Consumer advocates warn of another potential mortgage crisis in Maryland, call for legislative help

Another Maryland mortgage crisis may be on the horizon as out-of-state hedge funds buy up distressed loans and seek to foreclose on people’s houses, consumer advocates warned Thursday.

The advocates, flanked by homeowners and lawmakers at a rally in Mount Vernon calling for legislative action, said the hedge funds go unregulated and untaxed in Maryland because a state law expanded after the last housing crisis in the mid-2000s didn’t specifically require big investment funds to be licensed as debt collectors.

“It was an issue we thought was settled,” said Del. Charles E. Sydnor III, a Baltimore County Democrat. “Everyone should be playing by the same rules.”

National advocacy groups including the National Consumer Law Center have found problems around the country several years ago when the U.S. Department of Housing and Urban Development began selling billions of dollars in defaulted loans backed by the Federal Housing Administration in an effort to shore up the agency’s finances.

The Distressed Asset Stability Program attracted hedge funds and large private equity firms, which weren’t required to offer the same protections to those with FHA-backed mortgages.

Sydnor said Maryland tightened its own laws on the heels of the last mortgage crisis, but a recent Court of Appeals ruling said investment funds weren’t covered by the debt collection law.

He said that when the next session of the General Assembly convenes in January, he and his colleagues would look to further expand the law to cover hedge funds and any other entities that might jump into the debt collection business.

Jen Diamond is program manager for the Maryland Consumer Rights Coalition, which held the rally across from the office of the State Collection Agency Licensing Board, which would license the hedge funds.

She said unsuspecting homeowners who run into financial trouble are finding that the funds have bought their mortgages and are often unwilling to modify their loans — and sometimes charge fees they don’t understand.

She said some lenders move quickly to foreclose, taking homes from families and wealth from communities.

“They are not interested in helping families stay in their homes,” Diamond said. She called on the public to contact legislators and go online and sign a letter the group plans to send to members of the General Assembly.

Through public records kept by the Maryland Department of Labor, Licensing and Regulation, the advocacy group found that Prince George’s County had the most mortgage loans held by out-of-state hedge funds from January 2013 to February 2017, with 3,210.

Baltimore County followed with 2,688, Baltimore City with 2,397, Anne Arundel County with 1,464 and Montgomery County with 1,178.

The state Attorney General’s Office is aware of the issue and wrote an brief in support of homeowners in the Court of Appeals case decided over the summer. Any complaints by homeowners would be sent to the state Commissioner of Financial Regulation, part of the licensing and regulation department.

The commissioner’s office reports that so far in fiscal 2019, it has received 108 mortgage-related complaints, of which 21 involved foreclosure issues, though the office couldn’t immediately determine if they involved hedge funds. The office said it could have some jurisdiction over hedge funds depending on how they are structured, but that most consumer mortgage foreclosures involve mortgage servicers and collection attorneys that already fall under the office’s authority.

Zalee Harris came to the rally and said she has been fighting to keep her home of nearly three decades after a hedge fund acquired her loan when she began having trouble making payments. She said everything about the process has been difficult, including getting information on what she owed directly and through fees, and how to challenge decisions in the courts.

The foreclosure has gone ahead but Harris is appealing the case.

“As of July 2017, I can no longer say I am a homeowner,” said Harris, who remains in her home but said she has boxed up most of her belongings in anticipation of being evicted. “The foreclosure process is stacked in favor of the hedge funds.”

Joann Rodriguez also came to the rally to ask lawmakers to tackle the problem. She lived in a house in West Baltimore for eight years when she missed a mortgage payment because she lost a partner and her job at the same time. She said that while she was working with a bank on a new loan with cheaper payments she found out her mortgage had been sold and foreclosure proceedings had begun.

With the support of her family, she moved into a retirement center in Prince George’s County and didn’t fight the foreclosure.

“I think about how homeowners with fewer resources wouldn’t have the choices I had,” she said. “It shows you that it affects everybody.”

meredith.cohn@baltsun.com

twitter.com/mercohn

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