The Hampden County Bar Association’s Foreclosure Task Force, whose staff is still busy answering calls from people threatened with foreclosure (dial 413-322-7404), is rooting for a proposed new state law that may offer relief to more than one homeowner at a time. And—as legislators have pointed out in Florida, where a similar law is under consideration—it may help stabilize property values.
In spite of its liberal reputation, Massachusetts has hardly been a leader when it comes to progressive foreclosure law. Twenty-five other states give homeowners facing foreclosure a day in court. That’s important because it gives the homeowner a chance to lay before a judge any fraud or other misbehavior on the part of the lender (such as failing to apply payments made, or charging improper fees). But Massachusetts does not require that foreclosure cases be given court hearings.
Now before the state Legislature’s Joint Committee on the Judiciary is H1729, a bill that would require lenders to get court approval to foreclose (a corresponding bill, S1778, has been filed in the Senate). Before there could be a foreclosure, a complaint would have to be filed in Superior Court in the county in which the property is located and the homeowner would be given a chance to contest it. The court would have the power to alter the terms of the mortgage in favor of the homeowner, and even if the lender won the case, the homeowner would still have six months to redeem the property. The law would only apply to owner-occupied homes with one to four units.
“There are two benefits,” says Gene Berman, an experienced bankruptcy attorney who helped organize the Task Force. “It could delay the process by giving individuals the opportunity to negotiate with their lenders, to get refinancing, to sell the house or shortsell the house [to shortsell is to sell the house for less than what’s due on the mortgage with the lender agreeing to accept that payment in satisfaction of the mortgage; it’s a preferred alternative to auctioning]. People right now do not have a place to go and say, Hey, I didn’t sign that mortgage, that interest rate is usurious, or it was fraudulent, or you’re not the holder of the mortgage. Having judicial review would allow people to get a lawyer and contest the mortgage for valid reasons.”
Berman is frustrated because H1729 has been slow to move through the legislative process. “I don’t understand why they won’t even bring the legislation out of committee,” he said. “Most states have it.”
Typically banks and mortgage companies don’t like laws that slow down foreclosure processes, but Rep. Frank Smizik (D-Brookline), a sponsor of H1729, pointed no fingers when he responded to the question Berman raised. Smizik told the Advocate by email that the Legislature is swamped with bills addressing various aspects of the state’s foreclosure problem.
“Perhaps one of the reasons why there has not been any movement on the bill is because of the excess of foreclosure bills being considered,” Smizik wrote. “All we can do is try to work with the committees in addressing their concerns about bills, and encourage them to move them along favorably.”
