Recent changes in Maryland law that affects foreclosures. On April 4, 2008, a new law went into effect that addresses several aspects of the foreclosure process. The goal of this law is to give borrowers who are in default the time and information necessary to try to save their home from foreclosure.
Under the former law, lenders could foreclose in as little as 15 days. Often, the lender would send out the notice of intent to foreclose at the same time it would forward the file to its foreclosure attorneys. In essence, by the time the notice was received, the attorneys could have already initiated the foreclosure process and the letter stating that the foreclosure had been filed was received at the same time as the notice from the lender. “Service” could also be non-existent. All that the lender needed to do was send the notice by certified mail. This low standard for service meant that not all property owners were notified that the foreclosure process had been initiated. For example, if a rental property was in foreclosure, the lender could send the notice to the tenants and not the landlord and it would qualify as “service” to the owner of the property.
The new law does three crucial things: it requires a real service of notice; it extends the foreclosure process to a minimum of 90 days; and it requires that the borrower in default receives the name and phone number of a specific person designated by the lender to handle loss mitigation (meaning that the borrower has a designated lender’s representative with whom to discuss repayment plans or other alternatives to foreclosure).
“Now, the lender has to send out a Notice of Intent to foreclose. Included in the notice must be the amount to redeem the property, and it also must have the name and contact information of an individual authorized to do loss mitigation. It also must have the name of the loan servicer and the note holder. (For example, Citimortgage can be the loan servicer and Fannie Mae can be the note holder),” said Nancy Gusman, senior title attorney with Cosmopolitan Real Estate Settlements in Largo, MD.
Also, once the foreclosure is filed in court, there has to be a demonstrable attempt at physical service of the notice. While the service requirements are still lighter than for traditional lawsuits, the service requirement is considerably stronger than it was prior to the law. “The lender has to make two good faith attempts to physically serve you and hand it to you. If that fails, it can go to court and have an alternative means of service,” said Gusman. “The lender cannot schedule the auction for a minimum of 45 days after service has been accomplished, or 90 days after the initial default.”
Lastly, under the old law, home owners in default had until the auctioneer’s gavel fell to redeem the property. Under the new law, home owners have the right to redeem the property up to one day prior to the auction.
Since it is a new law, there is not yet a uniform process that lenders will follow. Each will handle the foreclosure process differently, but regardless of the specific details of implementation, the overall result is the same: home owners will have the specific information they need to negotiate an alternative to foreclosure with the lender, and a little bit of time in which to do so.