What constitutes a wrongful foreclosure in Maryland?
Maryland foreclosure law has changed substantially over the years, with a greater number of protections favoring the borrower. State and federal laws prevent lenders from surprising homeowners of their foreclosure, as well as actions that may be forceful or extreme. Lenders must follow laws to ensure that a homeowner is aware of the reason for foreclosure and what they may do to avoid it.
The steps of a foreclosure which the lender must follow to comply with Maryland law:
- The lender sends a Notice of Intent to Foreclose (NOI) and a loss mitigation application to the homeowner or borrower. This usually happens around 45 days after the homeowner defaults on their mortgage payment.
- The lender or mortgage company sends a copy of the NOI to the Maryland Office of the Commissioner of Financial Regulation.
- The lender and their law firm file an Order to Docket (OTD), which is the first filing of foreclosure in court. An OTD may also be called a “Complaint to Foreclose” or “Notice of Foreclosure Action.” Depending on the specifics of the situation, the OTD will include either a Preliminary or Final Loss Mitigation Affidavit. A Preliminary Loss Mitigation Affidavit is a document stating that the lender has not finished its analysis of your mortgage file. A Final Loss Mitigation Affidavit is a document stating that the lender has finished its analysis and sees no other option besides foreclosure.
- If no loss mitigation is agreed upon or is still pending, the borrower will be served with the OTD and either Preliminary or Final Loss Mitigation Affidavit. This may mean that a sheriff or other person appointed by the court will appear on the borrower’s property to serve them the OTD.
- When the lender sends the Final Loss Mitigation Affidavit, they also include a mediation request form. The borrower must complete and return this form within 25 days.
- If the borrower does not request mediation, the home sale can occur.
- If the borrower requests mediation, the Office of Administrative Hearings will schedule a mediation.
- If the mediation ends without an agreement, the lender will schedule the home for a foreclosure sale.
Homeowners Still Have Rights During Foreclosure
During the foreclosure process, homeowners (borrowers) have rights under Maryland law. These include:
- Filing a motion of dismissal if they have a valid reason why the lender should not foreclose on their home.
- Receiving timely notice from the lender of the date and time of the foreclosure sale.
- Preventing the foreclosure by paying all defaulted payments and fees up to one day before the foreclosure sale (reinstatement).
Unfortunately, some lenders fail to follow the law and force the foreclosure process by trying to push the defaulting borrower out of their home. Although frightening, wrongful foreclosure in Maryland is not as frequent as it once was, mostly because the law positions a circuit court judge between the foreclosing lender and the borrower.
Other situations that constitute a wrongful foreclosure in Maryland include:
- Forged signatures
- Failure to follow the Servicemembers Civil Relief Act
- Failure to follow state procedure
Beware of Reverse Mortgages
Lenders also frequently abuse reverse mortgages. Reverse mortgages typically impact older homeowners or lower-income homeowners who have accumulated substantial equity. Homeowners borrow from the lender, who secures the loan with a mortgage on the house. This allows the homeowner to essentially subsist off of their equity because the lender can’t foreclose the mortgage until the borrower vacates the property.
Borrowers do not make payments off of a reverse mortgage because they get all the money upfront. The lender gets paid after the borrower dies.
In this situation, some lenders want to get their hands on cheap property through agreement or foreclosure and sell it to make lots of money. These lenders want to make the agreement or foreclosure happen as soon as possible, so they perform fraudulent actions such as making falsified claims against the borrower.
Because borrowers in a reverse mortgage must live in the house and keep it insured, these questionable lenders claim that the borrower failed to insure or occupy the home. Lenders who do this are filing foreclosure actions when they shouldn’t. Sometimes, the borrowers don’t even know, which is especially abhorrent because most of them are elderly.
It’s important to check on elderly family members who have a reverse mortgage. Help them go through their mail and make sure they aren’t neglecting correspondence from the lender.