Maryland State Code 7-301

[bluechipdc]

Hi dlmcgill,

I invest in DC and Virginia and have done about a dozen rehabs in Baltimore.  I have not done any pre-foreclosures there, but I wanted to say that I agree with you about the law protecting the financial institutions.

My opinion is that the law was written by people who do not know anything about real estate and the homeowner's situation or consequences.  I think that the code/law will hurt more homeowners and banks, for that matter, than it will help.  The lawmakers did not look at what happens to someone if a bankruptcy or foreclosure goes on their record.  Since I live in Virginia, and do not do many deals in Maryland, I do not see the point in me writting the Maryland legislators to get my points across.  To be sure, if these laws start to be adopted by DC and VA, I will do everything I can to oppose and educate those in power.

I think the intentions of the law, to protect the homeowner, were good.  But how they wrote it will hurt those they are trying to protect more than it will help.  

I am sure that there are a lot of people on these message boards who have been sincerely thanked from homeowners who did not have a way out of their situation without an RE investor's help.   One of my properties I purchased, the family who inherited their mother's property had negative equity because of judgements and a son who ran up a 2nd position HELOC, with fees, missed payments, etc would have had to come out of pocket $18000.+ just to get walk away from the house.

I was able to discount the 2nd note and get a credit judgment and a criminal judgement released that were placed on the house, give the family $4500.00 for their mother's final expenses and purchase the house.  

The son in charge of the estate wrote me a letter thanking me for helping the family out of their situation.  I'll bet as probably would you, that their are 100s if not 1000s of stories like this from the people of these posts.  Somewhere, I still have the letter.  It would be great if the laws could be amended from people sharing those types of letters with the legislators.

Good post, and I learned a lot from it...so thank you.  I was curious as to the specifics of the legislation.

Chip

[DannyTheGreat]

I found out the Maryland doesn't have a redemption period.Its on a case by case bases when you go to court.

That's the part that scares me. I could deal with a flat 30-90 day redemption period but some undetermined period of time decided by a judge is what I can't handle. You got lucky to make 25k.

[Dave T]

The only problem with having a realtor do the deal is: If I interpreted the law correctly.  A licensed agent could do the deal but the homeowner would have to get at least 82% of the FMV from the sale.  Which would leave very little room for me to make money.

dlmcgill,

I am looking at the Maryland Code and can't seem to find where this 82% rule is mentioned.

Could you help me out?

I did find a reference to 82% of sale proceeds in MD House Bill 1288.  It is not clear to me that this 82% language ever made it into the final version that was enacted.

Essentially, the 82% rule applies to a "foreclosure reconveyance" wherein the investor gives the seller the right (whether by purchase agreement or by lease option) to repurchase his property from the investor.   If the investor sells the property to a third party anytime within the 18 month period after entering into a foreclosure reconveyance agreement, then the original seller is entitled to at least 82% of the net proceeds from the resale.

As I interpret my readings, the 82% rule in MD House Bill 1288 would not apply if the investor never enters into a reconveyance agreement with the seller in the first place.  As I said before, I can not find a reference to this in the Maryland Code, so I wonder if this provision of the Bill made it into the Maryland Code.

[dlmcgill]

Hi Dave:

I'm no attorney and I admit that I struggle with legal terminology    That said:  Maryland Code 7-301. Definitions states that 'Foreclosure reconveyance' means the transfer of equitable title from the homeowner to another party during the foreclosure process.  It goes on but I thought I would shorten it a bit.  This really hurts my business of Sub2 investing.  By which I target people in the beginning stages of foreclosure.  

Maryland Code 7-311.Obligations of foreclosure purchaser states "that the purchaser must make payment to the homeowner withing 90 days of any resale of the property so that the homeowner receives cash payments or consideration in an amount equal to at least 82% of the net proceeds from any resale of the property should a property subject to a foreclosure reconveyance be sold within 18 months after entering into a foreclosure reconveyance."

Maybe someone here can hopefully explain how this does not relate to a Sub2 deal in which homeowners in foreclosure are the target market.  That would help me out greatly.  I appreciate all of the feed back.  

dlmcgill

[DannyTheGreat]

MD Code 7-311 was passed not too long ago in response to the rampant illegal flipping/ loan fraud in Baltimore. Just another thing that keeps foreclosures out of my business model.

[Dave T]

I'm no attorney and I admit that I struggle with legal terminology    That said:  Maryland Code 7-301. Definitions states that 'Foreclosure reconveyance' means the transfer of equitable title from the homeowner to another party during the foreclosure process.  It goes on but I thought I would shorten it a bit.    

dlmcgill,

Thank you for pointing me to Section 7-311

Yes the definition of "foreclosure reconveyance" does go on, but the rest of the definition is the relevant part.  There are two parts to the definition of a "foreclosure reconveyance"

First (as you have already stated) is the transfer of title from the homeowner to another party (the foreclosure investor in our case), AND

second, the investor subsequently conveys, or promises to subsequently convey interest back to the homeowner.

A foreclosure reconveyance agreement is essentially a repurchase agreement between the seller and the foreclosure investor that is executed after the foreclosure preceeding has been resolved.  

When a property subject to a foreclosure reconveyance is sold to a third party instead of to the original seller anytime with an 18 month period after entering the foreclosure reconveyance agreement, the investor is required to give the seller 82% of the net profit from the sale.

I still maintain that the 82% rule does not apply if there is no agreement to resell the foreclosure property back to the original seller.  Stay away from a foreclosure reconveyance agreement and your sub2 business should be able to keep all the resale profits.

[dlmcgill]

Hi Dave:

I guess the word 'And' is the key word in the definition of 'Foreclosure Reconveyance' meaning both conditions have to be met.  Thanks for pointing that out.  That clears up that portion of the code.  Now I have to find a way around the realestate consultant portion.  

Realestate Consultant:  Looks like I can avoid getting caught up in being considered a consultant if the homewoner in foreclosure contacts me from a newspaper ad.  As long as the ad doesn't mention 'Avoiding foreclosure'.   What do you all think?

dlmcgill