Legislature Attempting to Curb 'Foreclosure Crisis' Through Mediation
A new law would require lenders to enter into government-run mediation before foreclosing on a property.
In the face of a skyrocketing foreclosure rate across the state, lawmakers are trying to make it harder for banks to take back houses.
The Senate passed a bill filed by Attorney General Martha Coakley, and passed in a different version by the House in May, that would force lenders to enter into a state-controlled mediation process that could include loan restructuring before foreclosing on a homeowner. The Senate version of the bill will now go back to the House for a vote.
In the meantime, a separate House bill that calls for mediation in Boston foreclosures is making its way through the Joint Committee on Municipalities and Regional Government. The fate of that bill could be determined by the one passed by the Senate.
"I think it offers an important opportunity to prevent forecloseures and keep people in their homes under an newly negotiated mortgage," Rep. Marty Walz, a co-signer of the House bill, said. The House bill is being sponsored by Rep. Elizabeth Malia (D-Jamaica Plain), who was arrested June 15 while protesting the eviction of a 61-year-old Jamaica Plain woman.
Statewide, foreclosures are up 32 percent over this time last year, according to The Boston Globe. And foreclosure petitions, the first step in the process, are up 77 percent. Coakley has declared a "foreclosure crisis" in Massachusetts and said the state needs to work to stop it. On her website, Coakley claims that her efforts have helped to keep 25,400 people in their homes.
But a government-run mediation program won't happen if the banks have their way. On Thursday, the Massachusetts Bankers Association sent an email to legislators voicing its "strong opposition to the foreclosure mediation provisions that were included in the Senate-passed version of Attorney General Martha Coakley's foreclosure prevention legislation.
The association claims that banks are doing all they can to stop foreclosures while at the same time staying in business. Furthermore, they say that costly mediation will slow economic recovery by tightening access to credit for low- and middle-income homebuyers.
"We strongly believe that any new statutory protections must strike an appropriate balance between the interests of the homeowner and those of the lender which extended credit in good faith and has a scurity interest in the property," the email reads.