Lenders pressed to pay for advisers
The Patrick administration is pressuring mortgage lenders that initiate foreclosures to pony up as much as $6 million to cover the cost of helping up to 8,000 Massachusetts homeowners who may lose their homes next year.
In an e-mail obtained by the Globe, Dan Crane, director of the Office of Consumer Affairs and Business Regulation, told a group of lenders that the administration expected them to provide money to pay for housing counselors who will assist delinquent homeowners through the foreclosure process or help them find rental housing.
This year, lenders have provided $10,000 in aid, far short of what will be needed in 2008 to address the foreclosure crisis, Crane said in the e-mail.
"We will expect each of you to provide us with information on how much support your organization will provide" for counseling, he wrote in the e-mail.
The letter targeted lenders with the largest number of foreclosure filings against Massachusetts homeowners, said administration officials, who declined to name them.
According to Foreclosures Mass.com, which tracks filings in state Land Court, those lenders include
Bank of New York has told the state it will not contribute: "We are not a loan servicer or a lender and do not feel it's appropriate to be included in the program," said spokesman Kevin Heine.
While Wells Fargo did not say whether it would comply with Crane's request, it said it has expanded its efforts to reach out to customers having difficulty making their payments. Countrywide did not return messages seeking comment.
In his e-mail, Crane said the housing counselors are at "the core" of the administration's effort to stem foreclosures. The counselors will work with delinquent borrowers and their lenders, to see if the terms of the loans can be modified to be more affordable or to facilitate a "short sale" in which the lender agrees to sell the house to a third party for less than what the borrower owes.
"The counselors are eligible for reimbursement of $1,500 when the outcome is 'positive,' such as a loan modification or short sale," Crane wrote. "However, they receive nothing when their work results in foreclosure unless we identify additional resources for them."
The administration projects between 6,000 and 8,000 borrowers with adjustable rate mortgages will be foreclosed on in 2008, according to the memo. This is the second recent effort by the Patrick administration to get lenders to pay for assistance to foreclosed homeowners. In July, lenders balked at the administration's request that they pay $5,000 to each owner of a repossessed house to finance their relocation.
"I don't think anybody signed on for it," said Kevin Cuff, director of the Massachusetts Mortgage Bankers Association.
Cuff criticized the plan for not detailing which lenders will be assessed or how the plan will be administered. The plan "may say much more about funding housing agencies, advocates, and counselors than it does about" foreclosure prevention, he said.
For those lenders that declined to participate in the earlier initiative, Crane wrote they should be prepared to disclose "how much support your organization will provide for housing counseling in Massachusetts" during a conference call with state officials scheduled for tomorrow. Crane referred questions to the department's spokeswoman, Kofi Jones, who said yesterday this latest request is part of Patrick's attempts to protect neighborhoods from a surplus of foreclosed homes.
"There will be families who cannot stay in their homes, and when there are many of them in a neighborhood, the neighborhood is at risk," she said. "You have a ton of homes that are boarded up, crime goes up. It is not what we want."
Jeremy Shapiro, Foreclosures Mass.com's president, predicted the number of filings to initiate foreclosure proceedings would exceed 26,000 this year, up from a record 19,487 in 2006.
"The situation's getting worse," he said.
Kimberly Blanton can be reached at blanton@globe.com.
