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O'Malley chastises mortgage industry

Gov. Martin O'Malley accused the mortgage industry yesterday of failing to follow through on promised assistance for homeowners facing foreclosure and called on more than two dozen loan servicers to meet with him in Annapolis next week.

At a news conference yesterday, he joined administration officials and nonprofit housing counselors in relaying consumer complaints about busy signals at loan servicers, long waits on hold and a lack of assistance once homeowners do get in touch with customer service representatives.

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"Far too often, homeowners who try to take action to avoid foreclosure are unable to even get their loan servicer on the phone," O'Malley said. "We need the loan servicers to join with us, not from someplace out in Topeka, Kansas, at a 1-800 number, but here in Maryland."

Underscoring the administration's hard-line stance, state regulators announced that they are opening an examination of one servicer, Ocwen Loan Servicing, after receiving several complaints. Labor Secretary Thomas E. Perez noted that Maryland is one of the few states that license servicers and said he plans to "exercise the full scale of our authority to hold them accountable to their obligations to protect consumers."

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While state and federal officials have scrambled to ease the foreclosure crisis stemming from the subprime mortgage debacle, the first option for many consumers is to work with loan servicers. In addition to complaints of unresponsiveness, consumers say the process can be confusing because banks and lenders often resell their loans to investors, while other companies service the loans for a fee.

Reports of how much help is being extended to homeowners are mixed. Moody's Investors Service reported that in the first six months of last year, servicers modified the terms of just 1 percent of subprime loans whose interest rates had risen nationally. But industry officials say that was only part of the picture and that efforts to help homeowners have been ramped up since then.

The industry helped 869,000 homeowners with loan modifications and repayment plans in the second half of last year, according to the HOPE NOW alliance, a coalition of servicers, mortgage counselors and investors.

In Maryland, according to the Mortgage Bankers Association, servicers started foreclosure proceedings on nearly 6,300 Maryland homes in the third quarter of 2007 but agreed to changes to help a group of almost 5,800 borrowers avoid foreclosure.

"Nobody benefits from a foreclosure. The lender doesn't, the borrower doesn't, communities don't," said Paul Richman, a vice president at the bankers association. "That's why lenders are undertaking this historic effort."

"We have a system in place that is working," he said. "And what we need is elected officials like the governor to endorse this system, rather than coming up with new regulations and legislation that aren't going to help people in the current situation."

Ocwen Vice President William Rinehart said that the company stands by its customer service record and has helped 80 percent of homeowners who are more than three months late on their mortgages avoid foreclosure.

"Certainly the situation in the market today has caused an increase in delinquency and default," he said. "There may be a situation where someone may have had a wait time on the phone. That's very possible. But we are staffing up and making sure we can handle everything as quickly as possible."

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O'Malley, a Democrat, sent letters to some of the biggest companies in the lending industry, including Countrywide Financial Corp., CitiFinancial and IndyMac Bancorp, asking them to attend his servicer summit Tuesday to discuss their efforts to mitigate foreclosures.

CitiFinancial, which is based in Baltimore, will send a representative to the meeting, spokesman Robert Julavits said. The company is "proud of its long record of proactively helping its borrowers," he said. "We are committed to being part of the solution."

Maryland officials have introduced a number of initiatives to address a rising number of foreclosures. There were 9,722 foreclosures in Maryland in the last three months of 2007, up 40 percent from the previous quarter, according to RealtyTrac data compiled by O'Malley's office. Prince George's County had the most foreclosures, followed by Montgomery County and Baltimore City.

The governor has proposed several bills to overhaul the foreclosure process and tighten lending standards that are being considered by the General Assembly, and the Department of Housing and Community Development has launched loan programs to help homeowners refinance into sustainable loans.

The Department of Labor, Licensing and Regulation also promulgated regulations to require that loan servicers file monthly reports about how many loans are in default and to document their efforts to help borrowers by refinancing or modifying the loan terms. Those regulations took effect today, making Maryland the second state in the nation after California to take that step.

Anne Balcer Norton of the St. Ambrose Housing Aid Center in Baltimore said homeowners are finding an "arbitrary and inconsistent" response to their pleas for help from loan servicers.

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"Despite the top executives and CEOs of major servicing companies promising a commitment to rate freezes, loan modifications and other loss mitigation efforts, the response from customer service representatives on the ground is much different," she said.

laura.smitherman@baltsun.com


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