Seizing of homes too easy in Md.

January 11, 2008|By JAY HANCOCK

Army Staff Sgt. Kevin Atiase was serving his country at Fort Sam Houston, Texas, when a mortgage company sold his Frederick house in a foreclosure proceeding a year ago. He couldn't attend court and didn't learn a judge approved the sale until it was too late, according to a brief filed with the Maryland Court of Special Appeals.

Perhaps Maryland's foreclosure process is greased a little too slickly in favor of lenders. Of the many mortgage reforms being considered by the General Assembly, increasing the transparency and fairness of the foreclosure process should be near the top of the list.

For some reason, the legal principle that the highest stakes should be adjudicated with the greatest consideration has been forgotten when it comes to the biggest investment most people make - their homes.

When you sue a Marylander for a couple of thousand dollars, he must receive personal notice, a courtroom trial and ample opportunity to appeal. But when you foreclose on his home, none of those bothersome technicalities apply. What kind of system is that?

Lenders are seizing thousands of Maryland houses because owners can't or won't make payments. Many of these cases involve weird mortgages whose monthly obligations rise over time.

This is not to excuse borrowers' duty to learn about loans and stay current. Many proposed reforms could go too far to protect irresponsible borrowers, which would unnecessarily increase loan costs for everybody.

But the protections for somebody faced with losing a house should be at least as high as those for somebody who gets sued over a plumbers' bill or a bar bet.

Under present rules you can lose a home as soon as two months after default, says Phillip Robinson, executive director of Civil Justice Inc., a nonprofit group that offers legal services to low- and moderate-income Marylanders. Your house can be gone less than a month after dispatch of a notice of sale - if you even get it.

"What a lot of Marylanders don't understand is that their house can be taken in such a short process," he says. "Why do we have a special set of rules for foreclosure cases?"

Mortgage companies bent on foreclosure "generally fail to capture the attention of the homeowner in crisis to alert them to a pending foreclosure action, and the process does not afford homeowners adequate time to mitigate their loss ... ," according to October's report by the Maryland Home Ownership Preservation Task Force, appointed by the governor.

There is no requirement that a sale notice be personally delivered to the homeowner or posted on the door, for example. Lenders must send multiple letters and, if they get no response, publish newspaper notices.

Homeowners who want to appeal a foreclosure decision are generally required to post a bond equal to the entire amount of the defaulted mortgage. If they're having trouble with monthly payments, they obviously have difficulty coming up with that kind of jack. So even appeals made on solid legal and moral ground get thwarted.

A great example is that of Kwaku Atta Poku, who lost his Columbia home after the settlement company failed to ensure that refinancing proceeds were used to pay off an earlier mortgage. He had never missed a payment. Yesterday the Maryland Court of Appeals ruled against him on technical grounds.

One Robinson client, out of work from an injury, got behind on payments but ultimately won thousands in a workers' compensation case - more than enough to fix the default. But by then the house had changed hands.

In other cases, homeowners with temporary setbacks start making monthly payments again but lose the house when the mortgage company insists on foreclosing over arrears.

Because of his military status, Atiase, the Army sergeant, was entitled to a freeze of foreclosure proceedings under the federal Service Members Civil Relief Act, his lawyer argues. The act is to help "those who dropped their affairs to answer their country's call," the Supreme Court has said.

But the lender falsely represented that Atiase was not in the military, the suit alleges, and the house had already been sold by the time he found out what was happening.

"It seems to me there should be perhaps some way to slow down the very swift practice of foreclosure," Maryland Court of Appeals Judge Dale R. Cathell said Tuesday during arguments in another mortgage case.

That sounds right. Maryland has cleaned up unfair rules for ground-rent seizures and started to with tax-sale collections. It should do the same for foreclosures.

jay.hancock@baltsun.com

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