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The O’Malley - Brown Administration’s Response

to Foreclosures in Maryland

Governor’s Housing Conference

September 27, 2013

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Maryland’s Foreclosure Response

Four Priorities:

(1) Intensive Public Outreach & Nonprofit Counseling

(2) Broad Stakeholder Engagement – Three Task Forces Since 2007

(3) Consumer-Focused Legislative & Regulatory Reforms

(4) Aggressive Enforcement Against Foreclosure- related Fraud

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DHCD’s Role in Foreclosure Response

• MD HOPE Hotline

• MD HOPE Website

• “Mortgage Late? Don’t Wait!” Events

• Targeted outreach, advertising, and response to consumer requests for assistance

• 20 foreclosure prevention releases since January 1

• Statewide network of housing counseling agencies and legal service organizations

Section 2 – O’Malley Brown Approach

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MD HOPE Program

Since 2007:• More than 70,290 consumers have called the MD HOPE Hotline• More than 591,350 have visited the MD HOPE website• More than 91,165 people have been assisted by our forty-plus nonprofit partners in the

HOPE network• More than 1000 volunteer lawyers recruited and trained through the Pro Bono

Foreclosure Prevention Project • 43 “Mortgage Late? Don’t Wait!” workshops with more than 14,800 people in attendance

Hotline Marketing Refresh• New visual designs of advertising and collateral

material

• Posters displayed in retail outlets

• Direct mailing of postcards to reach almost 300,000 delinquent homeowners

5Maryland Has the Fifth Highest HAMP Modifications per 1,000

Households in the Nation and Ranks Above Any State in the RegionJune 2013*

*Ranking from the highest to lowest modification rate

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Mediation Trends in Maryland

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Mediation Trends in Maryland

Program Life:*

•Mediation Requests: 7,936 requests

•Mediation Closed Cases: 7,199

•Opt-in Rate: 25%.

Current Opt-in Rate: 22%.*As of July 2013

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DLLR’s Role in Foreclosure Response

• Division of Financial Regulation• Licenses mortgage brokers, lenders and servicers

• Responds to consumer complaints and takes enforcement action regarding mortgage and foreclosure related abuses

• Promulgates regulations associated with foreclosure reform, mediation program and other legislation

• Conducts outreach – over 100,000 targeted outreach packages per year

• Created and manages Foreclosed Property Registry

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Consumer Outreach & Assistance

• More than 750,000 NOI’s received since April 2008

• More than 150,000 in calendar year 2012

• More than 750,000 outreach letters to homeowners facing foreclosure

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Foreclosed Property Registry

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Online registry to address long delays between foreclosure sale and deed recordation – accessible to state and local officials

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Enforcement

• Target: Loan modification scams that charge consumers illegal up-front fees for false promises of assistance in obtaining a mortgage modification or avoiding foreclosure.

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Owings Mills man pleads guilty in mortgage-scam case

At least 48 homeowners fell victim to scheme, state says

• September 06, 2012 - By Jamie Smith Hopkins - An Owings Mills man has pleaded guilty to mortgage fraud after prosecutors alleged he took money from at least 48 homeowners to help them get loan modifications, then stole the monthly payments they thought were going to their lenders, the state said Thursday.

• Rodney Getlan, 45, could be sentenced to as many as 90 years in prison. The state is seeking a 40-year sentence with 10 years suspended, along with restitution of about $400,000 to the victims.

Enforcement

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National Mortgage Settlement

Investigation started in October 2010 in response to “robo-signing” Negotiations included 50 state attorneys general, state banking regulators,

DOJ, HUD, Treasury DLLR’s Commissioner of Financial Regulation represented Maryland on the

negotiating team and now serves on the Monitoring Committee Settlement date: March 1, 2012 $25 billion in damages, fines and borrower relief Participating banks (60% of nationwide market):

Bank of AmericaCitiChaseWells FargoAlly (GMAC)

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National Mortgage Settlement at Work in Maryland

Maryland has received well over $1.4 billion in gross benefits from the 5 servicers in the settlement

$1.3 billion in relief delivered to homeowners currently facing foreclosure – Loan mods, short sales, deficiency forgiveness etc.

Equivalent to relief delivered in VA and PA combined$24 million – payments to borrowers already foreclosed upon$64 million – refinancing commitments to underwater borrowers$60 million – fine

$6 million to General Fund $54 million to housing initiatives – counseling, legal services,

local housing initiatives and state enforcement resources

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Detail on State Portion of Settlement Funds - $54 Million

Neighborhood Stabilization Funds - In Collaboration with the Office of the Attorney General,

DHCD is overseeing the following:

• $8.6 million for Housing Counseling Agencies with $1.7 million dispersed as of Aug. 30.

• $6.2 million for Legal Services Agencies with $1.4 million dispersed as of Aug. 30.

• $10 million each to Prince George’s County and Baltimore City

• $16.9 million (up from $14 million*) for Neighborhood Stabilization

Enforcement Funds

• $2.8 million for OAG – legal and investigative positions

• $2.1 million for DLLR’s Division of Financial Regulation – legal, investigative and compliance positions

*Funding of $14 million from the settlement was later supplemented by $2.9 million of additional proceeds from subsequent settlement funds

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Summary of Major Legislation

• In 2007, Homeownership Preservation Task Force

• Co-Chairs: DHCD Secretary Skinner and Secretary Thomas E. Perez

• Participants included all stakeholders – Lenders (bank and non-bank), brokers, real estate agents, attorneys, non-profits, foundations, local governments, and consumer advocates and lenders

• Produced landmark legislation reforming mortgage lending and foreclosure process

• In 2010, Mediation Working Group

• Produced Administration recommendations and ultimately legislation establishing Maryland Foreclosure

Mediation Program

• In 2011, Foreclosure Task Force

• Co-Chairs: DHCD Secretary Skinner and Secretary Alex Sanchez

• Similar coalition of participants

• Produced significant process reforms including Foreclosed Property Registry and accelerated process for vacant homes

Aggressive and Collaborative Legislative Approach to Combat the Foreclosure Crisis

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• 2008 – Comprehensive Legislation for Mortgage and Foreclosure Reform

• Credit Regulation - Mortgage Lending and Other

• Maryland Mortgage Fraud Protection Act

• Protection of Homeowners in Foreclosure Act

• Foreclosure Process Reform Legislation – Timelines / notice etc

• 2010 - Foreclosure Process Reform Legislation – Mediation

• 2012 - Foreclosure Reform Legislation – Registry, Vacant Property

Summary of Major Legislation

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• Major Focus Areas of 2008 Legislation

1. Lending Reforms - Protecting Consumers by Curbing Risky Practices and Correcting Defective Features of Loan Products

2. Addressing Fraud - Preventing harms and fraudulent acts

3. Foreclosure Process - Making the Foreclosure Process Fairer with more time and notice so that homeowners can avoid foreclosure

2008 Legislation

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• Pre-payment penalties are banned for all mortgage loans• Require Examination of Borrower’s Ability to Repay

• For ARMs, assure the borrower’s ability to repay the loan at the fully indexed rate

• Include in the calculation the borrower’s total housing cost including taxes and insurance, whether escrowed or not

• Consideration of a borrower’s debt to income, including existing debts and other obligations

• Verification of the borrower’s gross monthly income and assets• Requires review of 3rd party documentation reasonably believed by the

lender to be accurate and complete

2008 Legislation - Lending Reforms

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• Mortgage Fraud Protection Act• Comprehensive criminal mortgage fraud statute that includes: Fines

and penalties, imprisonment, restitution, private right of action• Protection of Homeowners in Foreclosure Act (PHIFA)\

• Foreclosure rescue transactions–a reconveyance of real property—banned

• Residences over 60 days in default subject to enhanced consumer protections and notice under certain circumstances

• Addressed loan modification consulting• The Commissioner of Financial Regulation now has concurrent

jurisdiction with the Attorney General to investigate and seek injunctions in these cases

2008 Legislation - Addressing Fraud

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• Maryland had one of fastest foreclosure timelines in the US

• Comprehensive foreclosure reform initiated in 2008

• Extended period for notice and cure• Minimum foreclosure extended from 15 to more than 100 days

• Notice of Intent to Foreclose (NOI) must be issued 45 days prior to ANY foreclosure being filed

• NOI may be filed as soon as 45 days after default

• Copy of NOI provided to Commissioner

• Currently used for outreach - Over 100,000 packages sent each year

• Enhanced filing requirements• Original or certified copy of the mortgage or deed of trust

• Statement of the debt remaining supported by affidavit;

• The mortgage lender and originator’s license number if applicable;

• Affidavit that defendant is not in the military

2008 Legislation - Foreclosure Process Reform

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2010 Mediation Legislation

• 2010 Mediation Legislation:• Introduced Foreclosure mediation to ensure that consumers receive a meaningful

evaluation for available loss mitigation options prior to a foreclosure sale.

• Mediation process – a opt-in system• Notice of Intent enhanced to include information on options available and loan

modification application

• Foreclosure filing must include “Foreclosure Mediation Opt-In” form

• Consumer has 15 days to opt-in and mediation session held at OAH within 60 days

• At the mediation session, a representative from the mortgage servicer with authority to make decisions, and a neutral third party mediator from the Maryland OAH to meet discuss alternatives to foreclosure

• Established Maryland Housing Counseling Fund, capitalized by lender fees at foreclosure filing stage ($300) and homeowner mediation opt-in fee ($50)

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Subsequent Mediation Reform Legislation:

• 2011 Mediation Legislation – process “tweaks”:• Increased time for borrowers to opt-in to mediation from 15 days to 25 days

• Provided for changes to forms through regulation

• Made certain changes relating to OAH (rules, timing)

• 2012 Foreclosure Task Force Legislation• Provided expedited process for vacant properties by which local governments

can issue certificates of vacancy that enables acceleration of process to foreclose upon and sell vacant properties

• Created foreclosed property registry• Lengthy delays between foreclosure sale and deed recordation left local authorities unable to

identify owners responsible for property maintenance and management

• Office of the Commissioner maintains online database of foreclosed property -

• Property must be registered within 30 days of foreclosure sale

• Accessible to local jurisdictions 24x7