Mass. foreclosure cases plummet
New law is credited, but will the relief be just temporary?
The number of foreclosure proceedings initiated in Massachusetts plummeted in June, a sign that a new state law delaying property takings is working.
There were just 350 new cases brought by lenders against delinquent homeowners last month, compared with 2,308 in June 2007, according to Warren Group, a Boston real estate data publishing company. There was a similar decline in new proceedings in May.
The drop is attributed to a state law that took effect May 1 giving struggling homeowners a bit of breathing room. The so-called right-to-cure law created a 90-day period in which homeowners can "cure" mortgage delinquencies by catching up on payments or finding a buyer. Signed by the governor in the fall, the law also prevents lenders from tacking on fees during those 90 days, said David Cotney, chief operating officer for the state Division of Banks. Normal mortgage payments will continue to accrue, however.
Cotney said state officials are hoping this will help because previously, "consumers would try to put together the dollars necessary to pay off their arrears, only to find out you're still in default because you've got these thousands of dollars in legal fees that you owe."
Even with the cooling off period, Massachusetts is on track to have more than double the number of foreclosures this year than in 2007. Through the first six months of 2008, lenders had repossessed 6,707 residential properties, compared with 3,083 in the first half of 2007.
Brockton, Dorchester, Lawrence, and Lowell continue to be among the communities hardest hit by the state's foreclosure crisis, according to Warren Group.
Still, it's too soon to tell whether the new law will help struggling homeowners, or just delay the inevitable. Warren Group's chief executive, Timothy Warren, said the law may just push back foreclosures by three months.
"I'd love to think it's going to help a lot of people. We'll know in August," Warren said.
In the meantime, Governor Deval L. Patrick has called on lenders to work with borrowers during the 90-day grace period to avoid unnecessary foreclosures, Cotney said. And legislation signed yesterday by President Bush may help as well, he said.
"There's really no single solution to this whole foreclosure issue," Cotney said. "We remain hopeful this [right-to-cure law] is a real opportunity for both homeowners and the lenders to, wherever possible, find a solution that avoids foreclosure. It's not going to help everybody."
A more telling sign of possible slowing of the state's foreclosure crisis may be the 19.5 percent drop in completed foreclosures from May to June, he added. Foreclosures are not affected by seasonal ups and downs the way real estate sales are.
Stacey Myers can be reached at smyers@globe.com.
