One State’s Mortgage Miseries

Apr 13th, 2009 @ 3:26 PM by Alden Smith

Maryland is a state that has seen its share of hard time from the fallout in the mortgage market.  Those mortgages in question are the infamous option arm loan.  This was one of those “no money down too good to be true” loans that had extremely attractive interest rates, and put thousands of Maryland homeowners into foreclosure.

These loans were so toxic that they put two banks out of business – IndyMac and World Savings. It has caused so much trouble in Maryland that 800 Maryland lawyers have volunteered to help homeowners as part of the state’s foreclosure prevention project.

Thanks to the foresight of Maryland legislators, new state laws and regulations have made the POA loans basically illegal.  Hopefully they will never reappear in the marketplace.  This does little to help the homeowners who fell for the POA scam.

In an article in the Baltimore Sun, stories of these POA’s and what they have done to homeowners is beginning to emerge. Thousands of homeowners in Maryland are struggling to stay current with their mortgages, which are basically underwater and are ruining the credit of the people taken in.  Many are simply walking away from these hopeless situations and allowing a home to go into foreclosure.

These loans were so conflicting and incomprehensible that the Montgomery county Circuit Judge, Joseph A. Dugan, Jr., ruled these loan and transactions were unfair and deceptive under the state’s Consumer Protection Act.  Homeowners are being awarded compensation.  This 2008 ruling is the first in the state that has declared the POA loan to be unfair and deceptive.

It is time that states and the federal government take action to ensure that people who have been hammered by these deceptive practices receive some kind of protection and competition.  After all, it was the federal government that deregulated the industry, allowing mortgage lenders and bankers to take advantage of an unsuspecting public.  Doing so would certainly help restore the public’s confidence in its leaders.