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.