Maryland Mortgage Legislation

2008 was an important year for the mortgage industry in Maryland. The state enacted new legislation to address mortgage foreclosures and mortgage fraud.

The legislation requires Maryland mortgage lenders to wait 90 days after a homeowner is in default before filing a foreclosure action. The entire foreclosure process is extended from the previous 15 days to roughly 150 days under the legislation. Lenders are also required to send the homeowner a Notice of Intent to Foreclose 45 days before the lender takes action. Under the bill, homeowners are also given the right to cure, which allows a homeowner to stop the foreclosure process by paying what is owed on the mortgage up until one day before the sale of the foreclosed property.

The "Bridge to Hope" Loan Program created by the bill provides small gap loans at zero interest for homeowners in trouble, giving them time to work with Maryland mortgage lenders to avoid going into foreclosure.

These new protections are a reaction to a dramatic increase in the number of foreclosures in Maryland. Some counties in the state saw foreclosure rates double or even triple in late 2007.

In addition to helping homeowners, the new legislation targets rogue mortgage brokers.

Maryland mortgage lenders will be required to make a full-faith effort to verify an applicant's ability to repay a loan rather than relying solely upon the information supplied by the applicant. The legislation also prohibits pre-payment penalties on mortgages.

Maryland mortgage lenders will face stricter licensing regulations, including increased surety bond requirements.

The new laws criminalize mortgage fraud, provide for substantial fines and even imprisonment for violations, and gives the state attorney general, the state's attorney and the Commissioner of Financial Regulation the power to enforce the law. Under the new law, lenders who engage in fraudulent practices can also be sued in court by victims of such fraud.

Mortgage associations such as the Maryland Bankers Association were supportive of the new legislation, welcoming the efforts to drive unscrupulous lenders out of business.

Lenders in Maryland now join New Hampshire mortgage lenders as well as lenders in several other states in cracking down on mortgage fraud, and helping homeowners in trouble.