Lawyers Debate Eminent Domain in Brockton
Industry Update: On March 22, Enterprisenews.com published an article titled Lawyers Debate Brockton's Foreclosure Strategy.
Please click here for prior reporting. Following is the aforementioned article.
Lawyers debate Brockton’s foreclosure strategy
BROCKTON -- A Boston lawyer hired to fight the city’s idea of seizing mortgages to prevent foreclosures told a working group studying the idea to expect a battle.
“They’re going to litigate this until they’re blue in the face,” said lawyer James Masterman of Greenberg Traurig LLP.
Masterman, referring to the lenders who could lose out in the city’s strategy, represented the interests of the trade group Securities Industry and Financial Markets Association before Brockton’s 11-member working group studying the eminent-domain plan.
The group heard from several lawyers on Thursday debating the legality of the city using its authority to take the mortgage note of a resident in need of refinancing and transfer it to a lender interested in helping the resident refinance the loan, preventing a potential foreclosure.
City Councilor-at-large Jass Stewart said that despite the spirited and complex debate over the legality of the plan, he’s confident it will be shown to be legal.
“The authority will be clear once we finish the conversation,” Stewart said.
Lawyers argued in depth over the public good of taking the mortgages and determining exactly who benefits from the idea during the 90-minute meeting held at the Brockton Public Library’s East Branch.
Group members asked if the city had the right to follow through on the plan’s structure of seizing the promissory note – which requires the borrower to repay the lender.
Matt Nickell, a Harvard University Law School student who is part of the Harvard Legal Aid Bureau, pointed out that eminent domain has been used to take many types of “property,” including interest on savings accounts, liens and insurance policies – rather than just land.
Stewart and Grace Ross, a group member and the coordinator of the Massachusetts Alliance Against Predatory Lending, are targeting about 2,300 mortgages that are tied to complex mortgage-backed securities.
William Morse, president and chief operating officer of Mutual Bank, said he was concerned by the amount of money changing hands and the profit that could go to a third-party investor backing financing the city’s seizure.
“That leaves me with a very uneasy feeling that somebody is going to get involved in this, I’ll call it a scheme, and is going to get a third of this debt forgiveness to put in their pocket,” Morse said. “And what are they doing for the city?”
Nickell argued that courts have found similar ideas to be legal and said that preventing foreclosures improves property values for all homeowners.
Southeastern Regional High School Principal David Wheeler asked Masterman directly if he considered the city’s plan is in the “public’s interest.”
Masterman said no because of a third-party investor gaining from the deal. He added that “economic redress” has not been allowed in Massachusetts.
“Taking underwater mortgages is not a public purpose in and of itself,” Masterman said.
The group intends to hold many more meetings with a goal of producing both a strategy and a dissenting opinion for consideration by May.
To view the online article, please click here.
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.