"Bridge to HOPE" program

Foreclosures have risen alarmingly across the nation since the housing boom deflated and many borrowers began contending with higher monthly payments as interest rates on adjustable-rate mortgages increased. Many of the troubled borrowers took out subprime loans, which are designed for those with spotty credit histories and come with higher interest rates to offset the risk to lenders."These are really, really tough times," O'Malley said. "We are seeing a national economic downturn, and we are also seeing a real unprecedented crisis when it comes to foreclosures."The administration also announced yesterday the "Bridge to HOPE" program to provide interest-free loans of up to $15,000 so that homeowners can catch up on their mortgage payments and avoid foreclosure. Raymond A. Skinner, secretary of the Department of Housing and Community Development, said his agency has moved $400,000 from its existing budgets to be able to make the loans with state dollars.The HOPE loan program, announced last summer by O'Malley, didn't meet expectations. It would have directed $100 million to assist hundreds of homeowners refinance, but only 14 homeowners have qualified. That program was funded through the bond market, so participants had to meet minimum creditworthiness requirements. The standards for the new, state-funded program will be less restrictive.Many of the governor's legislative and regulatory proposals came from a task force that included industry representatives as well as housing advocates. Administration officials hope that collaborative approach will lead to broad support for the proposals.One legislative initiative would extend the time between the start of foreclosure proceedings and the point at which the house can be auctioned, which is now 15 days. Under O'Malley's plan, lenders would have to wait 90 days from the borrower's default to file a foreclosure action, and another 45 days until the foreclosure sale. Lenders also would be required to send a notice to homeowners of intent to foreclose.Kathleen Murphy, president of the Maryland Bankers Association, said that the foreclosure reforms codify what most "responsible lenders" already do. She said the new notices would prompt borrowers who are late on their payments to call lenders to work out a solution. She said that lenders lose on average $68,000 per foreclosure and that it's in their interest to help borrowers.Another bill would require that lenders screen borrowers for their ability to repay an adjustable loan once the rate resets and verify sources of income. So-called "no doc" loans, which became known as "liar loans," call for very little or no documentation of income, such as tax returns or pay stubs. Many of those loans have gone bad.O'Malley also wants a criminal statute on mortgage fraud and a ban on prepayment penalties for subprime loans, both of which would enhance current laws on the books.Regulatory changes include holding brokers, lenders and servicers to a "duty of good faith and fair dealing," a standard of care. Thomas E. Perez, Maryland's secretary of labor, licensing and regulation, has frequently said that it's harder to get licensed as a barber than as a mortgage broker in Maryland, and one regulatory change would increase the amount of experience needed to obtain a license."You can be assured that person is qualified to give you a loan," Perez said. "That person would be required to look after the public interest rather than just lining his own pockets."