STATE HOUSE, BOSTON — By the end of July, both houses of the Massachusetts Legislature must approve a final version of a bill championed by Attorney General Martha Coakley and opposed by the financial services industry.
In 2006, when Lovely Hoffman was 25, she got a subprime mortgage on a condo in the Roxbury neighborhood of Boston. It was right before the housing crash. She started falling behind in her mortgage payments. And when she tried to get the bank on the phone for a loan modification, she said they gave her a runaround for a good 2 years. Then the bank started threatening to foreclose.
“Like right now, the banks are not trying to work with me at all. Like, they don’t return my phone calls. I’ve been trying to call for I don’t know how long and it’s always a new person,” she said.
Strangely, lenders report a similar problem. John Skarin of the Massachusetts Bankers Association said his member banks complain they can’t get borrowers on the phone to discuss changing their mortgage loan until it’s too late.
“People are ashamed. They’re in difficult situations. They don’t want to deal with it,” he said. “Unfortunately they tend to put their head in the sand a little bit and hope something’s going to turn around for them. And in a lot of cases it doesn’t.”
A House-Senate conference committee is working on a law to fix the communication problem and ultimately reduce foreclosures. The bill would require loan modifications when it is cheaper for the bank to modify home loans than to foreclose. The Senate version of the bill would also require mediation between borrowers and lenders before foreclosure.
A growing number of economists and observers have said that the provisions might help some homeowners on the margins — but that forcing mediation tends to delay the inevitable. Skarin said most troubled homeowners just can’t pay, and it’s cheaper for the banks to foreclose.
The Massachusetts Legislature has until July 31 to pass the anti-foreclosure law. It would then go to the governor.
