O'Malley, Cummings seek foreclosure mediation

February 16, 2010|By Julie Bykowicz | Baltimore Sun reporter

Gov. Martin O'Malley and Rep. Elijah Cummings on Tuesday urged Maryland lawmakers to adopt a proposal that would require mortgage companies to prove they tried to modify a borrower's loan before filing for foreclosure. The measure would also force companies into court mediation with homeowners who believe they have been wrongly denied loan modification.

The Democratic governor said his mediation plan is "designed to put homeowners on equal footing with their housing companies." Despite previous state efforts to slow down the foreclosure process and federal legislation requiring banks to work with homeowners, too many people are being put out of their homes, O'Malley and Cummings, a West Baltimore Democrat, told lawmakers at hearings before the House of Delegates Environmental Matters Committee and Senate Judicial Proceedings Committee.

Some lawmakers questioned the need for more legislation.

Del. Anthony J. O'Donnell, a Republican representing Calvert and St. Mary's counties, said Maryland seems to be doing a far better job of helping struggling homeowners than neighboring states like Virginia and Pennsylvania. He said O'Malley's proposal might be too expensive.

The Maryland court system also opposes the mediation bill because of its potential costs, among other reasons. A legislative analysis estimates it could cost courts more than $800,000 per year to hire and train mediators to handle contested foreclosures. But aides to the governor say that cost would likely be offset by a new $100 fee to be levied on lenders for each foreclosure action they file in court, a proposal that they say would generate $1.6 million or more per year.

Some lawmakers also complained that under O'Malley's proposal, borrowers are required to show up in person for mediation sessions but lenders can attend them by teleconference, something court officials also noted as "inherently unfair."

O'Malley and Cummings both said they would support an amendment requiring the lenders' presence, but banking groups and mortgage companies, which generally back the governor's plan, may balk at it. A representative of Wells Fargo said in written testimony submitted to lawmakers that the mediation process "can be effectively facilitated via teleconference."

The Maryland Bankers Association also said it wants an amendment that would enable banks to file a foreclosure action while assessing whether a homeowner's loan can be modified. O'Malley said he would be unlikely to back such a change.

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