EagleTribune.com, North Andover, MA

May 7, 2013

City Council requires mediation before foreclosure

By Keith Eddings
keddings@eagletribune.com

---- — LAWRENCE – Arthur Brien spends his days clipping legal notices advertising pending foreclosures, searching for homes about to be offered at fire-sale prices.

It’s a mission of mercy, not greed, carried out by a life-long city resident looking to help desperate families rather than make a killing on distressed real estate.

“We tell them, ‘Don’t fall for that scam; don’t give them your keys,’ “ Brien said he tells homeowners and their tenants, referring to banks and other lenders trying to get them out and rush through foreclosures. “You don’t have to leave until you’re evicted by a judge.”

Brien, a retired accountant who turns 83 on May 19, has been clipping foreclosure notices and then knocking on doors to educate homeowners and tenants about their rights for nearly a year as part of a program run by the Merrimack Valley Project, an Essex Street non-profit that advocates for homeowners, tenants, immigrants and workers in the region.

The Lawrence City Council recently handed the agency a powerful new weapon when it joined a small number of Massachusetts cities and towns that are requiring lenders foreclosing on residential properties to first go before a mediator who will ensure that everything has been tried to keep homeowners in their homes.

If the process fails, lenders will need a certificate from the mediator affirming they made a good-faith effort before they can begin foreclosing.

The law is intended to help reverse what has been a flood of residential foreclosure notices in the state’s poorest city, which peaked in 2007, when 813 homeowners received them. The number has been dropping steadily as the housing market and the economy recover, dropping to 236 last year and just 21 in the first three months of this year, according to the Warren Group, a Boston company that collects data on foreclosures and other real estate issues in New England.

The decline in actual foreclosures – from 469 in 2008 to just five last year – has been even more dramatic.

It’s a two-part effort. On April 16, when Lawrence city councilors voted unanimously to require mediation before foreclosure, they also voted to require banks and other lenders who foreclose on properties to post a $10,000 bond to ensure that the properties will be maintained.

The laws were proposed by freshman City Councilor Kendrys Vasquez, who said they will help preserve families, neighborhoods and the city’s tax base. He added that the foreclosure crisis continues even though the numbers have dropped because many of the homes that have been lost to the banks have remained vacant for years.

“We don’t want people to lose their homes,” Vasquez said. “Once they lose their homes, they’re dividing families.

“And those properties become vacant. Vacant properties reduce home values. Who’s going to be paying the taxes if the properties are gone? We need to make sure our neighborhoods are safe and secure, and by maintaining residents in their homes, that’s a way we can do it.”

Lawrence patterned both its laws on ones enacted in Springfield two years ago, which were immediately challenged in federal court by six local banks. The banks argued that the city preempted the state’s authority to regulate the banking industry and that the laws violated the contracts clause of the U.S. Constitution.

U.S. District Court Judge Michael Posnor rejected both arguments.

“Widespread mortgage foreclosures indisputably are an issue of serious public concern to municipalities like Springfield,” Posner ruled. “The modest effort made by the city to soften this crisis through the promulgation of the two ordinances violates no Constitutional provision or state statute.”

Springfield Mayor Domenic Sarno is searching for ways to pay the costs of administering the new laws, including hiring inspectors and mediators, before implementing them.

“Any vacant property or house where you see overgrown lawns, it obviously detracts from a neighborhood and property values,” said Jim Leydon, a spokesman for Sarno.

The Lynn City Council approved similar laws in 11-0 votes on April 10. Mayor Judith Kennedy vetoed them, asserting – as did the banks in Springfield – that the state and federal governments have jurisdiction over the issue.

That question could be made moot by the state legislature, which recently appointed a task force to study whether lenders statewide should be required to submit to mediation before foreclosing on residential properties anywhere in Massachusetts. Legislators appointed the task force to study the impact of the proposal after a similar bill was passed by the state Senate last year, but died in a conference committee.

In Lawrence, mediation will be offered only for owner-occupied homes of four units or less. The city will administer the program and, in addition to mediation, will provide loan counselors to homeowners facing foreclosure. Among the options, a mediator could propose restructuring a loan by lowering the interest rate or extending the life of the loan, or, for homes underwater, lowering the principal to the current market value of the home.

Homeowners will pay 15 percent of the cost of mediation; lenders will pay the rest. Lenders that fail to submit to mediation will be fined $300 a day for up to 105 days.

Late on a recent afternoon, Brien, the retired accountant who volunteers for the Merrimack Valley Project’s Home Defenders League, knocked on the door of a dilapidated house at 236 Hampshire St. looking for the owners or tenants, who are facing foreclosure.

The effort was too late. The house was empty.

“I do it for the love of God, for the love of a neighbor,” Brien said about why he took on the project at nearly 83 years old and more than a decade into his retirement. “And I’m trying to save my soul.”

 

 

Notices of intent to foreclose filed in Lawrence 2007: 813 2008: 617 2009: 596 2010: 390 2011: 188 2012: 236 2012 (through March 30): 21 Actual foreclosures 2007: 216 2008: 469 2009: 222 2010: 242 2011: 18 2012: 5 2013 (through March 30): 0