. Mr. O’Malley wants to increase the amount of time before a foreclosure could be completed from 15 days to 150 days.
Mr. O’Malley’s plan puts most of its emphasis on the subprime market, or the market for people who don’t qualify for traditional fixed-rate mortgages.
The changes would include a requirement that borrowers be screened for their ability to repay a loan over the long haul, not just during an initial period of low interest rates. The proposal would implement a virtual ban on loans made without proof of income, and a ban on “conveyances” of some properties in foreclosure, where homeowners sign away their homes under the guise of foreclosure protection.
“They need to do it,” said Charlene Williams of Capitol Heights, who signed away her childhood home last year after falling behind on mortgage payments but is challenging the action in court. “I was approached and told I could refinance, that we can help you, you won’t lose your home. …I was scammed.”
For homeowners who have already signed loans they can’t afford, Mr. O’Malley proposed a state fund offering up to $15,000 in interest-free loans to catch up on mortgage payments and prevent foreclosure.
“We are going to do everything in our power to protect Maryland homeowners,” Mr. O’Malley vowed.
The governor’s plan does not include more money for consumer education about mortgage debt or any new requirements that people signing for risky loans receive counseling or even a pamphlet explaining pitfalls of some subprime loans.
“Nobody would disagree that counseling is important for all consumers,” said Vicki Schultz, a senior adviser in a consumer protection agency for the state Department of Labor, Licensing and Regulation. “But there are concerns about how many counselors we have available.”
DLLR Secretary Tom Perez compared current mortgage laws to “Swiss cheese” and said the state would best serve home buyers by running fraudulent lenders out of state.
“We must have aggressive and effective regulation,” Mr. Perez said.
One senator who has proposed mortgage reforms, Sen. Catherine E. Pugh, Baltimore Democrat, said she was disappointed that Mr. O’Malley’s plan didn’t include some new educational efforts.
“I think we need to look at that,” Ms. Pugh said. When someone signs for the riskiest loans, “there ought to be something at least handed to you” about the loan, she said, adding that she supports the governor’s proposals.
Mr. O’Malley’s package also does not address businesses that offer to buy homes for cash. Those companies have been accused of cheating homeowners by offering less cash than the homes are worth and duping unaware property owners.
Mr. Perez said the administration may consider backing legislation on cash-for-homes schemes later. “We can do more,” he said.
The homeowner in foreclosure who hosted Mr. O’Malley’s announcement, Verna Floyd, choked back tears and told reporters that any action from the state would be a positive development. But she conceded that the reforms may not help people already in trouble, like her.
“We learned too late that if something sounds too good to be true, it probably is,” Miss Floyd said.
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