As Massachusetts lawmakers fine tune pending foreclosure legislation, local community bankers are concerned about the "over-reach" of the legislation and its potentially damaging impact on our fragile economy, the housing market, and the availability of credit.
The Senate foreclosure legislation (S 2298) would forestall the foreclosure process further and establish a mediation program for all mortgage loans in the Commonwealth. While we in the local banking industry are sensitive to the plight of distressed homeowners and work aggressively with troubled borrowers to find alternatives to foreclosure, a mediation requirement will substantially lengthen the foreclosure process, increase costs, and hurt existing home values, without any measurable benefit for delinquent borrowers.
Ironically, most of the problems with lenders and foreclosures do not apply to our local banking industry, but this legislation surely will. It has the potential to slow down the entire real estate market, something no one wants to see.
Should the legislation remain as is, credit could tighten as regulators and banks weigh additional lending risk. And the legislation is one sided. Massachusetts already grants a borrower a "150-day Right-to-Cure," a five-month window to cure the default and allow for ongoing discussions with a lender to resolve the delinquency. However, there is absolutely no burden on delinquent borrowers to respond in a timely basis—often the difference between a successful workout and a foreclosure.
Let’s hope our Legislature makes the right decision. The correct action will create a healthier economy, a robust local lending industry, stabilized home values, and benefit the vast majority of homeowners who, often at great personal sacrifice, are current on their mortgages, while we continue to help those who are not.
Daniel J. Forte
Massachusetts Bankers Association