Mandatory Mediation Law Introduced to Maryland Legislature

By: Ellen Frick, Outreach Coordinator, NHS of Baltimore

A few months ago the Baltimore Homeownership Blog mentioned that Governor O’Malley was considering introducing legislation requiring mandatory mediation between lenders and borrowers in cases where foreclosure is likely. Indeed, O’Malley did recently introduce such a bill. Last week the Governor and Congressman Elijah Cummings, longtime foreclosure prevention activist, testified before State House and Senate committees.

Governor O’Malley’s website outlines the details of the proposed law. The legislation is meant to protect homeowners, requiring all lenders to consider and discuss loan modifications and other options with borrowers before filing an intent to foreclose. A handful of other states, such as Nevada and Florida, already have mandatory mediation laws in place.

Despite the protective nature of the legislation, many people are questioning the usefulness and cost of passing such a law. For instance, some taxpayers are angry and feel that homeowners may be rewarded for purchasing a home they could not afford. Others are skeptical that the law would prove to be effective, and that banks will not fulfill their end of the mediation process. Yet O’Malley says the legislation is needed as mortgage companies are not doing all they can to work with struggling homeowners. The proposed law is important in order that we both alleviate the current foreclosure crisis as well as making sure it does not happen again.

Mandatory mediation laws ensure that financial institutions negotiate with homeowners and do everything possible to keep families in their homes. Some banks have come up with their own ways to alleviate foreclosure, such as increasing the workforce or creating entire loss mitigation departments. One of these institutions is CitiBank who has a department devoted to preserving homeownership. Many other lenders have introduced similar initiatives as well.

Dealing With Damage to Your Home After a Snow Storm

By: Salina Greene, Outreach Coordinator, NHS of Baltimore

In the seemingly near-ending saga of snow storms which have plagued our area, residents in the Baltimore metropolitan area have tried to cope with almost four feet of snow. Many homeowners’ are left to wonder how to recover from the damages associated with two of the most powerful storms to hit the region in over 100 years. A number of homes are likely to end up with some form of weather-related damage. The first step to addressing some of the problems is to review your homeowner’s insurance policy. Taking a few extra steps to insure you know your level of protection can save you a lot of money in the long run.

Generally, homeowner’s policies cover burst pipes, fallen tree removals, sleet and wind damage to rooftops, trees falling on top of houses, water damage due to “ice dams” that block gutters, and other such similar cases. Food damage caused by melting snow is usually covered through a separate policy, purchasable through a federal insurance program. A good resource to look into is the National Flood Insurance Program (NFI). Many homeowners’ policies have limitations on coverage that the owner is unaware of until a significant event occurs. Most of the time, consumers opt out of certain coverage to keep their premiums down; only to discover later that certain disasters are not covered. By then, it is too late.

If your home has already sustained damage, you first need to decide whether or not it is worth filing a claim. If the damage is mild, a few hundred dollars or so, you are better off paying for it yourself. If you can afford it, file a claim only when the damage is extensive. When it comes to renewing your policy, the insurance company will look at the number of claims you have filed in the past two to three years. If you made three or more claims during this period, they may see you as high risk and not renew your policy. If your claim is substantial, it is best to file as soon as possible.

Some precautionary measures to take to protect your home after a severe snow/rain storm are as follows: Make sure all snow is shoveled away from all doors and window wells. Once the snow starts to melt, it will probably begin to seep into basements and doorways. Move any furniture and/or household items off the basement floors and near the doors to avoid being warped by water. Outdoor faucets can be protected by foam covers- the covers draw heat away from the house and keeps the faucets from freezing. Covers can be purchased at your local hardware store. If you lose power, keep your indoor faucets trickling to avoid pipe freezing. Moisture coming through the ceiling can be a sign of gutter blockage by ice. Baltimore has a ton of flat roofs. Snow and ice accumulation can cause collapse. Garages and commercial buildings are the most susceptible to this outcome. Do not attempt to clean these problems up yourself. Hire a professional or contractor to handle this for you.

The Crisis has Halted, But the Road To Recovery is Long

By: Ellen Frick, Outreach Coordinator, NHS of Baltimore

During President Obama’s State of the Union speech, he asked politicians for unity in bringing the American people out of economic hardship. Indeed, elected officials from both sides of the table are going to have to work together to alleviate what the Economic Policy Institute (EPI) has noted is by far the worst economic crisis since the Great Depression. These measures take into account both severity and longevity.

Obama told Congress and millions of Americans that the worst of the storm is over, but devastation remains. Unfortunately, the devastation may remain for quite some time as the administration admitted that even with all the spending and other initiatives to create new jobs, the unemployment rate is unlikely to change a great deal by the end of 2010. In fact, the predicted national unemployment rate at the end of 2010 is 9.8%, a small change from the current level of 10%. That number is expected to improve over the next few years, reaching 7.9% by the end of 2012.

Moving forward, Obama stated job creation as the new top focus in Washington. The President’s new budget has allocated trillions of dollars for a new jobs initiative, similar to stimulus bills of the past. In addition, Obama pledged to bring jobs back to the United States by getting rid of tax cuts for outsourcing work overseas. A focus on job creation is imperative due to the painfully high employment rates occurring in all states throughout the past couple of years. More than just being an issue of having a job, unemployment has had widespread effects, such as enhancing the mortgage and foreclosure crisis.

With such a politically-polarized Congress, one has to wonder if law makers will be able to achieve the goal of more jobs for Americans. In attempts to reconcile political differences, Obama met with Republican lawmakers last weekend here in Baltimore. The President invited members of the GOP to challenge him and his ideas about how to strengthen the economy and alleviate the pain that so many Americans are feeling.

For more information about current unemployment rates and economic activity, visit EPI’s Economy Track website.

Federal Government to Ease Its Involvement in Real Estate

By: Salina Greene, Outreach Coordinator, NHS of Baltimore

Over the past year, the federal government has been instrumental in reviving the housing market by driving down mortgage rates through relief aid. Unfortunately, this is coming to an end this coming March. The government has decided to pull out. The decision to end federal support for mortgage rates will have a deep impact on the Obama administration. If the market thrives, it will be proof that we are heading towards a stable economy. If it falls again, homeowners may face another wave of trouble.

As of last year, the government pledged more than $1 trillion to help new and existing homeowners secure mortgages at the lowest rate possible. Without this aid, millions would not have been able to re-finance their homes, nor could some first-time homebuyers afford their new homes. When the government pulls out, there could be a surge in mortgage rates. To a point, the market has become dependent on the U.S. financial administration’s support in order to stay afloat. If policies change too quickly, the government could lose some creditability with the financial markets. Mortgage rates are the lifeblood of the real estate market. A sharp increase in rates can cause the housing market to stall, as homes become too expensive for many buyers to afford.

Many industry advocates disagree with the government’s decision to withdraw so soon in the current financial crisis. They are concerned with the potential of higher rates and slower housing sales. Although policymakers periodically decide on a base percentage for mortgage rates, the loan rates are largely based on the health of the market.

In the past, banks created large pools of home loans and turned them into mortgage-related securities that were traded on the open market. Investors would purchase these securities, therefore funneling money to potential lenders. When the financial crisis struck, the securities trade froze up. Fearing a major collapse of the housing market, the government stepped in and became the only major buyer of these mortgage-related securities.

Thanks to federal efforts, refinancing and home buying surged. Now, with the government ending their support of low rates, the future of the rates is uncertain. While some feel the government should gradually withdraw from the market, the government is confident the rates will only rise a faction of a percentage point. This will give us some ray of hope during this time of recession.

For more information, go to the U.S. Department of Treasury website: www.ustreas.gov. There are several useful articles on the website relating to home buying and re-financing.