Massachusetts Home Loan Regulations, Aid Programs Urged

Massachusetts Secretary of State William F. Galvin yesterday called for the state Legislature to give the court system oversight over foreclosure cases in the Commonwealth to protect thousands of homeowners who may have been victimized by predatory lenders.

Galvin, Attorney General Martha Coakley and members of Gov. Deval Patrick’s administration urged the State Legislature to toughen the state’s laws around predatory lending and subprime home loans.

The state’s Land Bank recorded 22,000 foreclosure notices last year, a new state record. Studies have blamed much of the problem on subprime (bad credit mortgage loan) lending involving products that are typically made to people with poor credit.

Homeowners pay low rates for the first few years, but then see their monthly Massachusetts mortgage payments skyrocket by hundreds or even thousands of dollars.

Galvin noted it was affecting wide areas of the state, from poorer cities like Lawrence and Lowell to suburban areas like the town of Barnstable.

Bristol County had 1,982 mortgage foreclosure notices from January 31, 2006, to January 31, 2007, a 93.74 percent increase over the same period the previous year.

“My prediction is that it is going to get very bad in Massachusetts, much worse than it is today,” said Sen. Mark C.W. Montigny, D-New Bedford, who has co-sponsored a bill with Sen. Jarrett Barrios, D-Cambridge, to reform the industry.

Richard Walker, a V.P. and community affairs officer at the Federal Reserve Bank of Boston, told the committee the bad credit mortgage problem may get worse this year, as more homeowners become delinquent in their loans.

All foreclosure notices don’t necessarily result in the outright loss of someone’s home. Residents can work out payment plans, sell their home to pay off their outstanding loan, or apply for mortgage refinancing.

But a stagnant Massachusetts housing market has made it much more difficult.

About 30 states require court approval of foreclosures. In Massachusetts, there are no court approvals, just a requirement that foreclosure notices be filed in Land Court.

“Massachusetts’ present foreclosure law does not protect homeowners,” Galvin said. “Indeed, compared to most of the other states, we are in deficit in that.”

The Housing Committee is considering several pieces of legislation that would toughen the laws on mortgage broker and lender organizations and provide counseling and assistance to homeowners.

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