In 2010, Maryland enacted a Foreclosure Mediation, Law RP §7-105.1, that provides for a conference at which the homeowner and lender appear before an impartial mediator to discuss and negotiate loss mitigation options in an attempt to avoid foreclosure. Loss mitigation programs are options regarding a owner occupied property that avoid foreclosure through loan modification or other changes in existing loan terms that are intended to allow the homeowner to remain in the property; or avoids foreclosure through short sale, deed in lieu of foreclosure, or other alternative intended to simplify the homeowner’s surrender of the property; or lessens the harmful impact of foreclosure on the homeowner.
A foreclosure may not be filed until either 90 days after loan default or 45 days after a Notice of Intent to Foreclose is sent, whichever is later. A Notice of Intent to Foreclose must include a loss mitigation application, instructions for completing the application, a description and eligibility requirements for loss mitigation programs, and a preprinted envelope with the address of the person responsible for conducting loss mitigation analysis on behalf of the lender. Loss mitigation analysis is an evaluation of the facts and circumstances of a loan secured by owner occupied residential property to determine whether the borrower qualifies for a loan modification and whether any other loss mitigation programs may be available to the homeowner. This essentially requires the lender to attempt to explore alternative options prior to beginning a foreclosure case. The loss mitigation analysis typically begins with investigating possible modification under HAMP, but should include any internal modification or forbearance programs that may be available.
After completion of the loss mitigation analysis, the lender must provide the homeowner with a Final Loss Mitigation Affidavit, which certifies the completion of the analysis and if denied, provides an explanation for the denial of a loan modification or other loss mitigation.
The lender begins the foreclosure process in the Circuit Court by filing an Order to Docket Foreclosure/Complaint to Foreclose. The law requires the lender to include with any foreclosure filed after July 1, 2010 either a Preliminary Loss Mitigation Affidavit or Final Loss Mitigation Affidavit. If the Order to Docket includes a Final Loss Mitigation Affidavit, it must also include a Request for Mediation form and preaddressed envelopes to the foreclosure trustee and Clerk of the Court. The homeowner must file the Request for Mediation no later than 15 days after service of the Order to Docket and pay the mediation fee of $50.00 to the Clerk of the Court.
If the Order to Docket includes a Preliminary Loss Mitigation Affidavit, it will not include a Request for Mediation. In the alternative, the Order to Docket will include a loss mitigation application with preaddressed envelope to the foreclosure attorney. The lender is required to file the Final Loss Mitigation Affidavit no earlier than 28 days after the Order to Docket has been served on the homeowner. The lender must include the Request for Mediation when it mails the Final Loss Mitigation Affidavit to the homeowner. The homeowner must file the Request for Mediation no later than 15 days after service of the Order to Docket and pay the mediation fee of $50.00 to the Clerk of the Court.
If mediation is requested, the Office of Administrative Hearings will schedule mediation within 60 days. In the time before the mediation, the parties will exchange documents, such as tax returns, proof of income, loss mitigation analysis, investor guidelines, payment history, and property valuations. The lender is required to be represented by a person who has authority to settle the matter or be able to contact a person with such authority. The homeowner is entitled to representation at the mediation, but is not required. At the mediation, the parties and mediator will discuss loss mitigation programs that may be available. This is an excellent opportunity to revisit and explore potential options to avoid foreclosure.
If the parties reach an agreement during mediation, the parties will draft a document outlining the terms. If there is no agreement, the foreclosure case will continue in the Circuit Court. If the lender fails to cooperate, the foreclosure case can be dismissed. Within 5 days of the mediation, the mediator will report the results to the Circuit Court and include any agreements. The property may be auctioned 15 days after an unsuccessful mediation.
If mediation is unsuccessful, the homeowner may request a stay of foreclosure to stop the auction or may utilize the automatic stay of bankruptcy to stop the auction.
If you are considering mediation, please contact us at 301-891-8485 or complete our online contact form to arrange a consultation to discuss your legal options.