DEVAL PATRICK
‘An escalating crisis’
The state’s top housing official will file a bill this week that would make mortgage fraud a crime and prohibit foreclosure rescue schemes.
The legislation also would require lenders to file pre-foreclosure notices with the state Division of Banks and establish a central database of foreclosure notices at the division.
Gov. Deval Patrick made the announcement that he has directed Secretary of Housing and Economic Development Daniel O’Connell to file the legislation as he spoke to members of the Massachusetts Association of Community Development Corporations during the organization’s annual legislative action day last Wednesday.
“I look forward to working with the Senate president, the speaker [of the House] and all the members of the Legislature in drafting legislation that will be a national model in combating mortgage fraud and predatory lending,” Patrick said.
The legislation is based on recommendations that were included in a report released by a group of regulators, lenders and consumer advocates in April.
O’Connell told Banker & Tradesman that he intends to file a bill by the end of this week. “This is very important. We need to move quickly,” he said.
Patrick also said he was taking immediate action to increase the licensing and education requirements for mortgage lenders and brokers and to strengthen the state’s consumer assistance and educations programs for homeowners.
The announcements came as the Bay State is facing a surge in foreclosure activity while industry leaders and policymakers are monitoring that trend. Foreclosure auction notices more than doubled during the first quarter of the year, according to The Warren Group, parent company of Banker & Tradesman. Slightly more than 3,100 foreclosure auction notices appeared in newspapers throughout the state in the first three months of the year, up from 1,069 a year earlier.
In addition, a total of 6,395 petitions to foreclose were filed in the Massachusetts Land Court during the first quarter, an 80 percent jump from a year ago. The petitions are the first step lenders take in the foreclosure process when homeowners fall behind on payments, but they don’t represent actual foreclosures.
“Right now, we are facing an escalating and complex crisis of homes that are being foreclosed all over the country,” said Patrick. “Behind those numbers are real families losing real homes. Their investment Â… their sense of security.”
Action Needed
Currently, the Bay State does not have a mortgage fraud law. Georgia was the first state to pass a law that specifically criminalizes mortgage fraud. Arizona, Colorado, Texas and four other states are considering laws that would make mortgage fraud a crime, according to the report that was the culmination of last fall’s Mortgage Summit held by the Division of Banks.
In early April, Attorney General Martha Coakley’s office asked a judge to issue injunctions against 19 individuals and companies that were allegedly involved in foreclosure rescue schemes. Her office charged that the companies deceived distressed homeowners facing foreclosure and illegally altered names and dollar amounts on checks and deeds. At the time, Coakley said the companies were preying on vulnerable homeowners facing foreclosure in order to take their homes and life savings.
The MACDC, along with several other groups, is supporting bills designed to protect homeowners facing foreclosure.
The bills would require the licensing of all mortgage originators, create a fund to provide counseling and assistance to homeowners, and extend the requirements of the Community Reinvestment Act to mortgage companies. CRA, which currently applies only to banks and credit unions, requires financial institutions accepting deposits from certain communities to reinvest in those communities and offer credit throughout their entire market area.
The proposed legislation also would create a 30-day freeze once a foreclosure notice is filed so that lenders couldn’t impose additional fees and penalties to the amount that a homeowner owes.
Patrick and other officials in his administration have expressed support for the bills, which were filed by Sen. Jarrett Barrios, D-Cambridge, and Rep. David Torrisi, D-Lawrence. Rep. Kevin G. Honan, a Democrat from Boston who co-chairs the Legislature’s Joint Committee on Housing, also has filed a related bill with Boston Mayor Thomas M. Menino.
About 300 leaders from community-based groups throughout the state showed up for MACDC’s lobby day to press lawmakers to pass the legislation.
MACDC President Joseph Kriesberg said legislation is needed given that 20,000 residents are facing foreclosure and thousands more will be doing so in upcoming months.
“The process by which the foreclosures occur in Massachusetts is deeply flawed and unfair to homeowners and Â… our regulatory system for mortgage lending is outdated and needs to be brought up to date so it can be used to deal with the issues of the day,” said Kriesberg.
Kriesberg said the foreclosure process moves very quickly and there’s no judicial review involved. “It’s much harder to evict a tenant than it is a homeowner,” he said.
Kriesberg said he is confident that Legislature will be responsive because many state leaders have acknowledged that the foreclosure issue is an urgent matter that must be addressed.
“Everybody agrees that we need to take action,” he said.
In addition to the homeowner protection legislation, MACDC members were asking legislators to pass a budget amendment that would provide $2 million for a program that assists small-business efforts. Last year’s economic stimulus bill included $2 million to initiate a program that supports local community-based business efforts. The fund runs out on June 30. Patrick’s budget included $2.25 million for the program, but the House budget didn’t.
MACDC members also urged legislators to pass a proposed $1.25 billion housing bond bill and to preserve affordable housing.
Last year, CDCs built or preserved 1,419 homes statewide and started or expanded 869 locally owned businesses, according to MACDC.
