Galvin to urge curbs on seizure of homes

With record numbers of Massachusetts homeowners facing foreclosures, Secretary of State William F. Galvin today will urge the Legislature to require mortgage lenders to get permission from local judges before they seize the homes of delinquent borrowers.

Galvin said court supervision would help ensure foreclosures sought by lenders are warranted and also give borrowers a venue in which to dispute the grounds for foreclosure. Massachusetts is currently among some 20 states, including California, Idaho, New Hampshire, and Texas, that do not require court approval when homeowners default on mortgage payments.

"You have the right to dispute a parking ticket but not to dispute the taking of your home," Galvin said yesterday. "We have to move now. This demands urgent action today."

Galvin does not have direct regulatory supervision over the mortgage industry. But he said the rapidly mounting number of foreclosures warrant state intervention. He will make his recommendation to the Legislature's Joint Committee on Housing, which has scheduled a hearing this morning on the foreclosure issue.

In 2006, foreclosure notices filed by lenders against homeowners reached a record high -- nearly 20,000 -- in Massachusetts Land Court. A Federal Reserve Bank of Boston study this month determined the increase was fueled by an explosion in high-rate mortgages to borrowers with poor, or "subprime," credit. Many of these loans had adjustable rates that rose after two years, increasing borrowers' monthly payments by hundreds of dollars.

While subprime loans are targeted to people with poor credit histories, Galvin, as well as some borrowers and many in the real estate industry, have contended some loans were made to people who clearly could not afford them or were based on inaccurate incomes that overstated borrowers' ability to pay.

Currently the only requirement mortgage lenders face in Massachusetts derives from a federal -- not state -- law. The US government forbids foreclosure against active-duty military personnel. Massachusetts lenders that want to foreclose must file a notice in Land Court, which ensures the notice is posted publicly so military personnel can respond. The borrower has six weeks to claim the exemption.

If they do not, the foreclosure proceeds. "The lender takes it from there, and we have nothing to do with it," said Melvin Karas, an assistant clerk in Land Court.

In neighboring Connecticut, meanwhile, foreclosures are overseen by local courts, and state law prevents lenders from taking the homes of borrowers who can demonstrate they are unemployed or underemployed.

"Maybe the borrower has valid reasons" for failing to pay, said David Volman, an attorney in Shelton, Conn., who represents homeowners facing foreclosure. In Massachusetts, "there's no judge monitoring" the process. With no oversight, he said, lenders "are going to do whatever they want."

Moreover, Volman added that it is unrealistic to expect homeowners who can't afford mortgage payments to hire an attorney to try to stop foreclosure.

Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, said mortgage companies oppose Galvin's proposal, which he said would cause an "unacceptable delay" for lenders.

"You're going to have legitimate foreclosure proceedings that are going to get hung up in court, and the lender is going to be out, and the investor" who buys those loans from mortgage writers "is going to be out," Cuff said. "It's going to throw into disarray the entire process."

Not all notices filed in Land Court result in foreclosure. Homeowners can attempt to negotiate a new payment schedule with the lender, refinance the loan, or sell the house to pay off the mortgage, said the Land Court's Karas.

But in a soft real estate market where home prices are falling, agents said it is impossible for many borrowers in this position to raise enough money to refinance or pay off the outstanding balance of their loans.

Other ways to block foreclosure are to file suit against the lender or file for bankruptcy in US court, which gives borrowers time to negotiate repayments to lenders.

Galvin supports other proposed bills before the Legislature that would increase disclosure of loan terms to mortgage borrowers or provide financial relief to borrowers already in foreclosure. But "there should be some state intervention" for thousands facing foreclosure this year, he said. "We can't say to all these people, 'You're on your own.' "

Kimberly Blanton can be reached at blanton@globe.com.