Agenda Item 3A
September 20, 2016
Introduction
MEMORANDUM
September 16, 2016
TO:
FROM:
SUBJECT:
County Council
Amanda Mihill, Legislative
Attomeyoh'~Jjfl
Introduction:
Bill 38-16, Housing and Building Maintenance Standards -
Foreclosed Property Registration Penalty
Bill 38-16, Housing and Building Maintenance Standards - Foreclosed Property Registration
Penalty, sponsored by Lead Sponsor Councilmember Hucker and Co-Sponsor Councilmember
Navarro, is scheduled to be introduced on September 20, 2016. A public hearing is tentatively
scheduled for October 18 at 1:30 p.m.
Bill 38-16 would impose a civil penalty for failure to register a foreclosure purchase. Additional
background materials from Lead Sponsor Hucker is attached at ©4.
This packet contains:
Bill 38-16
Legislative Request Report
Sponsor material
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Bill No.
38-16
Concerning: Housing
and
Building
Maintenance Standards - Foreclosed
Property Registration Penalty
Draft No.
_1_
Revised:
3/7/2016
Introduced:
September
20,2016
Expires:
March
20,2018
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
---!...!.No~n.!!:e=_____,____---_
Ch. _ _ Laws of Mont. Co. _ _ __
I
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Hucker
Co-Sponsor: Councilmember Navarro
AN
ACT to:
(1)
(3)
impose a civil penalty for failure to register a foreclosure purchase; and
generally amend the law regarding housing and building maintenance standards.
By adding
Montgomery County Code
Chapter 26, Housing and Building Maintenance Standards
Article I, General
Article II, Foreclosed Property Registry
Section 26-19
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* *
*
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No. 38-16
1
Sec.
1.
Chapter 26 is amended
by
Articles I and II (Section 26-19) as
follows:
Article I. General.
2
3
4
5
*
*
*
Article II. Foreclosed Property Ree;istry.
26-19. Foreclosed Property Registry Penalty.
6
7
W
Definitions.
In
this Section, the following words have the meanings
indicated:
8
9
10
11
Department
means the Department ofHousing and Community Affairs.
Director
means the Director ofthe Department.
Foreclosed Property Registry
means the internet-based Foreclosed
Property Registry established
Qy
the State Department of Labor,
Licensing, and Regulation as required
Qy
Section 14-126.1 of the Real
Property Article of the Maryland Code.
12
13
14
15
16
17
18
19
20
21
22
23
24
Foreclosure purchaser
means the person identified as the purchaser on
the report of sale required
Qy
Maryland Rule 14-305 for
sale of residential property.
~
foreclosure
®
Registration required
A foreclosure purchaser must submit any
required registration to the Foreclosed Property Registry as required
Qy
Section 14-126.1 of the Real Property Article ofthe Maryland Code.
W
Penalties.
Any violation of this Article is
maximum penalty for
or repeat offense.
~
~
civil violation. The
violation of this Article is $1,000 for an initial
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LEGISLATIVE REQUEST REPORT
Bill 38-16
Housing and Building Maintenance Standards
-
Foreclosed Property Registration Penalty
DESCRIPTION:
PROBLEM:
Bill 38-16 would impose a civil penalty for failure to register a
foreclosure purchase.
In 2012, the General Assembly enacted House Bill 1373, which
requires the purchaser of a foreclosed property to register with the
state. The law also authorizes local jurisdictions to impose a fine for
failing to register.
To use the authority given by the state to impose a fine for failing to
register a foreclosed property purchase.
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
To be requested.
To be requested.
To be requested.
To be researched.
Amanda Mihill, Legislative Attorney, 240-777-7815
To be researched.
$1,000 for failing to register.
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
TOM HUCKER
COUNCILMEMBER
DISTRICT 5
MEMORANDUM
TO:
FROM:
DATE:
RE:
Councilmembers
Tom Hucker
July 13,2016
Establishing a penalty for failing to register a foreclosed property
I will soon be introducing a series of housing bills that are meant to address the growing
number of neglected and vacant properties in the county. The first seeks to incentivize property
owners and banks to adhere to current law and ensure homes are properly maintained and taxes
are paid.
In 2012, at the request of Maryland Department of Labor, Licensing and Regulation
(DLRR) and the Maryland Foreclosure Task Force, the General Assembly passed HB 1373 ­
Foreclosed Property Registry. The law requires the purchaser of a foreclosed property to register
with DLLR within 30 days of the property's foreclosure sale. The law also authorizes local
jurisdictions to enact legislation to impose a fine of $1,000 for failing to register. The law was
meant to address the nine to eighteen month period 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. Based on the data from the State Foreclosure
Registry, there were 1,432 foreclosures countywide in FYI5. Of these, 34% (492) either failed to
register or registered long after the deadline. These unregistered properties are much more likely
to go unmaintained costing the county thousands in housing code enforcement and dragging
down nearby property values.
[I]
In addition, many purchasers - 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
County coffers of over $6,000 in revenue for a property of average value.
That is why I am introducing legislation to enact a penalty of$I,OOO per day for a
foreclosed property that has not been registered. This deterrent is critically needed when
[1 ]https://www.richmondfed.orgl-/medialrichmondfedorglconferences_and_events/community-developmentl20 12/
pd£'mdjoreclosure_taskJorceJPt.pdf
®
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foreclosed property owners can save many thousands of dollars in maintenance costs and taxes
by refusing to register and transfer ownership of their properties. These properties, often are in
persistent disrepair, hurt neighborhoods and force the County to expend resources to enforce
code violations. This bill gives us another 'stick' we can use to address this problem.
Attached is a copy of this bill and an FAQ sheet. I hope you will join me in cosponsoring
this legislation. Please let me know if I can provide any additional information.
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Foreclosure Registry
Frequently Asked Questions
1.
What is the Maryland Foreclosed Property Registry?
The Foreclosed Property Registry is an online system managed by the Office of the
Commissioner of Financial Regulation in the Maryland Department of Labor, Licensing
and Regulation (DLLR). State law requires that every residential property purchased at a
foreclosure sale be registered in this system.
2. What is the purpose of the foreclosure registry?
In 2012, the Maryland Foreclosure Task Force identified a limbo period of nine to
eighteen months between the property's foreclosure sale and the deed recordation in the
public land records. During this limbo period, it is difficult for jurisdictions to identify the
party responsible for foreclosed property, which often causes the property to fall into
disrepair. The Foreclosed Property Registry closes this gap by creating one centralized
database of information.
3. What causes this limbo period?
According to the Foreclosure Task Force, this limbo period is caused by the following six
factors:
Right of property owner to challenge the foreclosure auction.
Time required for Courts to ratify the foreclosure sale
Clearing of any priority government liens against the property
Lengthy eviction proceedings or eviction requirements
Market demand or lack thereof for the property by a new homeowner; and
Whether or not foreclosure purchasers record the deed prior to resale, or in the
alternative, wait to record upon resale to a third-party purchaser.
4. Why would a foreclosure purchaser wait to record a deed upon resale?
By postponing the deed recordation, a foreclosure purchaser can avoid paying thousands
of dollars in transfer and recordation taxes, which become the responsibility of the
third-party purchaser.
5. How much are property transfer and recordation taxes?
Transfer taxes are generally 1% of the value of the improved (building) and unimproved
(land) value of a property transferred to a new owner. Recordation taxes are 0.69% of the
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amount of the transaction. In Montgomery County, the recordation and transfer tax for a
property of median value in Montgomery County is about $6,600. The foreclosure
purchaser avoids paying these taxes, and often passes the costs on to the next person who
purchases the property.
6. What is a foreclosure sale?
In Maryland, a lender may file for foreclosure on a property 45 days after the first missed
mortgage payment. If the loan is not brought current or the loan is not modified, then the
lender can sell the property at a foreclosure sale. Typically, loans sold at foreclosure are
bought by other banks or real estate investors.
7. Who has to register the property?
The company or individual that purchases the foreclosed property is required to register
the property. The property does not need to be re-registered when the foreclosure
purchaser sells the property to a third-party purchaser.
8. What is the process for registering a property?
Purchasers are required to submit an initial registration of the property within 30 days of
the foreclosure sale, which includes the name, address, and telephone number of the
purchaser, their legal representative,property maintenance company, and the property's
occupancy status. The purchaser is also required to complete a final registration within 30
days of recording the property's new deed.
9. How is compliance enforced?
The statute that created the registry gives local jurisdictions the authority to enforce
compliance. A jurisdiction may enact a local law that imposes a civil penalty for failure
to register a property.
10. What is the noncompliance rate?
DLLR estimates that 20% of foreclosure purchasers do not register their property or
register after the deadline. In Montgomery County, however, that number is much higher.
In FY15, there were 1,432 foreclosures in the county, and 34% either failed to register or
were registered after the deadline.