Counsel’s Corner: Maryland’s Foreclosure Process Will Remain As Is For Foreseeable Future

Ronald S. Deutsch is a partner with the Towson, Maryland-based firm Cohn, Goldberg, & Deutsch. Mr. Deutsch obtained a nationally recognized reported decision in Island Financial v. Ballman (1992) and has had dozens of articles published in industry publications. He is also a former Chair of the Foreclosure Committee of the Maryland Bar Association and served on Governor Martin O’Malley’s Maryland Homeownership Preservation Task Force – Legal and Regulatory Reform Work Committee, which was established to rewrite Maryland’s foreclosure law. Mr. Deutsch co-authored the District of Columbia chapter in the National Mortgage Servicer’s Reference Directory 27th Ed and co-authored Maryland Foreclosure and Repossession, National Business Institute. Ron recently spoke with DS News about the foreclosure process in Maryland.

During your three years as chair of the Foreclosure Committee of the Maryland Bar Association, what were some of the Committee's most noteworthy accomplishments?

After organizing the committee, we received approval as an official committee of the Maryland Bar Association.  That gave us enhanced credibility when we went before the legislature, testified and participated in meetings during the numerous legislative or judicial events that occurred. We also established quarterly breakfast meetings and brought in guest speakers, including judges and opposing counsel. All of our practitioners learned from this - for example, learning what the judges wanted and what the opposing counsel's arguments were. I believe that advanced the foreclosure bar tremendously. These breakfast meetings with guest speakers were invaluable and still are.

Why is the foreclosure process lengthy in Maryland?

J.D. Salinger had a famous quote that answered how long must a man’s legs be. The answer he gave was that they must be long enough to touch the ground. So, let us take a look at the required process in Maryland. As we all know, Maryland historically was a very fast state. So much so that foreclosures could be completed in 35 days or less. The former governor, and now presidential candidate, Martin O’Malley, felt that a quick process did not provide borrowers with sufficient notice nor time to either sell their homes or to negotiate a work-out. As a result, he tasked the legislature with re-writing the Maryland foreclosure process to include various protections for borrowers, including a new notice of intent, final loss mitigation affidavit, and mediation process as well as various other “speed bumps” to ensure a more elongated process and the fairness he thought was necessary. Since then, most lenders and servicers, however, have adapted to the new process and have reported that it is running very smoothly. In comparison to various judicial states, Maryland’s process is not extremely lengthy other than when it is compared to its historical process.

Some states are trying to pass laws to shorten the foreclosure process. Is there anything like this in the works in Maryland?

No legislation has been proposed, or, if proposed, would be likely to pass, that would result in shortening the process. Maryland has an abandoned property process that was passed several years ago. However, that process does not offer any significant time savings.

Do you think a moratorium on foreclosures would be beneficial to housing in Maryland?

A moratorium on foreclosures would not be beneficial to housing in Maryland. During 2011 and 2012 a “de-facto” moratorium occurred. As a result, a significant backlog of defaults exists, resulting in Maryland being included within the top 10 states of volume per capita. Oddly enough, this is true despite Maryland having more millionaires than any other state, per capita. Although a backlog exists, Maryland volume is lower than volumes experienced during 2009-2010. In any event, the backlog coupled with the new more constrictive process, has caused real estate pricing to remain somewhat depressed, especially in the non-District of Columbia suburbs. Many homeowner associations have additionally been stretched financially as a result of defaulting borrowers not remitting their HOA/Condominium fees. All of this would argue against a moratorium being beneficial to housing in Maryland.

Where do you see the foreclosure process issue in Maryland in a year or two - the same, better, or worse, and why?

The foreclosure process in Maryland will be substantially the same in a year or two. No new legislation is contemplated, so we are not expecting any significant changes to the process. Given the current backlog of foreclosures in the system, coupled with future origination and trial plan defaults, I would also expect that no significant changes will be experienced from current lower constricted volumes. That said, I would expect real estate pricing increases to continue to occur, especially in counties that are located in the Washington, D.C. suburbs, which should reduce the number of properties that are below water.