Maryland rides to the foreclosure rescue

Posted on November 7, 2008. Filed under: Foreclosure Defense, Loan Modification | Tags: , |

Amid the widening housing crisis, Gov. Martin O’Malley plans to announce today an agreement with some of the nation’s largest loan servicers to help homeowners who have fallen behind in their mortgage payments to avoid foreclosure.

Under the accord, GMAC, Ocwen Financial Corp., Litton Loan Servicing and other companies have agreed to follow certain practices when working with borrowers seeking to modify terms of mostly subprime or adjustable-rate loans they can no longer afford. Significantly, the servicers have agreed to a “cooling-off” period to ensure that borrowers don’t lose their homes before they can get help.

Industry officials and homeowner advocates say Maryland’s efforts put it at the forefront of the national response to the housing crisis, which has led to increased foreclosures and declining property values across the country. The voluntary agreements come as the percentage of mortgages in Maryland that are overdue continues to increase, while the economy weakens and homeowners lose jobs or face other financial difficulties. In September, according to data collected from some loan servicers in the state, about one in 10 mortgages were two months late, an increase from one in 15 in February.

Few homeowners are able to work out arrangements with lenders to avoid foreclosure. Only 16 percent of Maryland borrowers who were two months behind in their payments negotiated such deals in September, according the state data that regulators began collecting this year.

“Far too few people are getting meaningful help,” said Thomas E. Perez, secretary of the Department of Labor, Licensing and Regulation, who will appear with O’Malley in Annapolis today.

The Democratic governor held a news conference at the State House earlier this year to chastise the loan service industry, saying troubled borrowers got busy signals or weren’t able to obtain assistance when they sought help. He met with industry representatives shortly afterward, and his administration spent the past few months hammering out the voluntary agreements.

The six companies account for about 23 percent of the market. Others declined to sign the agreement, in some instances because they are national companies that make it a policy not to sign state accords. Countrywide Financial Corp. had signaled a willingness to sign but was then acquired by Bank of America Corp., said Vicki Schultz, senior adviser for consumer protection at the labor department.

California and Ohio have struck similar agreements with loan servicers.

The companies are essentially debt collection firms that bill and collect mortgage payments, and many didn’t have the staffing or skills to handle a large increase in borrowers falling behind and calling to ask for help. In many cases, the number of delinquent borrowers continues to outstrip the ability of loan servicers to grapple with the problem.

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