GOVERNOR PATRICK UNVEILS FORECLOSURE PREVENTION PLAN
Lawrence, Boston, Brockton, New Bedford, Springfield and Worcester to benefit from Neighborhood Stabilization pilot programs
LAWRENCE - Thursday, October 18, 2007 - Governor Deval Patrick today joined state and local officials, non-profit leaders, mortgage lenders and city homeowners, to unveil his comprehensive foreclosure prevention plan designed to keep people in their homes and to stabilize neighborhoods across the Commonwealth.
The five-point plan consists of targeted neighborhood stabilization pilot programs in Lawrence and five other Bay State cities, transition resources from lenders and servicers, consumer outreach and education, lending best practices and coordination to increase utilization of MassHousing's loan refinancing program.
"A surge in foreclosures is taking a real toll on families, entire neighborhoods and local economies here in Lawrence and across the Commonwealth," said Governor Patrick. "Our prevention plan is comprehensive and gives distressed homeowners and communities the immediate and long-term relief they need right now."
NEIGHBORHOOD STABILIZATION PILOT PROGRAMS
In the past 12 months, more than 25,000 foreclosures were filed in the Commonwealth - a 76% increase over the same period last year with nearly two-thirds of the state's 351 cities and towns experiencing a 50% increase in foreclosures. It is reported that lenders have initiated nearly 600 foreclosures in Lawrence's 01841 zip code - roughly one for every 10 owner-occupied homes in the neighborhood - since 2005.
To combat these trends, the state Department of Housing and Community Development (DHCD) will launch neighborhood stabilization pilot programs in targeted Lawrence, Boston, Brockton, New Bedford, Springfield and Worcester neighborhoods. DHCD will partner with lenders and non-profits to reclaim pre-foreclosure and foreclosed properties in those communities. The properties will be sold to qualifying first-time homebuyers with the goal of returning them to fully-occupied status as quickly as possible.
"These pilot programs will leverage the hard work already being done on the front lines of the foreclosure crisis by local government and nonprofit officials," said DHCD Undersecretary Tina Brooks. "The state will partner with lenders and leaders in the hardest hit areas to stabilize neighborhoods and mitigate the risk of increases in crime and decreases in economic activity that can take place when boarded up homes and vacant storefronts permeate a community."
Participating non-profit organizations and housing counselors are critical to the neighborhood stabilization pilot programs and the overall foreclosure initiative. These agencies and individuals form an essential local safety net, serving as advocates and lifelines for struggling homeowners trying to save their homes or find alternatives to homeownership.
To assist these crucial efforts, the administration's prevention plan calls on participating lenders to provide $5,000 to the housing counseling agency working with an eligible homeowner who loses his or her home to foreclosure or gives a deed in lieu of foreclosure. The transition resources will enable the homeowner to pay for first and last month's rent and moving expenses. The remaining money will be retained by the non-profit organization to offset the administrative cost of its counseling programs. Transition resources will be limited to borrowers who are working with a qualified housing counselor approved or sponsored by NeighborWorks, CHAPA or HUD and who have an ARM first mortgage on an owner-occupied one through four-family home and meet other criteria.
"Lenders and borrowers have an equal financial stake in avoiding foreclosure - that much has been made clear through the upheaval in the credit and real estate markets and through our work with both parties," said Consumer Affairs & Business Regulation Director Dan Crane, who has been spearheading the administration's ongoing negotiations with key national, regional and local lenders. "I applaud the lenders who have acknowledged the indisputable fact that everyone must play an active role in the solution and I look forward to more lenders coming on board as we move ahead."
To date, Option One Mortgage Corporation and the Massachusetts Credit Union League, Inc. have agreed to provide funding for transition resources. The administration will be participating in next week's meeting to determine ways lenders can help reduce rising foreclosure rates organized by Congressman Barney Frank. The meeting will be attended by traditional and subprime lenders and community and housing groups.
"For almost a hundred years credit unions in Massachusetts have been helping consumers with their financial needs," said Jim Blake, President of HarborOne Credit Union of Brockton. "Now more than ever we see an opportunity to help during these very difficult times and would encourage all financial institutions in the state to support the efforts of the governor. Not only is this about securing the financial health of individuals and families, but likewise will prevent the decline of our neighborhoods by reducing the number of vacant boarded-up buildings."
CONSUMER OUTREACH & EDUCATION
Recognizing that successful foreclosure prevention rests in large part on a homeowner being aware of and understanding the multitude of services and resources available to them, the administration's five-point plan focuses on streamlining consumer outreach and education. Under the plan, homeowners will be directed to a single point of contact - NeighborWorks' Center for Foreclosure Solutions 24 hour a day, 7 day a week toll free hotline (888-995-HOPE). NeighborWorks mortgage counselors will refer Massachusetts homeowners to non-profit agencies for additional housing counseling.
Depending on the homeowner's circumstances, counselors will focus on loan refinancing and modification or oversee the smooth transition from homeownership to rental housing. On a case-by-case basis, agencies may refer homeowners to the Lawyers Clearing House for Affordable Housing or Attorney General's pro bono foreclosure legal assistance program.
If the homeowner is facing imminent foreclosure, the counselor will contact the Massachusetts Division of Banks so that the Division can intervene on the homeowner's behalf and work with the lender to grant the homeowner a 30 to 60 day stay in the foreclosure process. To date, the Division has secured nearly 500 delays for homeowners in foreclosure across Massachusetts.
LENDING BEST PRACTICES
The prevention plan calls on mortgage lenders and servicers to conform to a set of best practices when dealing with struggling homeowners. These practices will become increasingly important as the higher interest rates on ARM mortgages begin to kick in and more and more homeowners encounter difficulties meeting their new payment obligations.
Specifically, the best practices call on lenders to:
· Contact borrowers at least three months prior to a mortgage reset to inform them of the approximate difference in their mortgage payments.
· Consider long-term loan modifications.
· If a subprime borrower has made satisfactory payments on their mortgage for one year, lenders should review whether consumers qualify to refinance into a more affordable prime loan product. Require escrows for taxes and insurance for all subprime borrowers on any new mortgage.
· Allow a pre-foreclosure sale.
· Allow a deed in lieu of foreclosure.
"Thousands of homeowners will experience significant rate shock in the coming months as more mortgages continue to reset," said Commissioner of Banks Steven Antonakes. "The best practices will protect both homeowners and lenders and help us reach our shared goal of expanding sustainable homeownership opportunities."
MASSHOUSING LOAN REFINANCING PROGRAM
In July, the Patrick administration announced one of the country's most comprehensive foreclosure prevention products - MassHousing's $250 million program to provide fixed-interest rate refinancing loans and counseling services to struggling subprime borrowers. The program is privately financed through a $190 million commitment from Fannie Mae and a $60 million contribution from MassHousing. Eligible borrowers can be up to 60 days delinquent with credit scores as low as 560.
Through the five-point plan, the Patrick administration has worked and will continue to work to raise awareness about the availability of this product. Homeowners that may not qualify for traditional refinancing will be referred to MassHousing to determine if they are eligible for alternative financing. The administration will continue to expand coordination among lenders, counselors and MassHousing to maximize the number of borrowers who utilize this program.
"We are very pleased to be part of the administration's five-point plan to confront this foreclosure crisis with every resource we can to keep Massachusetts residents in their homes and our neighborhoods healthy and vibrant,'' said Mass Housing Executive Director Thomas R. Gleason.