FAQ: New Maryland Foreclosure Law (effective April 4, 2008)
September 18, 2008
A new foreclosure law went into effect in Maryland on April 4, 2008. A foreclosure filed after that date must comply with the new law.
The new foreclosure process and consumers frequently asked questions are discussed below.
Under the new law, lenders may not foreclose on residential property until the LATER of:
- 90 days after default OR
- 45 days after a ÂNotice of Intent to Foreclose notice is sent to the homeowner.
What is ÂdefaultÂ? What is the Âdate of defaultÂ?
- Homeowners should check their mortgage documents to see exactly how their lender defines Âdefault.Â
- Some lenders define Âdefault as happening when a homeowner is even 1 day late with payment
- Partial payments usually wonÂt help a homeowner avoid default.
- Example: Your mortgage payment of $1000.00 is due January 1. You send in $500.00 on January 1. On January 2, your lender might deem your mortgage to be in default even though you sent in a partial payment.
My mortgage is in default. When is my lender likely to send the required ÂNotice of Intent to ForecloseÂ?
Different lenders use different timelines. Most lenders will start off using normal collections procedures to try to recover the past-due amounts. At this stage, the homeowner might get phone calls and standard collection letters from a debt collector.
But, at some point, the mortgage holder will switch to foreclosure mode and will send the homeowner the required ÂNotice of Intent to Foreclose.Â
[Note: this Notice must follow a certain format and will be different in content from a standard collection letter. There are also rules specifying how this Notice must be delivered to the homeowner.]
After default, the lender will often use standard collections techniques for around 15 days before sending the required ÂNotice of Intent to Foreclose.”
In the example from (1) above, the homeowner in default might expect to receive a ÂNotice of Intent to Foreclose from his or her loan servicer in mid-to-late January if s/he went into default on January 2.
Some lenders will try to collect a little longer before sending the “Notice of Intent to Foreclose.”
I received my ÂNotice of Intent to Foreclose on January 15. What is the earliest date the mortgage holder can file a foreclosure case with the court?
The lender cannot file a foreclosure action until the LATER of the following: 90 days after the homeowner went into default, OR 45 days after you received your Notice of Intent to Foreclose.
In our example, the homeowner went into default on January 2. 90 days later would be April 2.
The homeowner received the ÂNotice of Intent to Foreclose on January 15. 45 days later would be March 1.
The later of these two dates is April 2.
So, the lender cannot file a foreclosure action with the court until April 2 at the earliest.
Foreclosure Alternatives / Stopping Foreclosure in Maryland and D.C.
September 18, 2008
As the credit crisis continues, many homeowners need help avoiding or stopping foreclosure. Some options are discussed below.
Note: Many of the alternatives described below appear very similar. But, different options can have very different affects on a consumer’s credit report and score. A consumer should carefully research the effect a proposed solution would have on his or her credit report and score before exercising any of these options.
Bankruptcy. Many consumers still qualify for bankruptcy. Under certain circumstances, bankruptcy can help a homeowner avoid foreclosure (although the bankruptcy court’s ability to modify residential mortgages is limited.)
Sale of Residence. While it isn’t anyone’s first choice, it might be better for a consumer to sell his or her home if a foreclosure is unavoidable.
Refinance. Lending criteria have become more strict, but many people can still qualify to refinance their mortgages.
Forbearance Agreement. If a consumer is unable to make loan payments, his or her lender might agree to grant a forbearance. A forbearance agreement sets forth a formal repayment plan that stops a pending foreclosure for a certain period of time while the consumer attempts to regain his or her ability to make payments.
Repayment Plan. If a consumer’s mortgage is past due because of a temporary financial setback, his or her lender may be willing to work out a Repayment Plan. Under a Repayment Plan, the homeowner usually must be able to make the monthly loan payment and pay an additional amount towards the past due amount each month until the loan is brought current.
Mortgage Modification Agreement. Under some circumstances, lenders may be willing to re-negotiate the terms of the mortgage and / or forgive a certain percentage of past due amounts.
Short Sale. If a consumer wants to sell his or her property, but the net proceeds from a sale is not enough to pay off the mortgage, the lender may allow the consumer to sell the property without paying the entire amount due.
Deed In Lieu of Foreclosure. This might be an option when a consumer has no other alternatives and there are no additional liens (other than the primary mortgage) against the property. The consumer avoids a foreclosure by deeding the property directly to the mortgage lender.
What’s the difference between a Debt Purchaser, Debt Collector, Collection Attorney, and a Collection Agency?
September 2, 2008
What is a “debt purchaser”? A “collection agency”? A “debt collector”? A “collection attorney”?
Companies called debt purchasers buy old accounts from original creditors– for example, credit card companies. Debt purchasers also buy accounts from other debt purchasers.
Debt purchasers then either try to collect on these accounts themselves or hire another company or attorney to do the collections work for them.
The company actually doing the collection work may be called a “debt collector” or “collection agency.” After trying to collect for a while, they may refer the account to a “collection attorney.”
In some cases debt collectors refer the accounts to attorneys just before they file a debt collection lawsuit.
This can be confusing for consumers, because several different companies might contact the consumer trying to collect on the debt.
For example: the consumer might get calls and letters from the original creditor, the debt purchaser itself, the company doing collections on the account, and the debt collector’s attorney.
What should I do if a debt collector calls me or sends me a collection notice?
It is important to note that debt purchasers typically pay pennies on the dollar for these accounts. A consumer will want to take this into account if he or she decides to negotiate a settlement with a debt purchaser.
It is also important to realize that merely paying a collection agency usually does NOT improve a person’s credit score. Improved credit reporting must be negotiated as part of any settlement agreement.
You should also research the following:
Is the account valid?
Are the debt collector’s numbers accurate?
Are the debt collector’s collection techniques legal?
Are the collection fees charged by the debt collector legal?
Which (if any) party is legally entitled to payment– the debt collector, the original creditor, or the collection attorney?
Note that debts are often sold or assigned to multiple collection agencies. And, if a consumer settles a debt for less than its full amount, the debt collector might attempt to resell the remainder of the debt unless there is a settlement agreement in place to prevent the resale.
What protections do consumers have?
Fortunately, there are both federal and state laws that protect consumers.
Whenever possible, it is very important to respond to collection agencies within 30 days of their first contacting you. Doing so will help preserve all of your legal options.
But, you still have many legal protections, even if you are responding more than 30 days after hearing from a debt collector.
And, different legal protections apply when original creditors attempt to collect on an account.
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