Seven Massachusetts banks recently lost a court bid to strike down ordinances from the cities of Lynn and Worcester that would require the banks to post cash bonds to finance mediation with mortgagors (we hesitate to call them “homeowners”); to maintain properties going into foreclosure; and to maintain those properties until they were resold. The court struck down the mediation requirement for Worcester, but allowed everything else, and it appears that a final resolution won’t be in hand until after the Massachusetts Supreme Judicial Court decides in a related case filed from Springfield.
The cities of Worcester and Lynn said a 2012 state law already on the books requiring lenders to offer loan modifications before foreclosing on some high-risk loans doesn’t go far enough.
The Massachusetts Bankers Association objects to the cities’ requirement for lenders to maintain properties before they have taken legal possession, and said that the ordinances conflict with state law and impose a de facto tax on lenders. An Eastern Bank spokesman reportedly said that if each of the 351 municipalities in the state could make their own rules, it would result in “big logistical problems” and called for a state-established standard.
This gets to a larger picture. In the same timeframe, national and regional retailers’ association are pushing for a national standard on reporting requirements for data breaches that expose customers’ personal information.
An attorney for banks in the Springfield case reportedly said the local ordinances conflict with state laws and regulations, and are therefore unconstitutional – and that the $10,000 bond that Springfield has requested, which includes an administrative fee for the city, is essentially a tax, which is illegal because any new city tax needs approval from state lawmakers – a viewpoint that coincides with the Massachusetts Bankers Association’s take.
So here we have the irresistible force of a call for state standards meeting the immovable object of municipal home rule. It’s the neighborhoods and their host cities that feel the adverse effects of foreclosure through declining home values and eroding tax assessments. They want a voice in remediation that answers directly to the municipal offices that are a phone call, email or even a Town Hall visit away. The entities calling for state standards want consistency across the regions for which they have responsibility.
The clash between home rule and wider jurisdictions has been ongoing in Massachusetts for centuries. When is something a tax or not a tax? How much leverage should local governments have to ensure that they can be responsive in addressing local problems? Red-state and blue-state sensibilities are clashing on this point – and the tug of war is far from over.
