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, however the cities of Lynn, Lawrence, and Springfield have implemented mediation programs through city ordinances.
Read on to learn more about how the mediation ordinances in the cities of Lynn, Lawrence, and Springfield work and how you can benefit from the process.
(To learn about other options if you are struggling to pay your mortgage, visit our Foreclosure topic area. To learn about other Lynn, Lawrence, and Springfield ordinances that apply to foreclosure, visit our Massachusetts Foreclosure Law 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.)
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, and Springfield Mediation Programs
While Massachusetts does not have a statewide foreclosure mediation program, the cities of Lynn, Lawrence, and Springfield have implemented ordinances that require 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 works under these ordinances:
Lender notifies city of notice to cure default. The mediation process starts 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 will 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 and Springfield).
Loan counselor assigned. Prior to the scheduled mediation conference, the homeowner will 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 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.
Eligibility for Mediation
To be eligible for mediation under the Lynn, Lawrence, and Springfield ordinances, all of the following criteria must be met.
- The property must be owner-occupied.
- The property must be the borrower’s principal residence.
- The property cannot have more than four units.
Foreclosed Homeowners in Lynn Can Become Renters
In Lynn, if mediation is unsuccessful in avoiding foreclosure and the bank is the purchaser of the property at the foreclosure sale, the parties may enter into a rental agreement where the former owner agrees to become a rent-paying tenant at a reasonable market rate. The former homeowner can stay in the home until a new owner purchases the property.
Mediation Laws Face a Court Challenge from Banks
In 2014, several banks filed a lawsuit objecting to the ordinances in Lynn and Worcester (which also has a mediation ordinance). In the meantime, Worcester is not enforcing the ordinances until the case is resolved in court. In Lynn, officials are now taking steps to enforce the mediation rules by signing a contract with a dispute resolution firm to handle mediations and small banks are engaging in some mediations. Springfield and Lawrence have not yet implemented their mediation ordinances. (Learn more in Nolo's article Special Foreclosure Rules in Lynn, Lawrence, and Springfield, Massachusetts.)
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”).