July 30, 2012
Governor Deval Patrick
Massachusetts State House
Boston, MA 02133
Dear Governor Patrick,
On behalf of thousands of Massachusetts families whose lives are impacted by foreclosure – and all Bay State residents and consumers harmed by the ongoing economic damage of this mortgage crisis – we ask that you take action to eliminate harmful measures included in the pending foreclosure abatement legislation, House Bill 4323.
As an attorney who cut his teeth advocating on behalf of homeowners in the last, comparatively small, foreclosure crisis, you know firsthand the life-wrecking stress experienced by families facing foreclosure and eviction. And as an elected leader, you have dealt directly with the devastating impact the mortgage crisis has had on communities throughout the Commonwealth.
With this experience in mind, we ask that you not sign this legislation as-is, but that you step in to amend and address damaging provisions included within. Among the actions necessary to restore the integrity of this bill:
Remove language that will otherwise extinguish Massachusetts homeowners’ rights to sue to get their homes back in the case of certain illegal foreclosures.
Correct the arduous and unworkable negotiation process proposed for subprime loan modifications – a process that has consistently failed lenders and borrowers across the country for years.
Ensure Bay State families are able to remain in their homes by renting post-foreclosure properties now.
Addressing language that harms victims of illegal or fraudulent foreclosure is of the utmost importance. First, a new section, inserted at the last minute without notice, transforms this legislation into an anti-homeowner bill and overturns a recent Supreme Judicial Court decision that affirmed a legal protection that has existed for over a century. This new language irrevocably extinguishes the right of all homeowners to sue to get their homes back in cases where lenders have sold properties to third parties – despite not having the legally required promissory note. In Brockton, Springfield, Worcester, and many other communities hardest-hit by the foreclosure crisis, on-the-ground experience shows real estate investors are the overwhelming majority of third party purchasers – not everyday citizens looking for a place to live and raise a family. Few potential homeowners qualify to meet today’s tight lending rules and banks consistently prefer the cash offers of investor-developers. Should this language remain intact, thousands of present homeowners’ rights will be extinguished the day of the auction if a third party purchase occurs at foreclosure.
Second, to the credit of its authors, this legislation would require lenders holding legally unfair, predatory loans to test if they lose more money foreclosing on a homeowner than by offering that family a truly affordable modification. Unfortunately, this protection was coupled with an unworkable process to negotiate and receive that loan modification – one that is by mail only, includes unrealistic deadlines, and offers no concrete notification to the borrower of their opportunities or potential loss ofprotections in this process.
For example, a bank conducts a now-mandated cost analysis; it shows they lose more money by foreclosing than renegotiating loan terms, and the lender must contact the homeowner about a loan modification. The homeowner, however, has only 30 days to prepare all necessary application documents and have them accepted by the bank. Lenders rarely accept an application as complete on the first try; families nationwide submit documents an average of six times to be deemed complete. In short, these processes and deadlines will block most homeowners from accessing the very protections this bill attempts to create.
Third, this bill also creates a task force to draft a measure to grant homeowners the right to rent their homes post-foreclosure during the bank’s ownership, but requires no real action from that committee until 2013. Permitting homeowners to pay fair market rent will dramatically reduce the rising number of empty, foreclosed properties that drive down property values in communities across the Commonwealth – and shrink the number of homeless families as well. You first spoke in support of this law in spring 2007, at the beginning of the crisis, and each year since, some 8,000 more homeowner households have been needlessly evicted. The task force needs to complete its work by the end of 2012, not 2013.
Even the positive changes in the bill will offer protection to an ever-dwindling number of Massachusetts families. The new loss analysis, for instance, covers only subprime loans. Federal Reserve figures show less than 30% of the Commonwealth’s foreclosures were of subprime loans in 2009, and that number has been dropping since. At best, an estimated 500 families would benefit from the new protection each year, compared to thousands who will loose a key right to regain their home due to the last-minute language additions mentioned above.
Governor Patrick, we ask that you prioritize immediate action to save the key right of all Massachusetts homeowners, going forward, to regain their homes. In addition, we hope that you will correct the loan modification process to work for those facing foreclosure due to unfair, subprime loans – and that you call for an end-of-year deadline for writing right-to-rent legislation that will help keep Bay State families in their homes.
Consumer Rights Unit, Greater Boston Legal Services
Chair of Massachusetts Foreclosure Task Force, National Lawyers Guild
Harvard Legal Aid Bureau
Mass Alliance Against Predatory Lending