Statement from DLLR Secretary Tom Perez on Homeownership Preservation

Secretary joins Montgomery County Executive to Educate Residents on Foreclosure Prevention

It is an honor to be here today with my good friend and mentor, Montgomery County Executive Ike Leggett, to call attention to the growing foreclosure problem in Montgomery County and across Maryland. For thousands of Marylanders, the American dream of homeownership is being swept away by a rising tide of mortgage foreclosures.

The mortgage foreclosure problem exists in virtually every corner of the state and is growing at an alarming rate. Last year, Maryland's foreclosure rate ranked 40th in the nation. This figure inched up to 37th in the first quarter of 2007, and has been on a steady slide in the wrong direction. Maryland's foreclosure rate was 28th in April; 22nd in May, and in figures released just a few days ago, the foreclosure rate leapfrogged to 18th in the nation in June. To put this into further perspective, nationally, the foreclosure rate was up 87% in June 2007 from June 2006, but in Maryland, the rate was up 370% in June 2007 from June 2006. Foreclosure rates are one set of statistics for which the Governor and all of us would be more than happy to rank 50th in the nation.

The vast majority of foreclosures are occurring in the subprime market. For all too many Marylanders, exotic mortgages with their often tantalizing teaser rates have become chaotic mortgages.

Some may believe that Montgomery County is immune from the foreclosure pressures. This is flat wrong. Foreclosures are increasing in Montgomery County at a very troubling rate. There were more foreclosures in Montgomery County in the first quarter of 2007 than in the entirety of 2006. If foreclosures continue at the current pace, there will be a 900% increase in foreclosures in 2007 from 2006. In the second quarter of 2006, there were 49 foreclosures in Montgomery County. In the second quarter of 2007, there were 717 foreclosures. This represents an exponential 1363% increase. In 2005, there were five jurisdictions with more foreclosures than Montgomery County. In 2006, there were six jurisdictions in Maryland with more foreclosures than Montgomery County. In the first half of 2007, there is only one jurisdiction with more foreclosures than Montgomery County. The foreclosure bug has infected Montgomery County, and it is time to apply some medicine to cure the problem.

I heard someone refer recently to the "mortgage foreclosure tsunami." I believe this is the wrong description of the problem for a number of reasons. Most importantly, a tsunami is an Act of God. Foreclosures are not. There is much we can do to prevent foreclosures from occurring, and Governor O'Malley and Lt. Gov Brown have made foreclosure prevention and homeownership preservation a top priority.

Governor O'Malley and Lt. Governor Brown saw this problem coming months ago. Under the Governor's direction, Secretary of Housing and Community Development Ray Skinner and I have been working on this issue for months. The Governor is well aware of the fact that we must move quickly, but we must also move effectively. His instructions were simple: figure out the precise nature of the problem, engage all the stakeholders in an effort to identify solutions, and come back with a comprehensive plan.

A comprehensive plan combines outreach, education, enforcement, reform of existing laws, and financial assistance to qualified Marylanders in danger of foreclosure. A comprehensive plan seeks to educate Marylanders; prevent problematic loans from being issued; seeks to root out fraud, deception and discrimination; and strives to ensure a fair process for people caught up in the web of foreclosure.

Last month, the Governor announced a number of initiatives designed to get ahead of the problem. The Governor created the Maryland Homeownership Preservation Task Force to promote home ownership and prevent foreclosures in Maryland. I am proud to co-chair the Task Force along with Secretary Skinner of the Department of Housing and Community Development (DHCD). Our first meeting is next week, and the Montgomery County Department of Consumer Protection will play an important role in our efforts to identify wide-ranging solutions.

Governor O'Malley is not waiting for the Task Force to complete its work to implement solutions for Marylanders. One essential program the Governor has created is the Homeowners Preserving Equity, or HOPE program at DHCD. The Department has made a $111 million commitment to home ownership promotion and preservation by providing funds that will allow eligible Marylanders to refinance their exotic mortgage and escape the specter of foreclosure. DHCD also operates a very successful loan program for moderate-income first time homebuyers. This program includes significant housing counseling so that participants are truly ready to purchase their home. DHCD has allocated $1 million for additional outreach and education activities by nonprofits. Education is a key to foreclosure prevention, and this $1 million additional investment will enable nonprofits across the state to increase their critically important programs and activities.

Governor O'Malley also believes enforcement is an important component of a comprehensive strategy for stemming foreclosures. The Department of Labor, Licensing and Regulation plays a lead role in enforcing laws designed to protect consumers in the mortgage setting. DLLR licenses 6100 mortgage lenders and 9300 mortgage originators, and enforces a wide range of laws intended to protect consumers seeking to purchase a home, or refinance their mortgage. Most companies and individuals involved in the mortgage business are law abiding. Unfortunately, there are bad apples that prey upon unsuspecting Marylanders. Too many vulnerable people are being enticed into loans that they cannot afford, and, in the process, are overwhelmed by the corrosive power of fine print that all too frequently results in a barrage of hidden fees, late fees, service fees, and prepayment fees. The FBI listed Maryland as one of its top ten hot spots for mortgage fraud per capita.

Our investigators are busier than ever in a wide variety of enforcement actions. In fact, DLLR has obtained roughly $2.5 million in consumer recoveries during this past fiscal year. This is the most money ever recovered by DLLR. We have also recovered over half a million dollars in fines and penalties for Maryland consumers.

But there are many more victims that DLLR could help if additional resources were directed at enforcement. I am pleased to that Governor O'Malley, as part of the Homeownership Preservation Initiative, added four additional investigators to enforce mortgage laws. The more investigators we have, the more consumers we protect. Each investigator is currently recovering roughly $130,000 per year that goes directly back into the pockets of homeowners. Our message is simple: to those in the mortgage business who are law abiding, you have nothing to fear. However, if your intention is to prey on the Maryland consumer's earnest desire to own a home, we will find you, haul you in, and bring you to justice.

In the months ahead, we will be working with all stakeholders on a series of statutory reforms that will address the foreclosure crisis. Homeownership preservation and foreclosure prevention will be a top legislative priority of the O'Malley-Brown administration in 2008.

We will continue to work closely with local governments, faith communities, the business community, and non-profit communities to address this challenge. The Department of Consumer Protection and the Office of Human Rights have a long, distinguished history of protecting Montgomery County residents. I know them well, and look forward to partnering with them in an effort to educate and protect Montgomery County residents seeking to realize the American dream. Secretary Skinner and I are traveling around the state, and working with various partners to educate Marylanders about foreclosure prevention, and to encourage the public to make use of the wide array of services that state government offers.

In the end, government can play an important role in protecting residents, but residents can do so much to protect themselves. There are some critical tips you should follow in considering whether to buy a home, or refinance a mortgage:

1. If the deal sounds too good to be true, it probably is. Call DLLR (1-888-784-0136), or Montgomery County Department of Consumer Protection, or talk to someone you trust, and who has no financial interest in the outcome.
    
2. If you have fallen behind in your mortgage, beware of scam artists posing as saviors. We are seeing a rise in so-called foreclosure rescue scams. It may be embarrassing to acknowledge that you have fallen behind in your mortgage, but it is better to be embarrassed and then empowered than embarrassed and swindled. We are here to help, but residents need to call early.
    
3. Read the fine print. There are too many documents at closings, and people all too frequently do not read them in any detail. Buying a home, or refinancing a home mortgage, is too important a transaction not to understand the details of the transaction. Consult an expert, and don't be afraid to get a second opinion.

The O'Malley-Brown administration is committed to ensuring that the American dream of home ownership does not become the American nightmare. We will continue to work closely with local governments, as well as other stakeholders, to stem the tide, and fix the problem.

Updated July 30, 2009