In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist homeowners in finding ways to avoid foreclosure, but few local entities have taken similar steps. In Massachusetts, there is no statewide foreclosure mediation program, yet the cities of Lynn, Lawrence, and Springfield passed city ordinances requiring lenders to participate in pre-foreclosure mediation. Worcester, too, passed a mediation ordinance. Recently, however, the Massachusetts Supreme Judicial Court (the highest court in the state of Massachusetts) struck down the mediation ordinance in the city of Springfield, which does not bode well for the future of the ordinances in Lynn, Lawrence, and Worcester.
Read on to learn more about the mediation ordinances in the cities of Lynn, Lawrence, Worcester, and Springfield and what the Supreme Judicial Court's decision means for these ordinances. (To learn about other options if you are struggling to pay your mortgage, visit our Foreclosure Center.)
What Is Foreclosure Mediation?
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the homeowners and the lender. Mediation consists of a meeting between:
- the homeowners
- their lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the homeowners’ financial situation and try to negotiate a way for the homeowners to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.
Potential outcomes of mediation include:
- loan modification
- repayment agreement
- forbearance agreement
- short sale, or
- deed in lieu of foreclosure. (To get information about each of these options, see our Alternatives to Foreclosure area.)
To qualify for mediation, the home being foreclosed generally must meet the following criteria.
- The property must be owner-occupied.
- The property must be the borrower’s principal residence.
- The property cannot have more than four units.
Massachusetts Foreclosure Process
In Massachusetts, most foreclosures are nonjudicial, which means the lender does not have to go through state court to get a foreclosure. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?).
(To learn more about foreclosure in Massachusetts, visit our Massachusetts Foreclosure Law Center.)
Lynn, Lawrence, Worcester, and Springfield Mediation Programs
While Massachusetts does not have a statewide foreclosure mediation program, the cities of Lynn, Lawrence, Worcester, and Springfield passed ordinances requiring banks to participate in a face-to-face mediation with homeowners to attempt to find a way to avoid foreclosure.
This is how the process was designed to work under these ordinances:
Lender notifies city of notice to cure default. The mediation process would start when the lender notifies the city that it has given the homeowner a notice of the homeowner's right to cure the default, which is part of the Massachusetts foreclosure process. (Learn more in our Summary of Massachusetts’ Foreclosure Law.)
City notice of mediation to homeowner. Then, the city will notify the borrower of his or her rights under the mediation ordinance.
Mediation conference scheduled. The mediation conference would then be scheduled no later than 30 days after the borrower receives the notice of the right to cure (for homeowners in the city of Lynn) and no later than 45 days after the borrower receives the notice of the right to cure (for homeowners in the cities of Lawrence, Worcester, and Springfield).
Loan counselor assigned. Prior to the scheduled mediation conference, the homeowner should be assigned to a volunteer city-approved loan counselor. (If the homeowner is already working with a counselor, that counselor can work with the homeowner during the mediation process.)
Mediation meeting. The mediation meeting will then take place at a location that is mutually convenient to the parties, who must put forth a good faith effort to negotiate a commercially reasonable alternative to avoid foreclosure.
The Mediation Ordiances Face Multiple Court Challenge from Banks
In November 2013, the U.S. Court of Appeals heard a lawsuit filed by six banks contesting Springfield's mediation ordinance, among others. The U.S. Court of Appeals, while keeping jurisdiction, decided on November 22, 2013, that the Massachusetts Supreme Judicial Court (the highest court in Massachusetts) should review the matter and ordered Springfield to refrain from implementing the various anti-foreclosure ordinances while the matter was in limbo.
In 2014, several banks filed a lawsuit objecting to the ordinances in Lynn and Worcester. In the meantime, Worcester decided to hold off on implementing a mediation program until the case is resolved in court. (In Lynn, mediations have begun. Lawrence has not implemented its mediation ordinances.)
Massachusetts Supreme Judical Court Strikes Down Springfield's Mediation Ordinance
On December 19, 2014, the Supreme Judicial Court struck down (invalidated) Springfield's mediation ordinance along with an ordinance requiring the lender to maintain the home during the foreclosure process. In the end, the court stated that state law preempted the city ordinances, and that the state should regulate foreclosures and related procedures -- not cities. (Learn more in Nolo's article Special Foreclosure Rules in Lynn, Lawrence, and Springfield, Massachusetts.)
How the Supreme Judicial Court Decision Impacts Lynn, Lawrence, and Worcester
Since the Massachusetts Supreme Judicial Court determined that the Springfield mediation ordinance is invalid, the future of the mediation ordinances in Lynn, Lawrence, and Worcester doesn't look good. While the Supreme Judicial Court's decision about Springfield does not immediately render the other ordinances void, any judge reviewing arguments against the ordinances in Lynn, Lawrence, and Worcester will likely follow this decision.
How to Find the City Ordinances
To find the City of Lynn Charter and Ordinances, go to www.ci.lynn.ma.us and select “City Hall,” then “City Departments,” then “City Clerk,” and finally “City Information” to find a link that will take you to the ordinances. However, the ordinance is so new that it has not yet been added to the online site.
To find the Lawrence ordinance, go to www.cityoflawrence.com and click on “Lawrence Municipal Code.” The ordinance for the mediation program, which will be contained in a new Chapter 8.30 called “Mediation of Foreclosures of Owner-Occupied Residential Properties,” has not yet been added online.
To find the Springfield ordinance, go to www3.springfield-ma.gov/law and click on “City Ordinances.” Then go to Chapter 182 (“Foreclosures”), Article I (“Mediation of Foreclosures of Owner-Occupied Residential Properties”).
To find the Worcester ordinance, go to www.worcesterma.gov/city-clerk/ordinances-regulations. Click on “Revised Ordinances of 2008 Part One - as Amended Through October 14, 2014.” Then look at Chapter 9, §14A.