Legislature stalls on foreclosure

Activists working to fight a recent sharp uptick in foreclosures suffered a setback at the end of this year’s legislative session in July, when the House declined to vote on a bill that would make give cities and towns the power to mandate mediation between banks and homeowners in default.

House Bill 4553: An act to minimize foreclosures and their harm, was designed to give cities and towns the right to enact local ordinances on foreclosures that activists say would compel banks to work out repayment plans with homeowners facing foreclosure.

Rep. Jose Tosado, the Springfield Democrat who sponsored the bill, says it was aimed at curtailing a growing crisis in his city and other Massachusetts municipalities.

“We pretty much have an epidemic,” he said. “It’s spread out everywhere in my district. You see boarded up houses everywhere.”

As cities were contending with fallout from the 2008 economic crash, some, including Lynn and Springfield, passed ordinances mandating that banks turn to a third party for mediation before moving forward with foreclosure proceedings. Activists say the mediation process was an effective tool that forced banks to work out repayment plans with homeowners who had fallen behind on their mortgages.

“We had people who applied for modifications over and over again, and the banks kept losing their paperwork,” said Rose Smith, an activist with the anti-foreclosure group Springfield No One Leaves.

In 2011, when Tosado was President of the Springfield City Council, that body passed an ordinance requiring mandatory mediation through a third party. Under the law, rather than sending tax returns, pay stubs and other documentation required for loan modifications to banks, homeowners would be required to send the documents to a third party.

“It was impossible when people were sending documents to the banks and they were constantly being lost,” Smith said. “We had some people who applied for modifications as many as 30 times and were denied because of documents the banks said were missing.”

A second ordinance would have required the banks to pay $10,000 into a city fund for every home that went into foreclosure. The funds would help secure and maintain homes that were foreclosed and abandoned.

But before the laws took effect, six banks challenged them. In December 2014, the Supreme Judicial Court ruled that Springfield’s ordinances were illegal because they were preempted by existing state laws.

“Mortgage foreclosure regulation traditionally has been a matter of State, and not local, concern,” Associate Justice Francis Spina wrote in his decision.

Worcester-based anti-foreclosure activist Grace Ross says the reason state law does not permit municipalities to enact ordinances regarding foreclosure is that the state has not seen the current volume of foreclosures in more than 200 years.

“There hasn’t been a foreclosure crisis this bad in Massachusetts since 1763,” she said.

The Legislature has passed other laws aimed at stemming the tide of foreclosures in recent years. One law lengthened the time period allowing borrowers to pay off a mortgage while a foreclosure is pending. Another requires banks to determine the value of modifying a loan before initiating foreclosure proceedings.

While the number of homes in foreclosure dipped from a high of more than 5,000 in 2012 to 820 in 2013, the number is creeping back up in cities like Worcester, Springfield and Lynn. White said her group is currently working with 80 Springfield families facing foreclosures.

“It’s noticeable,” she said of the increase in foreclosures. “There are 11 vacant homes in my neighborhood. When the bank is your neighbor, they don’t keep the property up.”

Tosado says he will refile his bill in January. Until then, he and other Springfield residents will likely see more foreclosures and more vacant homes.

“It’s an eyesore,” he said of the foreclosed properties. “And it can lead to crime. People break in and use the homes as a hangout. It affects property values for abutters.”