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Maryland: Legislative Updates Affecting the Residential Foreclosure Process

Posted By Rachel Ramirez, Tuesday, May 23, 2017
Updated: Wednesday, November 22, 2017

May 23, 2017 and August 1, 2017

by Angie Nasuta
The Alba Law Group, P.A. – USFN Member (Maryland)

The Maryland legislature has once again been active in regulating the local residential foreclosure process.

New Foreclosure Registration — The first bills of particular interest are House Bill 1048 and cross-filed Senate Bill 875, which have been approved by the governor but are not effective until October 1, 2018. This legislation requires that within seven days of filing an action to foreclose residential property, the substituted trustees must provide a notice of foreclosure to the Maryland Department of Labor, Licensing and Regulation (DLLR). The notice of foreclosure must contain certain specified information about the property and about the substituted trustees; it must be in the form that the department requires — which has not yet been established. This author’s firm will be closely monitoring DLLR’s activity for its regulations on this new notice/registration, which will hopefully be adopted well in advance of the delayed effective date.

New Foreclosure Notices — Legislation has been enacted to require additional notices in the foreclosure process beginning October 1, 2017. HB26/SB247, which have been approved by the governor, add to Maryland Real Property § 7-105.2(b) that notice of a proposed foreclosure sale under this article must also be sent to a condominium or homeowners association that has recorded a statement of lien against the property at least 30 days before the sale date. Procedurally, though, this change doesn’t really impose anything new upon foreclosure counsel, as Real Property § 7-105.3 (which has been law in one form or another since 1957) already requires notice of foreclosure sale to all holders of subordinate interests of record.

The key addition made by HB26/SB247, however, is the new requirement concerning postponed or canceled foreclosure sales. Within 14 days of sale postponement/cancellation, the substituted trustees must now send notice of the postponement/cancellation to the record owner of the property and any condominium/homeowners association that was sent notice of the proposed sale.

Vacant and Abandoned Properties — As with many states across the country, another Maryland focus in recent years has been to address concerns about vacant and blighted properties through so-called “fast-track” foreclosure options. The underlying mechanics and potential for challenges with these options, however, have limited the interest of mortgage servicers in pursuing what has been made available so far.

Signed by the governor on May 25, 2017, House Bill 702 and cross-filed Senate Bill 1033 provide a new expedited foreclosure process for vacant and abandoned properties — under certain circumstances. HB702/SB1033 (effective October 1, 2017) authorizes a secured party to petition the court to immediately commence foreclosure of its lien instrument if the property meets all of the following criteria:

• the loan has been in default for 120 days or more;
• no mortgagor has filed a challenge to the foreclosure “setting forth a defense or objection that, if proven, would preclude the entry of a final judgment and a decree of foreclosure”;
• no mortgagor has filed a statement with the court that the property is not vacant or abandoned; and
at least three out of a list of eleven specific circumstances regarding the property exist; e.g., status of utilities, condition of windows and doors, vandalism and criminal conduct, junk and hazardous materials, citations, condemnation, vacancy, written statement of intent to abandon, and a catch-all for other “reasonable indicia of abandonment.”

HB702/SB1033 will certainly be Maryland’s strongest attempt thus far at denting the local vacant and blighted properties issue. Unfortunately, the degree of limitations written into even this most recent piece of legislation suggests that there will continue to be limited interest from servicers in actually pursuing this newest option. [11/21/17 update to article: The Maryland Commissioner of Financial Regulation is required to promulgate implementing regulations. View the commissioner’s advisory dated October 31, 2017, here regarding “New Residential Mortgage Foreclosure Form and Changes to COMAR 09.03.12 – Effective November 6, 2017.”]

On a local note: In April, the County Council for Montgomery County approved Bill No. 38-16 (effective July 24, 2017) concerning “Housing and Building Maintenance Standards – Foreclosed Property Registration Penalty.”

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