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After the subprime mortgage crisis, which began to surface in 2008, the Maryland Legislature
passed The Real Property-Maryland Mortgage Fraud Protection Act in April of that year.
The Maryland Legislature passed several laws to help homeowners who are at risk of losing their
homes, and to prevent future homeowners from becoming at risk for losing their homes.
From a realtor's point of view, the most notable issues are the changes to the lending industry:
* Lenders will now be required to be licensed, and all mortgages must contain the license number
of a mortgage originator or mortgage lender. This would allow regulators to track which mortgage
providers have the highest foreclosure and default rates.
* Changes in the number of days until several steps of the process take place: The foreclosure
sale cannot occur sooner than 135 days after default.
* SB218/HB 361 establishes requirements for a foreclosure consultant. All of the details of this
professional will be fleshed out in the future. Suffice it to say, the foreclosure consultant will be
trained and probably licensed, not a real estate agent or bank representative. The consultant will
have a fiduciary responsibility to the homeowner, similar to a RE agent, and will counsel the
homeowner in all the aspects of the process.
* The third bill passed establishes stricter penalties for anyone engaged or intending to engage in
mortgage fraud.
Overall, I think these are some great steps toward preventing further fraud and helping
homeowners in trouble. I especially like the licensing of lenders. It will make it possible to track
fraud and actually find the people who are initially responsible. The inability to hold lenders
accountable has been a huge hole in the ability to prosecute fraud.
No More Stated Income Loans
Shortly after this law was passed, The Maryland General Assembly passed House Bill 363,
outlawing Stated Income loans in the state. Any loan applications made after June 1st, 2008
cannot be stated-income, or reduced documentation, or no-doc loans.
Many people might not be aware of the reason for this sweeping decision...there were cases of
loan fraud in the recent past, involving "No-Doc" loans. For example: Someone claims to work at
McDonald's and make $150,000 and because they have a 20% down payment, no documentation
is required. This kind of thing happened, and now some of the foreclosures we're seeing are a
result. There does need to be some kind of reform. But I have to say, over-reacting by making an
entire portion of lending products illegal is not what I call reform.
The purpose, as I understand it, in the low-doc and no-doc loans was originally to help self-
employed people (like me!) get loans they otherwise couldn't. When you're self-employed, your
accountant will advise you to write off all that you legally can so that you have less net income to
be taxable. You can make a hundred thousand and end up with 50 thousand to call income. The
problem with that is that it's hard to get a mortgage. Stated-income loans were originally designed
for self-employed people with 700+ credit scores, and they usually had to put 20% down. Most
borrowers were over age 40. These are not the people who are at risk of foreclosure. So the
stated-income program really works for these self-employed. The problem, of course, is that abuse
took place. So, naturally, the answer is to throw the baby out with the bath water. No more no-doc
loans, period.
The Evil ARMs - Adjusted Rate Mortgage
The bulk of the subprime loans that caused the horrendous meltdown were Adjusted Rate
Mortgages, or ARM's. ARMs come in many varieties, including the commonplace one-year and
5/1 ARMs. With a one-year ARM, you pay a fixed interest rate for the first year and then the
current interest rate each year after. With a 5/1 ARM, you pay a fixed rate for the first five years
and then the mortgage rate is set for one year terms until it's paid off.
Like the no-doc loans, ARMs have a purpose and are a good product for certain buyers. Buyers
who don't plan to stay in their homes for a long time may find an adjustable-rate mortgage better
suits their needs than a fixed-rate loan. And like no-doc loans, these ARMs have been abused,
causing many homeowners to face higher adjusting rates at a time when their home values were
plummeting, making it impossible to refinance.
Apart from the American Housing Rescue and Foreclosure Prevention Act of 2008, passed by
Congress in July of that year, the Maryland General Assembly passed 2 laws in 2009, H.B. 1535
and 1036, stating that lenders must give due regard to the borrower's ability to repay the loan, and
establishes more protections for consumers.
I think the best solution for the abuses of Adjusted Rate Mortgages is the natural pendulum swing
that happens after a market meltdown... lending guidelines tighten. It is next to impossible to get a
mortgage these days without qualifying. Credit scores are more important than ever, and common
sense guidelines once again rule the day.
See the Maryland Attorney General website for Foreclosure Counseling Services in Maryland.
Karen Highland writes articles for Frederick Real Estate Blog by Highland Group believing that an
informed consumer makes real estate transactions smoother for everyone.
301-831-9947
8923 Fingerboard Rd.
Frederick Maryland 21704
Associates at Turning Point Real Estate
Article Source:
http://EzineArticles.com/?expert=Karen_L_Highland
==== ====
Stop Youryland Foreclosure - Discover These 7 Little Know Loopholes Available To Mayrland
Home Owners
http://capitolshortsale.com/stop-maryland-foreclosure
==== ====