Bay State foreclosure figures on rise again

Mass. officials call for lender action as law's effect wanes

The number of foreclosure petitions in Massachusetts more than doubled in September, just four months after the state passed a law intended to encourage lenders to renegotiate the loans of troubled homeowners, new data released yesterday show.

The steep increase in the first step in the foreclosure process - from 943 petitions in August to 2,258 in September - follows what had been a decline in petitions in the first months after the "right-to-cure" law took effect May 1. The law, which gave homeowners a 90-day break to save their mortgages, was touted by Governor Deval Patrick and Attorney General Martha Coakley as a way to push lenders to take the extra time to restructure as many loans as possible.

"It put off, for 90 days, foreclosure but it didn't really solve the problem," Coakley said yesterday. "The voluntary thing hasn't worked no matter what the big institutions are saying. We haven't seen results."

As thousands more families lose their homes to foreclosure in Massachusetts, government officials and housing experts again are calling for more systematic efforts to help distressed borrowers. The number of foreclosure deeds - the last step in the foreclosure process - filed in Massachusetts for the first three quarters of the year jumped to 9,609, up 72 percent from a year ago, Warren Group reported.

US Representative William Delahunt, who held a briefing in the State House yesterday to focus on the mortgage crisis, called for the revival of a proposal to allow bankruptcy courts to modify the terms of predatory mortgage loans. The plan was rejected in the federal bailout package approved earlier this month, but Delahunt hopes to revive it in the new stimulus package being discussed in Congress.

"We are in the midst of an economic meltdown, and unless we address this issue and do it with a sense of urgency we are going to continue to see property values decline," said Delahunt. "This affects the entire economy."

Coakley, who also spoke at the briefing, said the Treasury Department should not buy toxic loans from lenders, as directed in the federal bailout, without first requiring lenders to do modifications with homeowners.

"The people who made the mistakes, who screwed this up, are now getting a huge benefit," she said. "They should do their best to modify the loans themselves or straighten out their books. . . . There is an urgency to getting people back in their homes and getting these loans modified."

Commissioner of Banks Steven Antonakes said it's still too early to judge the right-to-cure law based on new numbers. However, he agreed lenders need to do more at a systematic level.

"I certainly believe servicers should be working far more aggressively to modify loans en masse to avoid unnecessary foreclosures," Antonakes said. "It is going to take a federal solution ultimately, given the scope of the problem."

Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, which has more than 400 members, said there are some people who should never have bought a home. However, lenders are increasingly interested in saving loans rather than going into costly foreclosures.

"People received loans that they ought not to receive and the best case scenario is to let it go to foreclosure," Cuff said. "There are modifications being done every day where the agreement is done between bank and the lender. More and more will be done."

Despite an overall increase of foreclosure deeds in 2008, the number of deeds filed each month has been decreasing since June, Warren Group reported. Joseph Kriesberg, president of the Massachusetts Association of Community Development Corporations, said the numbers could reflect that the 90-day waiting period helped some people avoid foreclosure. Without the law, numbers could have been even worse, he surmised.

"My guess is we delayed some and we prevented some" foreclosures, Kriesberg said. "If somebody has three months, they are not able to save their home, maybe save a few dollars, and arrange for a smoother transition in terms of getting into a new apartment. I wouldn't belittle the value of three months to a struggling family."

Grace Ross, coordinator for the Massachusetts Alliance Against Predatory Lending, said she can tell just by walking in Worcester that neighborhoods are increasingly struggling with abandoned homes, absentee landlords, and blight.

"Any provision that assumes [lenders] are going to work things out with people is a foregone conclusion it won't work out like we needed it to," said Ross. "We had a 90-day lull."

Jenifer McKim can be reached at jmckim@globe.com.