In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. If you're a homeowner facing foreclosure in Maryland, you might be eligible to participate in the state’s foreclosure mediation program. Read on to learn more about how the program works and how you could benefit from the process.
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the homeowner to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.
Potential outcomes of mediation include:
(To get information about each of these options, see Avoiding Foreclosure: Basic Workout Options.)
In Maryland, foreclosures are generally nonjudicial, but with court supervision. The process begins when the lender mails the borrower a Notice of Intent to Foreclose. The lender may then file its foreclosure 45 days later, but no sooner than 90 days after default. (To learn about the specific foreclosure laws in Maryland, see our Summary of Maryland’s Foreclosure Laws and Maryland Foreclosure Laws and Procedures.)
Maryland has established a mediation program to provide certain homeowners in foreclosure with the right to mediation. (Md. Code Ann. Real Prop. § 7-105.1.) (Some homeowners get the opportunity to participate in "prefile" mediation, before a foreclosure officially starts.)
Maryland borrowers facing foreclosure are eligible for mediation if the property is:
Commercial and other non-owner occupied properties don't qualify.
Here's how the process goes:
When starting the foreclosure, the lender must send the homeowner a request for mediation form along with the foreclosure paperwork. (Though, if the homeowner participates in prefile mediation, then mediation isn't available after foreclosure begins, except as otherwise provided in a prefile mediation agreement.)
The homeowner has 25 days to complete the request for mediation form and file it with the Circuit Court where the foreclosure action has been filed.
Homeowners must pay a nonrefundable $50 fee when they file their request for mediation.
After the homeowner files the mediation request with the Circuit Court, the court refers the matter to the Maryland Office of Administrative Hearings (OAH). The OAH will schedule the mediation session—which will be within 60 days after it receives the request from the court—and notify the homeowner of the time, date, and place for the mediation session.
At the mediation, you can have more than one person assist you—like a lawyer, a HUD-approved housing counselor, or someone else.
The OAH will send a list of required documents that the homeowner must provide along with notification of the scheduled mediation date. All documents must be provided 20 days prior to the mediation.
If the homeowner and lender are able to reach an agreement to avoid foreclosure, the mediator will draft an agreement. The lender and homeowner will both sign the agreement and receive a copy before leaving the mediation session, and the foreclosure case will be dismissed.
If the parties do not reach an agreement at the mediation, or the 60-day mediation period expires without an extension granted by the OAH, the foreclosing party may schedule the foreclosure sale. Though, you might still get time to submit documents for the bank to consider you for a modification or other loan workout option.
Even though participating in Maryland’s foreclosure mediation program doesn't guarantee that you'll be able to avoid a foreclosure, it doesn't hurt to participate. The lender might be more likely to agree to a nonforeclosure solution during mediation than if you try to work something out on your own. Or you might qualify for a loss mitigation option that you hadn’t previously considered.