To stem foreclosures

The appeal of the O'Malley administration's latest response to the foreclosure crunch in Maryland is also its strength: The plan attacks a variety of problems while offering some relief to homeowners and driving industry participants toward greater accountability. The proposal recognizes that government alone can't stem the tide of foreclosures and that the private sector must take a leading role.

Since the subprime mortgage industry imploded nationally, foreclosure filings in Maryland have steadily increased. A total of 11,017 loans in Maryland were in foreclosure in November, up 8.5 percent from the previous month, according to a report prepared for the state. Prime loan foreclosures grew by 9 percent to 5,574, while foreclosures among subprime loans increased by 8 percent to 5,443.

Gov. Martin O'Malley's package, announced this week, looks ahead, and could most likely benefit tens of thousands of Marylanders whose risky subprime mortgages will reset in two years, leaving them vulnerable to foreclosure. It would establish a $400,000 loan pool to help homeowners pay their mortgages as they try to avert foreclosure, toughen licensing requirements for mortgage brokers and, most novel, require loan servicing companies to document the number of loans in default and efforts to help borrowers.

Consumer advocates have charged that lenders aren't modifying loans, despite pledges to help homeowners resolve their problems. A study by Freddie Mac, the corporation founded by Congress to help provide affordable home loans, shows that 60 percent of borrowers who enter foreclosure never talk with their bankers, but 80 percent who do talk to their lenders get relief.

First-time homebuyers would be well advised to enroll in loan counseling programs so they understand the extent of their financial commitments.

The state's proposals offer some legislative remedies, including a bill that would extend the minimum period from 15 to 45 days for notification of foreclosure. The Maryland Bankers Association supports this bill, and it should be approved. A second bill that deserves support would require lenders to verify a borrower's ability to repay an adjustable-rate mortgage.

The governor's package may help Marylanders at risk of foreclosure, but not those who are losing their homes now. The impact in neighborhoods will be significant and should compel state and city officials to begin planning for ways to shore up hard-hit communities. That's the next conversation to have.