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Foreclosure frenzy in Maryland?

Courts say they are ready for new mediation rules, but some attorneys rushed filings into the system

Those who work closest with foreclosures are split on what impact the new law and the massive effort to implement it will have on Marylanders.

Those who work closest with foreclosures are split on what impact the new law and the massive effort to implement it will have on Marylanders.

Maryland’s foreclosure mediation law takes effect Thursday with teams of court staffers, reams of new forms and hearing rooms in courthouses across the state dedicated to connecting struggling homeowners and the banks that lent them money.

But those who work closest with foreclosures are split on what impact the new law and the massive effort to implement it will have on Marylanders facing foreclosure.

Some say the mediation law will force open lines of communication between lenders and borrowers, leading to more successful resolutions. Others predict the new requirements will make foreclosures more time-consuming and more expensive while doing little to keep people in their homes.

And some didn’t wait to find out.

The uncertainty of the new law — combined with its $300 filing fee and additional $30 filing fee for all civil matters in circuit court also enacted Thursday — made Wednesday an unofficial deadline for getting cases into the court system.

Many circuit court clerks’ offices saw an uptick of foreclosure filings in June. In Baltimore City, more than 800 foreclosures had been filed as of Tuesday morning, or slightly less than half the number of all foreclosures filed in the last three months. About 1,350 foreclosures were filed between April and June of last year by comparison, according to Court Clerk Frank M. Conaway Sr.

William E. Allen, chief deputy clerk in Baltimore County, said Tuesday morning that 498 foreclosures had been filed in June, and a stack of folders on his desk ensured that number would exceed 500. That represents a 12 percent increase from May and a 29 percent increase from June 2009.

Jeffrey B. Fisher, a foreclosure attorney with The Fisher Law Group PLLC in Upper Marlboro, said his firm pushed to get all the foreclosure filings it could out the door before the law took effect.

“If the client has referred the case to us, we’re going to give an extra effort to get a notice of an intent of foreclose out before Thursday,” he said.

While circuit court clerks’ office have been busy filing foreclosures, personnel statewide have undergone training on the new law and prepared accordingly. Baltimore and Anne Arundel counties have set aside places in their courthouses for mediation sessions, while Baltimore City is assigning one clerk to handle foreclosure filings where mediation has been requested.

“Whatever happens, I will ensure we meet the demands of the public,” Conaway said.

Preparedness in theory and in practice can be two different things, however. Stephen V. Hales, clerk for Worcester County Circuit Court, said his office will be reviewing mail more frequently and carefully to ensure the new filing deadlines are met.

“On-the-job training is what is going to get us through it,” he said.

The bill requires lenders to send borrowers an application for loan modification or mitigation and information about housing counseling services 45 days before filing a foreclosure. Lenders will also have to file an affidavit 30 days before a foreclosure sale, swearing they checked borrowers’ eligibility for loan modification or mitigation options.

“The challenge we’re finding is what type of forms to send to borrowers,” said attorney Ronald G. Deutsch of Cohn, Goldberg & Deutsch in Towson.

Borrowers will be able to request non-binding mediation sessions with their lenders or their representatives to press their case for loan modification or other mitigation options.

John Gabel, who represents borrowers, said having a person who can act on behalf of the lender at the negotiating table is one of the law’s primary benefits.

“If we can negotiate with someone who can cut a deal, it would save the banks and everyone a lot of time,” said Gabel, a Bowie solo practitioner.

The $300 fee charged to lenders, and the $50 fee for borrowers who opt for mediation, will be used to add 12 staffers to the state Office of Administrative Hearings and to pay for nonprofit housing counseling programs.

The state expects to spend $1.8 million in the next year to handle up to 6,000 mediations.

“We don’t expect to see any mediations until mid-August, and probably not in any significant capacity before Labor Day,” said Elisabeth Sachs, director of policy and planning for the Department of Labor, Licensing and Regulation.

Daily Record Legal Affairs Writer Danny Jacobs contributed to this story.