Owning your own home has long been a key component of the American dream. However, the recent economic downturn has caused a great deal of turmoil for homeowners and has led to a mortgage crisis for banks and homeowners. Home foreclosure occurs when the mortgage holder, usually a bank, is unable to recover the money it lent to the homeowner. Mortgage holders may be unable to recover the money because homeowners may lose their jobs or find themselves with a variable rate mortgage that has spiraled out of control due to the subprime mortgage crisis. Homeowners who are having mortgage difficulties and who are facing foreclosure should contact a Maryland bankruptcy lawyer right away to discuss their options.
Although filing a Chapter 13 bankruptcy may enable homeowners to redistribute their debt and keep their homes, this is not the only option. On July 1, 2010, Maryland’s foreclosure mediation law went into effect, giving troubled homeowners a powerful tool to help them retain ownership of their homes in these uncertain times. This new law requires lenders to provide homeowners information about loan modification programs when they notify them about the impending foreclosure. They must also provide a “loss mitigation affidavit” to the court before they are able to foreclose the property. The affidavit must explain that the lender has fully evaluated the homeowner’s eligibility for loss mitigation programs and explain the reasons why it might choose to deny them.
The loss mitigation affidavit must state the following:
- If the property is the primary residence of the borrower
- If the amount of the loan is too high for modification
- If there is a second mortgage that makes the loan ineligible
- If the borrower has failed to make payments during a trial modification period
The lender must also provide the borrower with a “request for foreclosure mediation” form that allows the homeowner to opt for court-supervised mediation if they do not agree with the denial of the loan modification. This aspect of the law provides an extra incentive for banks and lenders to work with proactive borrowers to find a mutually acceptable outcome. However, there is only a 15 day window to file the request for mediation and pay the $50 filing fee. After the Circuit Court receives the mediation request, it refers the matter to the Maryland Office of Administrative Hearings. This office then schedules a mediation session, which the law requires to occur within 60 days. Mediation is preferable to litigation because the impartial mediators provide a more collaborative approach to help the lender and the borrower reach a mutually workable agreement.
The process is fraught with complex technicalities, so it is important to consult a Maryland bankruptcy attorney before entering the Maryland foreclosure mediation program. Although mediation is a powerful alternative to litigation, the lender will certainly have their lawyer present, so it is a good idea for borrowers to have their own legal representation.