City abandons effort to help homeowners facing foreclosure

City Councilor-at-Large Khrystian King is pushing a proposal that would provide seniors on fixed income with interest-free extensions in paying off their overdue taxes.

It’s a welcome overture at time when lack of affordable housing and high foreclosure rates are two of the bigger threats to the city’s economic development renaissance.

Mr. King’s proposal is particularly heartening, because if adopted it would imbue a little empathy in the city's current, and what I consider cruel, policy of allowing private investors to buy tax liens and foreclose on those properties, even if the homeowners' equity in those properties is significantly greater than the amount owed in taxes.

But Mr. King's focus on seniors vulnerable to foreclosure is seemingly being undermined by what some activists see as a general retreat by the city in combating the lingering and high level of foreclosures from the 2007-2010 mortgage crisis.

According to Grace Ross, coordinator of the Mass. Alliance Against Predatory Lending, activists are getting better at forcing the postponement or cancellation of foreclosure auctions by using civil and criminal charges to get banks to provide evidence to support the need foreclose on homes. Nevertheless, foreclosures statewide are still running at a rate equal to that at the peak of the Great Depression of the 1930s, she said Monday.

“It is still hot,” she said of foreclosure rates in Massachusetts.

“We are currently seeing about 450 a month in the state, while Worcester County continues to be one of the hardest hit in the state every year. Today, I have 10 cases from Worcester on my desk.”

To be fair, city leaders, though reluctantly at times, have sought to use local ordinances to reduce the number of foreclosures and to mitigate the disrepair and blight such foreclosures often create in neighborhoods.

One such ordinance requires banks foreclosing on a mortgage to notify the city, keep the property up to code and pay a nonrefundable fee. In a March 12 memorandum to city councilors, Mr. Augustus said this ordinance is working just fine, with the city taking in some $4.5 million through the program since 2012.

"To put the success of this ordinance in perspective, in this fiscal year alone, 98 properties that have commenced foreclosure have registered with inspectional services," Mr. Augustus said in the memorandum.

"These 98 properties have made payments in the amount of $294,000 ... (which) equates with the $276,380.63 which was expended this fiscal year to keep all registered properties up to code."

But while the city appears to be getting some financial relief in maintaining distressed properties in foreclosure, it has not achieved the same level of success in helping the distressed owners of those properties.

Pushed by a local anti-foreclosure group, for example, the city in 2014 adopted a mandatory Foreclosure Mediation Ordinance requiring mortgage lenders to work with homeowners before foreclosing on their homes.

The ordinance, which required lenders to receive a mediation certificate from a neutral arbitrator before any foreclosure attempts, was considered one of the most effective ways of preventing "foreclosure, given that mediation has proven highly successful in helping owners hold on to their homes through loan modifications," Ms. Ross said.

However, after mortgage lenders fought and won a court battle against a similar ordinance in Springfield, Worcester’s was never implemented, she said.

And in his March 12 memorandum, Mr. Augustus appeared to have given up on the idea when he noted that City Solicitor David Moore had concluded that the court’s decision in the Springfield case rendered the Worcester mediation ordinance “null and void.” The courts, Mr. Augustus said, held that local policies cannot override the state’s mortgage foreclosure process.

“The legality of these (mediation) ordinances cannot be saved by any action short of state legislation, either by general law and special act,” Mr. Augustus wrote.

But Kevin Ksen, a local activist, was shocked by what he considered the nonchalant way in which it seemed the city was responding to the apparent demise of the local mediation ordinance.

 "This is pretty amazing," he said in an email.

"Basically the manager says, in print, 'we’re throwing up our hands about helping people in foreclosure because we feel the courts have invalidated the Foreclosure Mediation Ordinance, but hey we’ve saved lots and lots of money with the Property Maintenance Ordinance.'"

Indeed, Ms. Ross believes the city is being too quick in walking away from the ordinance, arguing that the court's decision was confined specifically to the Springfield ordinance.

“The presumption that the court's ruling would prevent the Worcester ordinance from going forward was never adjudicated,” she said.

“Our legal system is set up to have two parties argue their positions and to have judges decide the merits of those arguments. The Worcester ordinance was an improvement on Springfield’s, and we worked with the (city’s) legal department to press that case, but to no avail.

“It’s a big deal that the city didn’t defend (the foreclosure mediation ordinance.)”