Foreclosure in court

Judges consider changes to rules

July 22, 2008|By Sumathi Reddy | Sumathi Reddy,Sun Reporter

Maryland's highest court will convene today for a hearing on changes to foreclosure rules that would conform with new legislation that gives homeowners more notification and a longer waiting period before their homes are sold.

The hearing by the Court of Appeals follows a top judiciary subcommittee meeting yesterday in which officials discussed further reforms and changes to help ease a foreclosure crisis that is engulfing the state and country.

While the proposed rules address the issue of giving homeowners greater notice to allow them to settle debts and potentially avoid foreclosure, the regulations should also be clearer on homeowners' rights and responsibilities in the interim, said Linda M. Schuett, an Annapolis attorney and vice chairwoman of the Standing Committee on Rules of Practice and Procedure, which met yesterday.

"The rules need to be clearer on what [homeowners] can do. ... It really involves a lot of different questions ... trying to balance the right of the creditor against the right of the property owner. It's a huge and somewhat difficult process to work out fairly for everyone," she said.

The new law, enacted by the General Assembly as an emergency measure, requires a lender to make a genuine effort to notify homeowners that the lender might sell their house. Lenders would have to provide homeowners with 45 days' written notice by certified or first-class mail, and they would not be allowed to foreclose until 90 days after a default.

In a letter to the full Court of Appeals, Schuett and Judge Alan M. Wilner, chairman of the court's Rules Committee, wrote that the "Rules governing foreclosure, at least with respect to residential property, need to be more widely examined. They have not been comprehensively reviewed for decades."

The new law was part of a 2008 legislative package addressing what proponents described as a crisis in foreclosures brought on by a boom in subprime lending that collapsed when many adjustable-rate mortgages reset to higher rates, increasing homeowners' payments.

More than 13,000 Maryland homeowners were in foreclosure at the end of last year, a 150 percent increase from the previous year - the biggest annual rise since the Mortgage Bankers Association began tracking the numbers in 1979.

More than 70,000 loans were at least 30 days past due in the first three months of 2008 year, including those in imminent danger of foreclosure. That's an increase of 70 percent from the first quarter of last year, the largest jump since 1979.

The crisis has also sparked judicial intervention. In a letter urging Maryland's lawyers to help those in distress, Chief Judge Robert M. Bell of the Court of Appeals wrote, "This is one of the most important pro bono initiatives of our time. In its absence, the thousands of individuals and families now at risk would almost surely move from being homeowners to becoming homeless."

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