Steve Lash//March 21, 2023
//March 21, 2023
ANNAPOLIS — The General Assembly is considering expanding the state’s program for providing legal counsel to low-income tenants facing eviction to include needy homeowners facing foreclosure.
Under proposed legislation, the Maryland Legal Services Corp. would administer the Access to Counsel in Foreclosure Proceedings Program, which would provide free legal representation from the homeowner’s receipt of the notice of intent to foreclose through a first appeal.
The Senate Judicial Proceedings Committee held a brief hearing Tuesday afternoon on Senate Bill 904. The House Judiciary Committee held a longer hearing on the cross-filed House Bill 225 last month.
“Foreclosure is a process with many discrete steps,” Deb Seltzer, MLSC’s executive director, told the Judiciary Committee in support of the bill.
“Some foreclosure cases can take more than 50 hours of attorney time,” Seltzer said. “Having an attorney explain all options will both ensure homeowners have their rights enforced and make the process more efficient. The sooner a client can connect with counsel the better.”
MLSC, a grant servicing agency for providers of free legal aid, also administers the state’s two-year old access to counsel in evictions program.
The foreclosure program would be available to households with incomes not greater than 50% of the state median income, which currently translates to households earning $47,192 or less.
The program’s funding sources would include the state budget and a fee on residential property sales. The fee would be $250 for property sales of $500,000 or more; $100 for sales from $350,000 to less than $500,000; $50 for sales from $200,000 to less than $350,000; and $25 for sales of less than $200,000.
The Maryland comptroller’s office has estimated the property sale fee would raise $10.2 million for the foreclosure program during the fiscal year that begins July 1 and at least $13.8 million in each subsequent fiscal year, according to the Department of Legislative Services.
Other funding would come from private donations, as well as interest and investment income from the program’s fund.
Vicki Schultz, executive director of Maryland Legal Aid, called the foreclosure program essential for providing representation to low-income homeowners facing mortgage debt they cannot pay.
“The loss of one’s home is a devastating consequence not only for the family who loses that home, their place to live and the potential generational wealth that home ownership generates, but (for) the community, when a home is sold through foreclosure, the loss of wealth is substantial,” Schultz told the Judiciary Committee.
“Advocates know that those who seek legal assistance early in the process and have representation have a higher rate of home retention,” Schultz said. “Early involvement is absolutely critical and having an attorney by your side to investigate the legal claims, the complex legal claims involved in foreclosure is essential.”
Reena K. Shah, executive director of the Maryland Access to Justice Commission, equated the foreclosure assistance program to the legal assistance program the General Assembly enacted for low-income tenants during the economic hardship wrought by the COVID-19 pandemic.
“Foreclosure is just the other side of eviction,” Shah told the Judiciary Committee.
“If we are serious about preserving people’s homes, keeping them housed and not experiencing the collateral consequences that come with the loss of home ownership, the disparate impact on black and brown communities, this is a bill that this body should support,” Shah said. “Attorneys make a difference. … Foreclosure is a complex process, so for anyone to have to navigate that on their own would result in unjust outcomes.”
But D. Robert Enten, representing the Maryland Bankers Association, called the bill unnecessary due to the legal protections state law provides for those facing foreclosure, including mediation. He also objected to the fees that would be assessed on home sales.
Maryland has “probably the most friendly consumer foreclosure law in the country,” Enten told the Judiciary Committee.
“Our foreclosure process works,” added Enten, of Gordon Feinblatt LLC in Baltimore. “This bill increases the closing cost for every single person that buys a home in the state of Maryland and we don’t think that’s necessary.”
Under the legislation, MLSC would develop an information pamphlet in English and other languages explaining the legal rights of homeowners and the access to counsel program. The Maryland Commissioner of Financial Regulation would provide copies of the pamphlet to homeowners.
MLSC would also report annually to the General Assembly on the number of people provided legal counsel in foreclosure proceedings during the prior year.
Sen. Alonzo T. Washington, D-Prince George’s, is chief sponsor of SB 904. Del. Nick Charles, D-Prince George’s, is chief sponsor of HB 225.F