If you are a struggling homeowner in danger of foreclosure in Lynn, Lawrence, Springfield, or Worcester, Massachusetts, there are city ordinances that may protect you throughout the process. Read on to learn more about how ordinances in these cities are designed to homeowners avoid foreclosure, protect property values, and prevent unnecessary vacancies, as well as the obstacles that are standing in their way.
(To learn more about foreclosure in Massachusetts, read our Summary of Massachusetts' Foreclosure Laws.)
Purpose of the Ordinances
Homeowners are not always given a fair chance when it comes to working out an alternative to foreclosure such as a loan modification, forbearance, or payment plan with their lender. (To get information about these and other options to avoid foreclosure, see our Alternatives to Foreclosure area.) Additionally, banks sometimes are not the best neighbors when it comes to maintaining properties after they take over foreclosed homes, often letting the homes fall into disrepair.
The goal of the city ordinances is to:
- provide homeowners with the opportunity to participate in mediation to avoid foreclosure, and
- protect neighborhood property values.
The ordinances in Lynn, Lawrence, and Springfield have two major components: mandatory mediation and property preservation.
Banks Must Engage in Pre-Foreclosure Mediation with Homeowners
Under the city ordinances, banks are required to participate in a face-to-face mediation with homeowners to attempt to find a way to avoid foreclosure.
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
- the borrowers
- their lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the borrowers’ financial situation and try to negotiate a way for the homeowner to keep the home or give up the property without going through a foreclosure.
To be eligible for mediation under the Lynn, Lawrence, and Springfield ordinances, the property being foreclosed must be:
- the borrower’s principal residence, and
- have no more than four units.
(Learn more about foreclosure mediation in our State Mediation Programs area.)
Banks Must Put Up a Cash Bond
Vacant properties going through foreclosure often have a negative impact on the entire neighborhood. They can present a danger to the safety and welfare of public safety officers, the public, and occupants, and, as such, constitute a public nuisance. Unsecured and unmaintained vacant properties also tend to attract vandals and thieves, thereby bringing down the value of nearby properties.
To avoid the fallout associated with vacant properties in the foreclosure process, the ordinances in Lynn, Lawrence, and Springfield require that banks put up a $10,000 cash bond to the city at the start of a foreclosure. This ensures that a vacant property is taken care of during the process.
If the bank maintains the property, it gets that money back when a new owner purchases the home. On the other hand, if the bank lets the home deteriorate, then the city can use that money to pay for the upkeep.
Lynn Ordinance Prevents Unnecessary Vacancies
After foreclosure, banks frequently evict families, displacing them from their homes. (To learn more about eviction, visit our Evictions and Terminations area.) As mentioned earlier, this leaves the property vacant and often neglected.
The Lynn ordinance has a special provision to address this issue and prevent unnecessary vacancies. Under Lynn’s ordinance, if the bank is the purchaser of the property at the foreclosure sale, the bank must allow the former owners to become rent-paying tenants at a reasonable market rate (if they can afford it) until a new owner purchases the property.
While the new ordinance does not mean that the family can remain as tenants in the home forever, it does mean that a foreclosed family will not be immediately ousted from their home, even after a foreclosure has been completed.
(To learn the ins and outs of the foreclosure process, visit our Foreclosure Center.)
Like the other cities' ordinances, Worcester's ordinances require lenders to maintain abandoned, foreclosed or foreclosing properties and post a bond for each property on which they start foreclosure proceedings. In addition, banks must negotiate alternatives with delinquent homeowners through a formal mediation process and obtain a certificate from a neutral arbitrator before they're allowed to foreclose.
Several banks filed a lawsuit in 2014 fighting the ordinances in Lynn and Worcester. In the meantime, Worcester will not enforce them until the case is resolved in court.
Enforcement of the Ordinances in Springfield, Lynn, and Lawrence
While the Springfield City Council passed its foreclosure ordinances in 2011, the city did not begin enforcing the bond ordinance until October 2013 (and the foreclosure mediation ordinance is still not implemented). The similar bond ordinances in Lynn and Lawrence were implemented sooner.
In Lynn, officials are now taking steps to enforce the mediation rules by signing a contract with a dispute resolution firm to handle mediations.
Banks Fight the Springfield Anti-Foreclosure Ordinances
In November 2013, the U.S. Court of Appeals heard a lawsuit filed by six banks contesting Springfield's foreclosure ordiances, which focused mainly on the bond requirement. (The banks appealed the decision of a U.S. District Court in Springfield that upheld the 2011 ordinances.) Of the $10,000 bond required by the ordinance, the city plans to keep an administrative fee from each bond estimated at about $500 to $1,000. The banks argued that this constitues a tax, which makes the bond requirement illegal since the city would need the approval of the state legislature for a new tax.
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. The U.S. Court of Appeals ordered Springfield to hold off on implementing the anti-foreclosure ordinances while the matter is pending.
As of mid-2014, the matter is still is on hold pending the ruling from the First Circuit Court of Appeals and an opinion from the state Supreme Judicial Court. A ruling is expected sometime later in the year.
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 been added to the online site as of yet.
To find the Lawrence ordinances, go to www.cityoflawrence.com and click on “Lawrence Municipal Code.” Then go to Title 8 (“Health and Safety”), and Chapter 8.28 (“Regulating the Maintenance of Abandoned and Foreclosing Residential Properties”). 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 ordinances, 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”) and Chapter 285 (“Property Maintenance”), Article II (“Vacant or Foreclosing Residential Property.”)