Washington Post Staff Writer
Thursday, May 20, 2010; 4:10 PM

Maryland Gov. Martin O’Malley signed legislation Thursday that creates a foreclosure mediation program designed to help beleaguered homeowners stay in their homes.

The bill gives homeowners the legal right to mediation with their lender during foreclosure proceedings.

“With my signature today, we are empowering our fellow Marylanders, putting them on a more equal footing with mortgage companies that too often can’t be bothered to pick up the phone before beginning a foreclosure proceeding,” O’Malley said in a statement. “This legislation will help keep more Marylanders in the homes they worked hard to purchase.”

Under the bill, the lender is required to send an application for a loan-modification or loss-mitigation program to the homeowner at least 45 days before a foreclosure action is filed in court. It is also mandated that the lender pay a $300 fee for a foreclosure filing.

The homeowner has 15 days after receiving the lender’s final loss-mitigation affidavit, which states reasons for denial of a loan modification, to request a foreclosure mediation. The request must be sent to the Circuit Court, along with a $50 fee.

A work group organized by O’Malley last year initially considered a mandatory mediation program. But the bill instead allows homeowners to opt in.

The program, which is scheduled to be fully implemented by mid-August, will be handled by the Office of Administrative Hearings.

The mediation program is O’Malley’s latest effort to help homeowners stave off foreclosure.

In 2008, O’Malley proposed bills that extended the foreclosure timetable from 15 to 150 days, prohibited prepayment penalties and made egregious mortgage schemes subject to criminal prosecution.