Md. court approves emergency rules on foreclosures

AP News
Posted: Oct 19, 2010 6:02 PM
Md. court approves emergency rules on foreclosures

An emergency measure approved Tuesday clarifies what methods state courts can use to review the paperwork behind foreclosures, including bringing in attorneys to explain questionable documents and hiring outside experts to examine them at a bank's expense.

The measure approved by the state's highest court spells out how state judges can review foreclosures and stop them if the documents are found to be invalid. However, it's still up to individual judges to decide how to use the tools.

The head of the state judicial committee that drafted the measure told the Court of Appeals that it will send a clear message that courts will scrutinize banks' paperwork.

"Nothing in this rule mandates any particular action by the court," said Alan Wilner, chairman of the Maryland Standing Committee on Rules of Practice and Procedure. "This flexibility is essential, because the context and circumstances may be different from case to case."

Unfair foreclosure practices are being investigated around the country because of questionable paperwork. Preliminary audits have found that hundreds of bogus affidavits have been filed in Maryland courts.

Wilner told the judges that two lawyers who have 4,400 foreclosure cases pending in Prince George's County have admitted they didn't sign all of the documents themselves and filed corrective affidavits in some of the cases.

"Some of the judges are concerned that what we have discovered so far is only the tip of the proverbial iceberg," Wilner said.

The measure, which takes effect immediately, gives companies with questionable foreclosure documentation 30 days to demonstrate they are legally sufficient, and judges can bring attorneys to court to explain the validity of documents.

The rules enable courts to force companies to pay for part-time examiners to look at the documents. Costs cannot be passed on to the homeowner.

"The committee was strongly of the view that the homeowner should not have to pay directly or indirectly for the cost incurred in cleaning up the mess that the creditors caused by their own conduct," Wilner said.

Kathleen Murphy, president of the Maryland Bankers Association, said the association believes it is important to have a consistent standard.

"We believe the response is certainly a measured response," Murphy said.

Murphy also said the association will be following the impact of passing the costs of part-time examiners on lenders, particularly because they still have to pay even if the review finds everything was done properly.

"The fee provisions, we did not object to them, but we will be following the impact of that very closely," Murphy said.

The seven-member Court of Appeals voted 6-0 to approve the measure. Judge Sally Adkins was not present due to an illness.