Enough is enough, according to Martha Coakley, Massachusetts' Attorney General, who submitted a two-part plan for solving the state's foreclosure crisis. With some help from the Massachusetts Legislature along with the mortgage settlement reached with the five largest mortgage lenders, the state is poised to close the door on this five-year long foreclosure crisis and move forward with growing the state's economy again.
More than 45,000 Massachusetts residents have lost their homes to foreclosure over the last five years with thousands more heading toward foreclosure. February of this year saw more than double the number of foreclosures started than in February of 2011, which had 1,394. The Loan Modification Bill, which was just approved by the Legislature's Joint Committee on Financial Services, is designed to keep people in their homes by requiring banks to modify mortgages when it is commercially viable to do so.
Many financial institutions have long acknowledged that it makes more sense, and cents, to modify a loan into more affordable payments, rather than attempt to foreclose on a home and sell it at a loss. Ms. Coakley stated that we can keep more families in their homes while also improving the lenders' bottom line, making it a win-win for everyone, including entire communities affected by the foreclosure crisis.
One would think since lenders agree it makes better financial sense to try and work out a payment plan rather than foreclose on a home; there would be more modifications across the board. But we're just not seeing modifications on the scale that is required to turn this ship around. A perfect example of how a modification makes more sense than a foreclosure involves an East Boston homeowner who bought a condominium with a $147,000 mortgage, then lost his job and tried to work out a payment plan that would have reduced the loan to $90,000.
The bank refused that request and chose to foreclose on the property instead and later resold that property for $40,000. And this story is one of many similar stories in the state. By having a more predictable and enforceable loan modifications program in place, homes that can be saved will be, and those that cannot will have a more predictable, and efficient foreclosure process in which to work with.
If you are in need of assistance in understanding the multitude of federal and state mortgage and refinancing programs, consider contacting a residential real estate attorney who can walk you through your options and get you on the right path to either saving your home or working with your lender to pursue another remedy, such as a short-sale.
Source: The Boston Globe, "Two-part cure for unnecessary foreclosures," Martha Coakley, May 11, 2012