Executive Order Addresses Repossessions and Residential Foreclosures
On October 16, 2020, Governor Lawrence Hogan, Jr., issued an executive order, amending and restating his April 3, 2020, executive order. In his April order, he prohibited the following:
- Self-help repossessions for trucks, automobiles and chattel homes;
- Initiation of new residential foreclosures; and
- Entry of eviction judgments where tenants established a coronavirus-related substantial loss of income.
However, in the new order, the governor lifted the ban on truck and automobile repossessions.
The new order also significantly alters the current state of residential foreclosures. The order directs the Maryland Department of Labor’s Commissioner of Financial Regulation (Commissioner) to reopen the notice of intent to foreclose online registry, which will enable the initiation of new residential foreclosures. However, the order also imposes a new notice requirement: Lenders must provide borrowers with notice of certain forbearance rights before initiating a foreclosure.
If the subject loan is covered by the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the lender must notify the borrower of its forbearance rights under the CARES Act at least 30 days before sending a notice of intent to foreclose.
If the loan is not covered by the CARES Act, the lender must notify the borrower that it has the right to request a similar forbearance as provided under the CARES Act (i.e., up to a 180-day forbearance period with the ability to extend for another 180-day period, regardless of delinquency status).
Lenders may not accrue fees, penalties or interest while a loan is under forbearance beyond those amounts scheduled or calculated as if the borrower had stayed contractually current. Lenders must also submit a certification to the Commissioner of their compliance with the new notice requirement when they submit a notice of foreclosure with the foreclosed property registry.
Practice Point: The order has several ambiguities, including:
- Whether the order only applies to new foreclosures or those already in progress,
- Whether regular interest accrues during a forbearance period, and
- Whether the order applies to subordinate financing like home equity lines of credit (HELOCs).
We are continuing to monitor the order and any guidance from the Governor’s Office and the Commissioner.
Please contact Bryan M. Mull and Christopher R. Rahl with any questions concerning this topic.
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