According to the Washington Post, Maryland Gov. Martin O’Malley signed a bill into law earlier this month that reduces the time in which debt collectors can pursue homeowners in court for an old foreclosure debt from 12 years to three.
“We had essentially the worst law in the country,” said state Sen. Jamie B. Raskin, according to the Post. “And that just adds insult to injury. America is the land of second chances.”
According to RealtyTrac, Maryland now has the second-highest foreclosure rate in the nation, and the law will now move the state from among those with the longest collection times in the nation to an average rate.
Earlier this year, a Washington Post investigation showed that homeowners in Maryland were frequently taken to court over mortgage debts, sometimes years after the foreclosure process had been completed. The new law will help people who are underwater with their homes—as the newspaper put it, “a property with a $500,000 mortgage that is worth $300,000 when it is foreclosed on leaves a $200,000 debt.”
The new law will go into effect on July 1, and will help the current 214,000 homeowners who are underwater on their mortgages in the event of foreclosure. The law will apply retroactively to people whose homes were foreclosed upon during the 2008 housing crisis, as long as the owners occupied the properties at that time.
It should be noted that the law does not address interest on debt that is acquired after a home goes into foreclosure. In some cases, this can add up to thousands of dollars. The Post reported that in 2013, a Montgomery County homeowner was ordered to pay $115,000, plus nearly $23,000 in interest, on a foreclosure that occurred years earlier.
“There may be more things we need to do in looking at the interest,” Marceline White, executive director of the Maryland Consumer Rights Coalition said, according to the Post.
Under old laws, debt collectors had an additional 12 years to collect the debt and a one-time renewal of 12 years, on top of the 12 years to pursue court cases — for a total of 36 years to pursue homeowners, according to the Post.
What Can I Do If I Cannot Afford to Pay My Mortgage?
There are options if your home is underwater. Reorganizing your debt by filing for bankruptcy could help you save your home.
During a Chapter 13 bankruptcy, a debtor can enter into a repayment plan lasting between three to five years. If you have an outstanding mortgage balance, this process can give you time to pay off the debt, as an automatic stay goes into effect that prevents a lender from taking actions against you to collect debts.
Save your home. Visit our Facebook page, our LinkedIn page, our Google+ page and our Twitter page for more information about our foreclosure and bankruptcy services. We are located near the Navy Memorial/Metro Station.
Law Firm of Kevin D. Judd– Maryland and Washington DC bankruptcy attorney
Judd’s Judgment: In March, one in every 527 housing units was involved in a foreclosure filing in Maryland.