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Bills target rules on foreclosure

Homeowners may get added protection

By Jenifer B. McKim
Globe Staff / January 18, 2011

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Legislation meant to help troubled homeowners avoid foreclosure is scheduled to be introduced in the State House this week, bolstered by a recent Supreme Judicial Court decision and national focus on alleged bad behavior of banks.

Scores of housing advocates are expected to head to Beacon Hill today to lobby for the new bills that would require all foreclosures to be reviewed by a judge, force lenders to negotiate with troubled borrowers, and protect former homeowners from eviction, said Grace Ross, coordinator of the nonprofit Massachusetts Alliance Against Predatory Lending. Ross said the bills should all be introduced by the end of the week.

“Foreclosures are spreading like wildfire across Massachusetts, with some of the now hardest hit communities in rural areas and wealthy suburbs,’’ said Ross. “This is a crisis that affects everybody, and we’ve got to get on top of it.’’

The legislation comes after more than 20,000 Massachusetts homeowners have lost their properties to foreclosure over the last two years, leaving small towns and big cities plagued by abandoned homes and depressed property values.

Concerns about lenders’ foreclosure practices also have escalated following reports that bank employees known as robosigners approved thousands of legal documents without reading them. Adding further consternation to the fragile housing market, the Massachusetts Supreme Judicial Court recently upheld a lower court decision invalidating two Springfield foreclosures because lenders were unable to prove they owned the loans. The decision put into question the ownership of thousands of local properties.

“There’s a lot of things going on right now in this foreclosure arena,’’ Barbara Anthony, undersecretary of the state Office of Consumer Affairs and Business Regulation, said yesterday. Anthony declined to comment on new legislation. However, she said the state is talking to national lenders to make sure they follow state law when they foreclose and improve efforts to help troubled homeowners. “We have a continuous relationship with the national lenders and are pressing them to do more,’’ she said.

Ward P. Graham, a member of the legislation and title standards committees for the Real Estate Bar Association for Massachusetts, said he has not seen the new proposals but cautioned lawmakers not to move too quickly to change laws that have been on the books for hundreds of years.

“We need to calm down a little bit and take a more judicious approach and figure out what the problems are and not use this as a pretext to completely change our foreclosure process,’’ said Graham. “Basically the foreclosure process has worked pretty well going on 200 years.’’

Proposals include a bill supported by Secretary of State William F. Galvin that would require that all foreclosures be approved by a judge, a process that already occurs in 23 states. Galvin has argued that recent examples of sloppy and fraudulent lending practices demonstrate why foreclosures need judicial review.

Another bill would force lenders to prove they possessed a valid title for a property before an eviction. And lawmakers are expected to file a bill this week that would require foreclosing banks to negotiate with homeowners by sitting down with a third-party mediator. It is meant to improve legislation signed into law last summer that forces lenders to wait 150 days to foreclose, instead of 90 days, if they don’t negotiate with a troubled borrower.

Many local housing advocates say that lenders are choosing to wait out the time rather than work with borrowers. They argue that voluntary loan modification efforts, including those supported by the Obama administration, have largely failed to help troubled homeowners.

“People are realizing that the system is broken and in order to avoid foreclosures there has to be some good faith effort to modify loans,’’ said Nadine Cohen, managing lawyer of the consumer rights unit at Greater Boston Legal Services, a nonprofit that provides help to low-income clients.

The state Division of Banks has scheduled three hearings, in Brockton, Lawrence, and Springfield, this month to address details of last year’s foreclosure legislation.

Anthony said many lenders have chosen to avoid the state-legislated process because it requires written proof that negotiations took place, raising liability concerns. If nothing else, she said the new law has helped homeowners by delaying the foreclosure process, allowing borrowers more time to work out a deal. “I don’t think it is accurate to say the legislation has failed to spur on negotiations,’’ she said.

Legislation scheduled to be introduced this week also would provide new protections to homeowners who have lost their homes to foreclosure. Last year’s legislation provided renters protection against evictions, but didn’t help former homeowners. In another protest scheduled today, activists from the Jamaica Plain community group City Life/Vida Urbana plan to physically block the eviction of a Hyde Park family with five children who recently lost their home to foreclosure.

Steve Meacham, a community organizer, said if the new eviction legislation were in place, the Hyde Park family would be able to stay in their home at least until the property is resold. The family is willing to pay rent but the lender has refused to accept any money, he said. “The eviction itself is outrageous and unnecessary,’’ Meacham said.

Eliza Parad, an organizer with the tenant association at the nonprofit Chelsea Collaborative, plans to attend today’s demonstration to support new legislation, especially the effort to force lenders to negotiate with homeowners. Parad said she, too, is hoping the new political climate will mean good things for struggling homeowners. “People feel so ignored and so paralyzed,’’ she said.

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