Foreclosure crisis has changed -- and so has Md.'s response

We wonder whether the thousands of hardworking Maryland families who have received counseling and assistance through Governor Martin O'Malley's response to the national foreclosure and subprime lending crisis would agree with Marta Hummel Mossburg's assertion that it has all been a waste of effort ("State fails to stem the tide of foreclosures," Jan. 5).

Maryland's response to the crisis is considered among the most comprehensive in the nation because it has had tangible benefits.

Foreclosure filings dropped almost immediately after emergency reform legislation went into effect. In the first quarter of 2009, foreclosure filings fell 7.4 percent from the previous quarter and by 18.5 percent from the first quarter of 2008.

The Department of Labor, Licensing and Regulation's Office of the Commissioner of Financial Regulation, armed with new powers to combat mortgage fraud, issued more than two dozen cease-and-desist orders last year against operators of foreclosure rescue scams and helped prosecutors obtain several high-profile criminal convictions.

The governor's office reached agreement with mortgage servicers handling 23 percent of the state's residential loans to make their loss mitigation processes more streamlined and transparent.

Meanwhile, Maryland established the HOPE counseling network, under the supervision of the Department of Housing and Community Development (DHCD), so that embattled homeowners can get the kind of up-to-date, reliable and free counseling they need and deserve. DHCD's community outreach staff has participated in 154 foreclosure prevention forums throughout the state, helping thousands of families cut through the delays and red tape and meet directly with loan counselors, lenders and pro bono attorneys to find sustainable alternatives to losing their homes.

The reason for the recent rise in foreclosure filings is not that the reform package was misguided or the O'Malley administration's implementation of it has been ineffective. Foreclosure filings continue to rise because the problem has changed.

Two years ago, the biggest issue driving foreclosures was subprime mortgages -- loans that never should have been made in the first place, or were made at adjustable interest rates that quickly reset to a point where homeowners could no longer afford them.

Many of those cases can be resolved by a loan modification if the foreclosure process is slowed down to give homeowners a chance to be able to work something out with their lenders. This was the guiding principle behind the 2008 package.

Today, however, more and more foreclosures are driven by the rise in unemployment that was triggered by what most economists agree has been one of the most prolonged economic downturns on record. That is a more difficult issue to resolve. Unemployed homeowners in many cases no longer have the income to be eligible for a modification.

A different problem requires a different solution, which is why Governor O'Malley is proposing legislation to introduce a mediation or settlement process into foreclosure cases. This would not only ensure that homeowners and lenders come together to fully explore modification options when modification is warranted but to assess all options for a graceful exit short of foreclosure when modification is not possible.

Foreclosure helps no one -- not homeowners, not lenders, not surrounding neighborhoods. DHCD researchers estimate foreclosures cost Marylanders more than $4 billion a year in lost property taxes, revenue and home values. Other studies show a clear link between foreclosures and both declining values of nearby properties and an increase in crime.

Keeping Marylanders in their homes and preventing foreclosure in as many instances as possible not only is the right thing to do, it is the smart thing to do, and the O'Malley administration will continue to seek ways to make the process more responsive and equitable.

Raymond A. Skinner and Alexander M. Sanchez, Baltimore

The writers are secretaries of the Maryland departments of Housing and Community Development and Labor, Licensing and Regulation.

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