O’Malley, Rawlings-Blake testify at foreclosure hearing

Kevin Jerron Matthews tried 50 times in a year to speak with his mortgage servicer in an effort to prevent a foreclosure on his Northern Parkway home. The disabled military veteran drained retirement funds and let other bill payments lapse in an effort to keep up with his mortgage. But his house was still foreclosed on in May 2010 — even though his Veterans Administration loan required his lender to attempt mitigation efforts before foreclosing.

“I am an example of everything that can go wrong when lenders abuse the system and [are] not held accountable,” Matthews told a panel of federal lawmakers at a field hearing Tuesday at the University of Maryland School of Law.

Matthews serves as a living example of the foreclosure crisis the U.S. House of Representatives’ Committee on Oversight and Government Reform has been examining across the country for several years. The committee has held hearings in areas hit particularly hard by foreclosures; Rep. Elijah E. Cummings, whose district includes the law school, said there were 11,000 foreclosures in Baltimore between 2008 and last year.

“Foreclosure is a wrecking ball smashing through communities across the nation,” said Cummings, a Democrat and the committee’s ranking minority member.

Gov. Martin O’Malley and Mayor Stephanie Rawlings-Blake touted Maryland’s efforts in stemming foreclosures even as they asked for continued, federal assistance for the state’s distressed homeowners.

The number of foreclosure filings in Maryland dropped 70 percent in January 2011 compared to one year earlier, the steepest drop in the country. O’Malley attributed the fall in part to the state’s new mediation law, which allows homeowners to meet with lenders in an attempt to avoid foreclosure proceedings.

Foreclosures also stalled in Maryland and other states in the fall as regulators and attorneys generals investigated so-called “robo-signings” to determine if employees at banks and processing firms signed court documents containing unverified or false information to speed up the foreclosure process.

“Putting families on equal footing with the mortgage servicers and forcing them to come to the table … before they can go forward with the foreclosure is really, really important,” O’Malley said. “It’s tragic that this apparatus, this sort of meat grinder of homeownership destruction, continues to go unchecked and even accelerate in the course of this recession.”

Rawlings-Blake said more than a third of the city’s neighborhoods have had more than 5 percent of their properties foreclosed upon. Foreclosures cost the city $14 million in property taxes last year, she added. While praising the work of city housing counselors, she and O’Malley urged Congress to continue its effort to standardize foreclosure proceedings and require transparency among lenders.

“Increased transparency will enable distressed homeowners to better defend their homes and to better plan for their future,” Rawlings-Blake said.

Many questions from the three Republicans on the committee focused on the Treasury Department’s Home Affordable Modification Plan (HAMP), which Chairman Darrell E. Issa, R-Calif., called a “failure” in a statement prior to the hearing. The $30 billion program allows a struggling homeowner to make temporarily reduced mortgage payments on a trial basis while the lender determines if the modification can become permanent.

Rep. Tim Walberg, R-Mich., spoke on Republican criticisms of the program’s ineffectiveness, noting HAMP has resulted in few permanent modifications, while there have been more than 800,000 cancellations of temporary modifications.

“Homeowners whose HAMP modifications are canceled often end up worse than if they had never been part of the program in the first place,” he said.

Democrats acknowledged HAMP is not perfect but said eliminating the program would not make things better and could make things worse. Mark A. Kaufman, the state’s commissioner of financial regulation, said HAMP has helped start to standardize what had been a “wild west” of loan modification forms. Third-party reviews, adherence to timelines and greater use of technology would make the existing program more effective, he said.

“I think a lot of this applies to everything, and not just HAMP,” Kaufman said.

Kaufman also criticized the so-called “dual-track” process, where homeowners are considered for loan modifications on their home while at the same time they face the possibility of foreclosure. The mixed signals are why the term robo-signing “caught fire” with the public, he added.

“It embodies everyone’s sense that while servicers and borrowers are struggling along, the foreclosure process is operating in the next room unencumbered,” Kaufman said.

Matthews, the military veteran, learned last fall that his foreclosure proceedings were started by an alleged robo-signing, and he became the lead defendant in a class-action countersuit brought by Civil Justice Inc. and the law school’s consumer protection clinic to dismiss all similar cases in Maryland. Matthews’ foreclosure case and hundreds of others allegedly based on robo-signed affidavits were subsequently dismissed.

Matthews physically has his property back but it is still not a home. His lender locked the house during the foreclosure proceedings and did not return the keys to his lawyer when the case was dismissed, forcing Matthews to break into his own home. He discovered the house had not been “properly winterized,” he said, and it cost him $1,500 to replace his hot water heater.

“I have not been reimbursed,” Matthews said. “I’m still going through this.”