ANNAPOLIS — An influential Senate committee heard testimony from homeowners’ and lenders’ attorneys Wednesday on three bills designed to make it easier for borrowers facing foreclosure to discover who owns their loans before it is too late.
One of the proposals would remove registries like the lending industry’s home-loan database — Mortgage Electronic Registration System, or MERS — from the definition of “secured party” in the state’s foreclosure law.
Attorney Phillip Robinson, who defends distressed homeowners, said the bills would eliminate the confusion and obstacles borrowers experience as they try to prevent the loss of their homes.
But Jeffrey B. Fisher, a lawyer who represents lenders, cautioned the Senate Judicial Proceedings Committee that any legislative effort to help homeowners “should not be so onerous that [banks] cannot go forward with foreclosure” when warranted.
The legislative package gives meaning to a law enacted last year that enables homeowners facing foreclosure to seek loan-modification talks with their lenders, said Sen. Brian E. Frosh, the committee’s chairman and chief sponsor of the three bills.
“We want the homeowner to have time to contact the lender,” the Montgomery County Democrat told his colleagues at the hearing’s outset. “It’s time for the lender to step forward.”
Senate Bill 206, the MERS bill, is designed to reduce potential confusion about the foreclosing lender’s identity, Frosh said. Similarly, SB 205 would require the loan’s current holder to attest in its notice of intent to foreclose that it is the one to whom the debt is owed.
The third measure, SB 450, would require lenders who lack documentation showing they own the loan to explain why they cannot provide written proof and how they came to possess the loan. It was introduced in response to the Court of Special Appeals’ decision last year in Anderson v. Burson that a lender lacking documentation nevertheless could foreclose, Frosh said.
“It’s a scary thought to me,” Frosh said of the decision, which has been appealed. “You don’t have to explain why you don’t have the note.”
Robinson, executive director of Civil Justice Inc. in Baltimore, told the committee that most homeowners know only the identity of the loan servicer, not the secured party.
“If the servicer cannot answer your question, you should know who else to call,” Robinson said.
The Consumer Protection Division of the Office of the Maryland Attorney General supported the three bills in written testimony.
The office, “in trying to assist homeowners who had been victims of foreclosure scams, similarly faced hurdles in trying to identify the proper secured party when trying to help consumers get back into their homes,” wrote Steven M. Sakamoto-Wengel, consumer protection counsel. “Consumers should have the right to know who the actual lender is that holds their mortgage.”
Fisher, who represents lenders, told the committee he supports Frosh’s goal of ensuring that homeowners are informed who holds their loans. But Fisher cautioned against imposing demands on lenders that extend beyond providing simple notice.
“This should be routine financial data,” he said of the loan information provided to borrowers facing foreclosure. Any new notice requirement should not be “that much more complicated,” added Fisher, of The Fisher Law Group PLLC in Upper Marlboro.
D. Robert Enten, general counsel for the Maryland Bankers Association, also pressed committee members not to impose too great a burden on lenders.
Confirming the chain of title is very time consuming, Enten said, so lenders often rely on agents, including lawyers, for assistance.
Those agents should be permitted to serve as the loan’s trustee for the purpose of notifying the borrower, Enten said.
MERSCORP Inc., the Reston, Va.-based company that operates MERS, did not testify before the committee. Elsewhere, the company has argued that it is acting as the lender’s agent.
Karmela Lejarde, a spokeswoman for MERSCORP, said the company is “looking at the legislation.”