The Maryland General Assembly has reacted quickly and idealistically to the foreclosure crisis rampant throughout the country and in Maryland. In 2008, the Maryland General Assembly enacted legislation to elongate the foreclosure process. By 2010, the Maryland General Assembly had written loss mitigation programs and mediation remedies for borrowers into the code.
While the intention behind such wide sweeping laws was to help struggling homeowners, the real effect was extending the time that underperforming and "under water" properties sat vacant or with non-paying occupants to the detriment of banks, investors, and the local community. Further, while the 2008 laws were meant to only apply to "residential property", the definition of residential property as "property improved by four or fewer single family dwelling units" was much broader and would include investment properties. The 2010 laws that introduced loss mitigation programs and mediation remedies are only applicable to owner-occupied residential properties.
Some of the key laws enacted by the 2008 General Assembly session are summarized below:
- An action to foreclose may not be filed until the later of 90 days after a default has occurred or 45 days after a notice of intent to foreclose is sent. Md Real Prop. Code Ann. § 7-105.1(b)(1)
- The lender must include required disclosures in the "notice of intent to foreclose", a prerequisite to initiating a foreclosure. A copy must also be sent to the Commissioner of Financial Regulations. Md Real Prop. Code Ann. § 7-105.1(c)
- Copies of the "Order to Docket" (the typical pleading that commences a judicial foreclosure action) must be personally served on the borrower. Md Real Prop. Code Ann. § 7-105.1(f)
- A foreclosure sale may not occur until at least 45 days after the borrower is personally served with a copy of the Order to Docket. Md Real Prop. Code Ann. § 7-105.1(l)
Some of the key laws enacted by the 2010 General Assembly session are summarized below:
- The "notice of intent to foreclosure" must now include a loss mitigation application, which includes instructions on completing the application and the lender's eligibility requirements for loss mitigation programs offered. Md Real Prop. Code Ann. § 7-105.1(c)(5)
- The lender must include an affidavit with the Order to Docket that details the lender's efforts with respect to allowing the borrower to obtain entry into a loss mitigation program. The Maryland Courts may not allow a foreclosure action to proceed should the lender claim in its loss mitigation affidavit that it was unable to make contact with borrower or obtain the documentation necessary to complete a loss mitigation analysis. Md Real Prop. Code Ann. § 7-105.1(d) and (e)
- The borrower may file with the Court a request to engage in mediation to which the lender must partake in should the borrower follow the proper precedures. Md Real Prop. Code Ann. § 7-105.1(h)
The fact that complying with these new laws has been and would be a nightmare for some banks and other lenders has actually created an opportunity for investors because banks and other lenders are desperate for a way out of their notes. This situation has opened the door for investors to acquire property through the purchasing of notes directly from lenders at a significant discount. While such investing is still in its infancy, the opportunity to buy cheap notes directly from lenders has created a new market for investors who are at the forefront of real estate investing innovation.
It is important to keep in mind that the laws summarized above are merely examples of the obligations on lenders (or purchasers of notes from lenders) under Maryland law and are far from all-encompassing. There are very detailed and extensive procedural and substantive legal requirements for this type of real estate investing. If you are interested in exploring the possibility of purchasing notes from lenders or other real estate investments, please contact the Law Office of Hunter C. Piel, LLC: (410) 823-1881; firstname.lastname@example.org.
This article is for general information purposes and is not intended to be and should not be taken as legal advice on any particular matter. It is not intended to and does not create any attorney-client relationship. Because legal advice must vary with individual circumstances, do not act or refrain from acting on the basis of this article without consulting professional legal counsel. If you would like additional information on the subject matter of this article, please feel free to contact Hunter C. Piel.