Every day a family in Springfield loses its home—some days, more than one family (235 over the 180 days prior to press time). Holyoke, with 19 foreclosures in the last six months—11 of them within the last 60 days—by now has a higher foreclosure rate than 312 of the state's 367 towns. In the upper Valley rates are generally lower, but there seems to be a pocket of foreclosure activity in South Hadley, which with nine foreclosures had a higher rate over the last 60 days than 299 other Massachusetts towns.
The state of Massachusetts has taken a few steps to try to ensure that the waves of foreclosure don't keep rolling indefinitely. It has passed a law requiring previously unlicensed lenders unconnected with banks to pay a licensing fee of $500 a year and be checked for criminal histories. In 2007 it instituted a three-month moratorium on foreclosures.
But Massachusetts has what by national standards is a very strict law about mortgage defaults: while many states allow homeowners facing foreclosure to appear in court and contest their lenders' actions, Massachusetts does not. Consumer advocates have pressed for a change in the Bay State's law for years, but Eugene Berman, a Springfield lawyer with a specialty in bankruptcy, says the law is not likely to change.
"The problem," says Berman, "is really a federal problem. The federal government could have avoided the whole crisis by not forcing lenders to write the mortgages off when they went into a simple default. They could have declared a moratorium. They could have said, Write them down to an appraised value. There are lots of things they could have done."
Massachusetts Attorney General Martha Coakley has attacked the foreclosure problem on more than one front, not only by suing predatory lenders operating here, but by giving testimony in Congress this fall about how such lenders failed to keep their promises to rewrite the terms of unviable loans to make it possible for borrowers to fulfil them.
"When so-called loan modifications do occur, they often do not result in a sustainable loan," Coakley told Congress. "Lenders and servicers routinely offer and complete so-called loan modifications that increase monthly payments and increase overall debt. They do not meaningfully avoid foreclosure. At best, they temporarily delay the inevitable delinquency and eventual foreclosure."
Locally, the Hampden County Bar Association has set up a task force to help people in Springfield and elsewhere in the Valley deal with foreclosure—to ward it off when that's possible, and to offer support and coaching to those for whom it's too late to escape the process. Berman, who was a principal in the Springfield firm of Kamberg, Berman and now describes himself as "on the yellow brick road to retirement," is chairing the task force, which offers people the assistance of lawyers specially trained to deal with the technicalities of foreclosure.
Berman says people who see that they are going to miss payments on their mortgage should, first of all, try to get an accommodation from their lenders. (Interestingly, Berman notes that mortgages issued by local banks who continued to service the mortgages rather than selling them away to other companies have rarely gone into default. "We have no crisis with the local banks," he said. "The local banks have made traditional loans predicated on the ability to pay.")
If the lender is not receptive, borrowers should call the task force's foreclosure hotline at 413-322-7404 for a free consult to help determine whether anything can be done to stave off foreclosure. Further help is available for payment figured on a sliding scale that takes into account the client's ability to pay.
In the best of all possible worlds, borrowers, or their advocates, would be able to go to bat with their lenders to get their mortgages modified. On Capitol Hill, Massachusetts Representative Barney Frank, chairman of the House Financial Services Committee, has pushed for large-scale mortgage rewriting programs. Says Berman, "A modification of a mortage should have two elements. First, the mortage should be reduced and the interest rate should be reduced to something that is market-competitive. Second, the mortgage should be fixed-rate for a specific time. If the mortgages were recast," he adds, "the crisis would be over."
But Berman predicts that the foreclosure epidemic—because it's tied to other forms of household debt—will likely be worse in the coming year because large-scale defaults on credit card debt are expected then. "Those are coming due and people aren't going to be able to afford them," he said. "The Federal Reserve allows almost 30 percent interest to be charged on credit cards. That's immoral, unethical and horrendous. That's going to catch up with people. The Titanic meets the iceberg."
