Lynn, MA Enacts Foreclosure Mediation Law

Industry Update: On June 18, Itemlive.com published an article titled Lynn Enacts Foreclosure Mediation Law.

Please click here for prior reporting.  Following is the aforementioned article.

Lynn enacts foreclosure mediation law

LYNN -- The city foreclosure mediation ordinance became law on Monday, and city attorneys plan today to arrange mediation services with a Boston firm.

City Solicitor Michael Barry said discussions with the American Arbitration Association will center on mediation services the organization can provide and fees the association charges.

Approved by the City Council on April 9 and again on May 14, when City Council members overrode a mayoral veto, the law requires residential loan holders to sit down with homeowners and attempt to modify mortgage terms or take other steps aimed at preventing foreclosure.

Read the ordinance

If mediation is unsuccessful, any foreclosure deeds filed with the Southern Essex Registry of Deeds must be accompanied by a city certificate of compliance.

“If we don’t have a certificate, we won’t file the foreclosure. Register (John L.) O’Brien has stated this publicly,” said First Assistant Register Kevin Harvey.

No banks have sent the solicitor’s office notice of pending foreclosures, said Assistant Solicitor James Lamanna, of threatened legal challenges to a law that met with bank opposition. Once a “150-day notice to cure” is sent to the solicitors, Lamanna said the notice will be forwarded to American Arbitration Association, and the organization will follow the law’s mediation scheduling language.

“We will be a clearing house: When a notice comes in, we send it out,” Lamanna said.

The law calls for mediation to be scheduled within 45 days of the homeowner receiving a “notice to cure.” Homeowners will be sent a notice in English, or other languages spoken in the city, stating: “The City of Lynn has a mediation program that may help you negotiate more affordable mortgage payments and avoid foreclosure...”

The law states that loan holders and homeowners will make “a good faith” effort to agree on alternatives to foreclosure, and it makes banks responsible for mediation costs.

“It is intended there will be no cost of this Mediation program to be borne by the City,” the law states.

Lamanna said the city may be able to reduce mediation costs if it can arrange to schedule multiple mediation sessions through American Arbitration. Harvey said 28 foreclosure deeds were filed in the Register’s office between Jan. 1 and June 1, but mediation advocate Isaac Hodes said that number reflects an “artificial dropoff” in deed filings.

“The numbers are going to go back up, unfortunately,” Hodes said.

Local attorney Robert Marder said unanswered questions lurk within the new law, including foreclosure mediation’s possible impact on local home values and what course mediation will take in the event a homeowner files for bankruptcy.

He said foreclosure mediation’s crafters should have reached out to involve banks in crafting the law, but Hodes said disinterest on the part of large banks to aid homeowners facing foreclosure underscored the need for the law.

“The banks’ attitude has been, ‘we’ll do what we want.’ They don’t have the interest of the community at heart,” Hodes said.

Not so, said Marder, who pointed out that smaller, local banks’ “doors are open to mediate.”

Barry said the Lynn law, which he said also benefits small banks by waiving a $10,000 bond requirement for foreclosed property, will stand up in court. He said it parallels nearly word for word a Springfield law that has held up against bank lawsuits and said the certificate issuance requirement gives banks a document they can take to court, if necessary, to prove they tried to find an alternative to foreclosure.

“I would think some banks would welcome this,” he said.

Don’t bet on it, said Marder, adding: “Of course there will be legal challenges.”

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About Safeguard 
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.

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