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Governor O'Malley Announces Agreement with Mortgage Servicing Companies to Provide Foreclosure Relief

 

ANNAPOLIS, MD (November 7, 2008) - Governor Martin O'Malley today announced that after intensive negotiations, Maryland has reached agreements with six mortgage servicing companies to create a streamlined and transparent loss mitigation process for distressed Maryland homeowners. Together, these companies service 23% of home loans in Maryland. The Governor was joined today in Annapolis by Department of Labor, Licensing and Regulation Secretary Thomas E. Perez, Department of Housing and Community Development Secretary Raymond Skinner, Financial Regulation Commissioner Sarah Bloom Raskin and representatives from the participating servicers.

"During this time of economic uncertainty, we must do all that we can to protect our middle class families and keep our families in their homes," said Governor O'Malley. "I want to thank these six lending companies for taking the lead in their industry, and becoming part of the solution for distressed homeowners in Maryland."

The agreements follow a five-point framework that will provide Maryland homeowners direct access to servicers through Maryland's Foreclosure Prevention Assistance Network. By signing the agreements, the servicers, HSBC, Ocwen, GMAC ResCap, Litton Loan Servicing, AmeriNational Community Services and Citi, have pledged to abide by a predetermined timeline for loss mitigation that will ensure homeowners have an answer within 75 days from the time they submit a loss mitigation package. The agreements also ensure that generally during that time, the lender will halt foreclosure actions and penalties will not accrue. The servicers agreed to designate representatives, known as "Team Maryland," who will serve as the direct points of contact for Maryland assistance network working with distressed homeowners. The servicers have also agreed to establish or continue internal policies that offer staff incentives for loan modifications, and to refrain from offering incentives that encourage foreclosures.

"Maryland has been at the forefront of creating policies and reforms to combat the foreclosure crisis that has swept the nation. These agreements are a critical component of our comprehensive efforts to provide homeowners with the resources and assistance they need to remain in their homes," Secretary Perez said.

As delinquency and foreclosure rates have climbed across the nation, homeowners seeking alternatives have had increasing difficulty even getting their loan servicer on the phone, let alone accessing meaningful loss mitigation. Recognizing this troubling trend, Governor O'Malley called servicers to the table in February to find a way to ensure more Marylanders have access. The agreements announced today are a result of months of negotiations.

"Maryland's agreements with servicers will enable our network of HOPE housing counselors to work more closely with lenders to provide more options for Marylanders to mitigate foreclosure," said DHCD Secretary Raymond A. Skinner. "The efforts of the housing counselors have been incredible, and a better relationship with the servicers will surely help increase positive outcomes for our State's homeowners."

The O'Malley-Brown Administration has also undertaken other efforts to ensure servicers do their part in Maryland to preserve homeownership. The State enacted an emergency regulation to collect loss mitigation data from servicers. The data has shown that while more delinquent homeowners are receiving loss mitigation services now than they were six months ago, the number of delinquent homeowners continues to grow.

In addition to the steps taken today, Governor O'Malley, Administration officials and the General Assembly have worked aggressively over the past year and a half to address what has become the worst housing crisis the nation has seen since the Great Depression. Governor O'Malley has signed into law legislation that The Washington Post called "among the most sweeping in the country" to keep families in their homes, including legislation that:

  • Lengthened the foreclosure process to approximately 150 days, providing homeowners with more time and notice before a foreclosure sale;
  • Made mortgage fraud a crime for anyone involved in the mortgage transaction and punishable by fine or imprisonment;
  • Reformed lending practices by banning pre-payment penalties on mortgage loans, requiring lenders to verify a borrower's ability to repay a loan and strengthening the licensing requirements for mortgage professionals.

Governor O'Malley also announced the "Bridge to HOPE" Loan Program, which provides small gap loans at zero percent interest to homeowners facing difficulty, giving them time to get back on their feet or find a solution. Families and individuals facing the possibility of foreclosure should call 1-877-462-7555 or visit Maryland HOPE website for assistance. He also launched the "Mortgage Late? Don't Wait!" campaign, a comprehensive, multimedia advertising campaign to help tackle rising foreclosures in the State and ensure Maryland homeowners are aware of the programs available to provide assistance and relief.

Servicers are also now subject to a duty of care, which requires them to promptly respond to homeowners seeking timely help and information about their mortgage loan accounts. Servicers must also pursue loss mitigation where possible. Maryland is the first state in the nation to enact such a duty for loan servicers.

"This new regulation makes clear that servicers with a Maryland license will be held to a standard of care that reflects best practices in the industry and is responsive to consumers," Commissioner Raskin said.

The agreements announced today add an additional tool to the arsenal the State has developed to preserve homeownership in Maryland. Housing Counselors and pro bono attorneys who are part of the Foreclosure Prevention Assistance Network, and accessible through the HOPE Hotline, will now have better access to servicers. This latest development is part of Maryland's long term, comprehensive efforts to combat foreclosures, protect homeowners and preserve communities.

State of Maryland Servicer Agreements: Five-Point Framework

I. Process-Maryland's 5/10/60 Timeline for Loss Mitigation

5 days: Servicer will acknowledge receipt of a loss mitigation package within five days of receipt.
10 days: Servicer will confirm that the package is complete within 10 days of 
acknowledging its receipt.
60 days: Servicer will make a decision regarding the nature and extent of loss 
mitigation within 60 days.

  • Cooling Off Period - Servicer agrees to halt foreclosure actions and the accrual of fees and penalties during the period between acknowledging receipt and rendering a decision.

II. Team Maryland

  • Servicer agrees to designate certain employees to act as Team Maryland and serve as the point of contact for Maryland homeowners working through the Foreclosure Prevention Assistance Network.
  • Servicer agrees to provide "escalation contacts," who have the authority to resolve more complex or problematic cases.
  • Servicer will assess the adequacy of Team Maryland staffing on an ongoing basis.
  • Maryland agrees to support a Foreclosure Prevention Assistance Network to potentially increase the servicers' capacity to do loss mitigation. The Network will include nonprofit housing counselors who will work with Team Maryland.

III. Technology and Data

  • Servicer agrees to consider participating in a pilot of any software that Maryland undertakes to manage and facilitate the collection and submission of information and documents from the Network to the servicer.
  • Servicer will provide periodic data reports to the Commissioner of Financial Regulation, including response time data, loan profile data and loss mitigation data.
  • Maryland will provide periodic data to servicers regarding the servicers' response time based on the experience of the Network.

IV. Modification Guidelines

  • Servicer agrees to provide Maryland with its general loss mitigation guidelines.
  • Servicer agrees to create internal policies and incentives for staff and foreclosure counsel that result in modification of loans rather than foreclosure. This includes offering incentives to reduce delinquency rates and refraining from offering incentives that encourage foreclosure.
  • Servicer agrees to, as a matter of regular business practices, document communications between employees and agents and borrowers regarding their accounts and modification efforts.

V. Marketing and Outreach

  • Servicer agrees to participate in outreach and marketing by notifying borrowers and providing staff at large-scale events in Maryland.
  • Servicer will train and participate in periodic conference calls with counselors.
  • Servicer will consider working with Maryland to redevelop Real Estate Owned Properties (REO) in partnership with government and nonprofits.