Bryan P. Sears//October 14, 2020
//October 14, 2020
The economic fallout of an ongoing pandemic has state lawmakers asking what can be done to stave off a looming foreclosure and eviction crisis.
About 70% of the mortgages in the state are backed by the federal government and are subject to CARES Act provisions that provide two 180-day forbearance periods that begin at the request of the borrower. Those periods begin to expire in the spring without any extensions or other actions taken by the federal government.
State officials said efforts with other nonfederally backed lenders in the state have added protections for those who are not covered by the CARES Act. Still, lawmakers and others said they are concerned about what happens when those protections go away.
“If we allow these foreclosures to take place then we’re looking at another housing crisis,” said Del. Jay Walker, D-Prince George’s.
Gov. Larry Hogan in April issued an executive order that effectively blocked new foreclosure proceedings in the state. Those filed in April or that would have been allowed to proceed at that time have resumed.
There were just 174 notices of foreclosure in September in Maryland, roughly one-third of the typical month, according to the Maryland Department of Labor, which regulates the state banking industry.
Attorney General Brian E. Frosh said the state is limited in how it can help because mortgages and leases are private contracts.
“There may be some things we can do in the state of Maryland, but we run into constitutional issues like interference with contracts,” said Frosh. “I’m afraid that the biggest piece of that solution is one in the hands of the U.S. government, the president and Congress.”
Frosh said he was willing to work with lawmakers to find ways to prevent lenders from requiring balloon payments to catch up on back payments.
“There are certainly ways in which we can’t do it,” said Frosh. “The Constitution prohibits interference with private contracts, and mortgages are contracts, but I think there may be ways to getting to that end without just saying you’re prohibited from enforcing your contract.”
Robert Enten, general counsel for the Maryland Bankers Association, said lenders in the state “are bending over backwards” to work with borrowers.
“We don’t want to take possession of these properties,” Enten said. “And the process takes forever.”
The average process to foreclose on a property is more than 540 days, according to Enten.
The Federal Housing Administration, Enten said, is prohibiting balloon payments to catch up on mortgages and instead is requiring missed payments to be tacked on to the end of the loan.
Foreclosure problems in Maryland, so far, are nonexistent, Enten said.
“We’ve not had a single contact from any member of the General Assembly since you adjourned saying a constituent is having a foreclosure problem,” Enten said.
Hunter Pickels, director of legislative affairs for the Department of Housing and Community Development, said federal and state efforts to delay foreclosures during the pandemic has effectively stabilized the market.
“We’ll have to stay on top of what things look like as these protections start to unwind,” said Pickels.