Troubled homeowners may be getting some much-needed assistance in the form of new legislation from Beacon Hill. Last week, the State Senate passed a bill which aims to reduce the amount and severity of foreclosures in the Massachusetts. Senate Bill 2287, An Act to Prevent Unlawful and Unnecessary Foreclosures, makes several key modifications to the way foreclosures are handled, and not a moment too soon.

Over 45,000 people in the Bay State have lost their homes to foreclosure since the financial crisis began. Foreclosure rates stalled – and even dropped, momentarily – from the end of 2010 through September of 2011. This was partly due to Attorney General Martha Coakley’s pursuit of fraud charges against the financial industry, and partly due to a new state law which increased the time given to borrowers to address a mortgage default from 90 to 150 days. Since last October, however, new foreclosure filings have consistently increased when compared to the past year, including a nearly 6% spike in April 2012.

In its current form, the bill has been criticised by housing rights activists as not doing enough for homeowners. Issac Simon Hodes, a member of Lynn United for Change, said that without the amendments, “the bill amounts to a sellout to Wall Street.”

“It affects a very small proportion of foreclosures,” Hodes said, “and even for the loans it does cover, it’ll be minimally helpful.  It may even make things worse for others, by shortening the time between the start of the foreclosure process and sale.” For Hodes, the strength of the bill lies its amendments.

One amendment to the bill would bring in a legally required mediation process which gives borrowers a chance to sit face-to-face with a rep from the institution that holds their mortgage. More than a dozen states in the U.S. have implemented similar programs in the last few years.  Although sparse research has been done on these programs’ efficacy, the U.S. Department of Housing and Urban Development recently issued a report which praised these state-level mediation programs, many aspects of which Massachusetts will adopt if the bill passes through Governor Patrick’s desk unscathed.

Another amendment- which has yet to be approved – would allow a tenant whose home has been foreclosed on to continue living there as a renter, until the bank is able to find a suitable buyer.   The Preventing Unnecessary Vacancies amendment – as well as the mediation amendment – was sponsored by State Senator Thomas McGee of Lynn.

As it stands, many banks move to evict tenants from a home as soon as foreclosure proceedings have ended, sometimes by force. These properties often sit vacant for years, especially in lean times when the market for home buying is weak, which has an added detriment of driving down the property values of the entire neighborhood.   Massachusetts has a vacancy rate of 9.3%, which is slated to rise as foreclosures continue across the state.

Members of the Massachusetts Bankers Association have publicly opposed some of the original bill and all of McGee’s amendments.   Some site concerns of an overly long mediation process and potential liability for not offering loan modifications to some homeowners.   Even so, the bill appears poised to pass through the full legislature with – at minimum – the mediation amendment attached.

The NEW ROAD Network, a coalition of MA housing rights groups assembled by the Boston economic justice organization City Life/Vida Urbana, was largely responsible for pushing these stronger amendments to the bill.   Activists in the network spent a great deal of time lobbying state reps prior to the vote last Wednesday, and even staged an overnight sleep-in on the steps of the Statehouse as a public protest.  City Life is also rallying for amendments that require banks to reduce the principle on underwater mortgages to reflect the actual market value of the property reduction and make the monthly payments more affordable, which banks have vehemently opposed.

One of those who could be affected by the bill’s passage is Marlon Hernandez, a Malden resident who works at a safety insurance company. During a demonstration at the Massachusetts State House on Tuesday, June 5, Hernandez discussed the subprime mortgage on his house, which he’s lived in since 2004.

“I didn’t have any experience at the time with banks, or adjustable interest rates,” he said.  Hernandez smiles at his daughter, Daniella, who’s painting a sign on the ground nearby. “When you have a family, your dream is to get your own house. I didn’t know it would turn into a nightmare.”

Wells Fargo first moved to foreclose on Hernandez’s home in mid-2009, at the peak of the financial crisis. Desperate to keep his home, Hernandez looked everywhere for help. “We even got ripped off by an attorney that promised us a loan modification.  Instead he just took our money.”

Hernandez believes that a strengthened version of the current bill in the legislature, with all of NEW ROAD’s proposed amendments intact, is necessary for his family and those in Massachusetts who are facing foreclosure. “I hope that the politicians will act in time,” he said.

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