The number of houses in foreclosure in Maryland has jumped since the end of last year, according to statistics from the Baltimore Business Journal. From the end of 2011 to the middle of July, 2012, there has been a 26.5 percent increase in foreclosures; however, the number is down more than 8 percent in comparison to the number of foreclosures in Maryland this time last year. The up-and-down foreclosure data for Maryland over the last couple years is related to the impact of government programs for troubled homeowners and the greater legal review of the foreclosure processes.
Despite the recent surge of foreclosures in Maryland, the state is among a majority that have experienced a drop in foreclosures since the second quarter of 2011, according to RealtyTrac Inc., a foreclosure data firm. The upswing of foreclosures in Maryland that began in the beginning of the year is the result of lenders and servicers working through a backlog of delinquent loans. The backlog of home loans in default grew during the foreclosure crisis when many large banks and financial institutions failed to provide proper legal documentation for homes being foreclosed upon, and while federal and state authorities addressed and resolved legal documentation issues like robo-signing. A national settlement with the country’s largest banks reached in February and approved in April helped cap systemic foreclosure issues.
The resolution of issues like robo-signing contributed to a longer average foreclosure time period. On average, it takes 378 days to complete a foreclosure, but the process is beginning to shorten partly because of the settlement. In nearby Washington D.C., the foreclosure rate dropped nearly 60 percent since the second quarter of last year and has dropped more than 14 percent since March. Fortunately, distressed homeowners in Maryland have a range of options.
Options to Stop Foreclosure
This fall new foreclosure laws will go into effect in Maryland that can provide relief to distressed homeowners. For example, homeowners who have received delinquent notices will have the option to modify their loan through a pre-foreclosure mediation program. If mediation is not the appropriate choice, homeowners facing foreclosure may find relief through bankruptcy protection.
When a homeowner files for bankruptcy, the court automatically issues an order called an automatic stay. The automatic stay directs banks and other creditors to stop their collection efforts including the foreclosure process; however, there are exceptions.
Chapter 13 Bankruptcy
In addition, the filing of a Chapter 13 bankruptcy provides a unique set of tools to address the threat of foreclosure. A Chapter 13 bankruptcy allows a debtor to develop a repayment plan that allows the debtor to catch up on his or her debts, including the debtor’s home loan. If the debtor makes mortgage payments and payments for back payments under the repayment plan, the homeowner can keep his or her home and avoid foreclosure. Moreover, Chapter 13 can also address second or third mortgages. Depending on the equity of the house, a Chapter 13 bankruptcy may help a homeowner eliminate a second or third mortgage by turning the mortgages into unsecured debt.
The path to addressing a potential home loan default and foreclosure is fraught with complicated legal choices. An experienced bankruptcy attorney can help a distressed homeowner make the best choice for his or her situation.