Protection for Neighborhoods from Foreclosed Properties

Today we unanimously approved bill 38-16 that will impose a civil penalty for property owners who fail to register a foreclosure purchase. The intent of the bill is to keep unmaintained properties from becoming a nuisance to the community.

The bill will impose a civil penalty for the failure to register a property that is purchased by foreclosure. By Maryland law since 2012, the purchaser of a foreclosed property must register the property with the Maryland Department of Labor, Licensing and Regulation and the Maryland Foreclosure Task Force within 30 days of the property's foreclosure sale. The law authorizes local jurisdictions to enact legislation to impose a fine of $1,000 for failing to register.

The law was meant to address the period of nine to 18 months that frequently occurs between the date of a foreclosure and the date that the property title is transferred. During this time, local jurisdictions have a hard time identifying the party responsible for maintenance, security and taxes. To date, Montgomery County has not enacted any punitive fine and hundreds of foreclosed properties have gone unregistered since the General Assembly approved the law.

DLLR estimates that 20 percent of foreclosure property purchasers statewide do not register their property or register after the deadline. Based on the data from the State Foreclosure Registry, there were 1,432 foreclosures in Montgomery County in Fiscal Year 2015. Of these, 34 percent (492) either failed to register or registered long after the deadline. The unregistered properties are much more likely to go unmaintained, costing the County thousands of dollars in housing code enforcement and impacting the value of nearby property.

In addition, many purchasers of foreclosed properties—often banks and out-of-state investors—wait to record the deed to the property until it is resold to another purchaser. By circumventing the normal process and improperly (and illegally) transferring the property to a new homeowner in this fashion, the County does not receive the recordation tax or the transfer tax, which shortchanges the County of approximately $6,000 in revenue for a property of average value.