Massachusetts Supreme Judicial Court Invalidates Two Springfield Anti-Foreclosure Ordinances
On December 19, MassLive.com released an article titled SJC rules against Springfield in foreclosure ordinance case.
SJC rules against Springfield in foreclosure ordinance case
BOSTON – The Supreme Judicial Court on Friday ruled that Springfield’s foreclosure laws are illegal because they are preempted by existing state laws.
“Mortgage foreclosure regulation traditionally has been a matter of State, and not local, concern,” Associate Justice Francis Spina wrote in the unanimous decision.
The city of Springfield passed two anti-foreclosure ordinances in 2011 as the city was being hit hard by the mortgage foreclosure crisis. The ordinances have never been enforced because of court challenges by a group of Western Massachusetts banks.
One ordinance requires a bank that forecloses on a home to maintain the home to certain standards and pay a $10,000 bond, which can be used by the city to maintain foreclosed properties, if the bank fails to do so.
The other ordinance requires the establishment of a mandatory mediation program to help homeowners facing foreclosure. The bank would be responsible for paying most of the cost of the mediation.
Six Western Massachusetts banks, with Easthampton Savings Bank as the lead plaintiff, challenged the ordinances. A U.S. District Court judge upheld the ordinances. However, on appeal, the U.S. Court of Appeals issued a stay preventing Springfield from enforcing them. The federal court asked the Supreme Judicial Court, the state’s highest court, to answer two questions related to state law.
The SJC was asked to decide whether the local foreclosure ordinances are preempted by existing state laws and whether the $10,000 bond is a legal fee or an illegal tax. Cities and towns cannot create taxes without legislative approval.
The SJC ruled in favor of the banks, finding that the local foreclosure laws are preempted by state law.
Regarding the mandatory mediation policy, the justices wrote that the state already established a different way for banks and homeowners to negotiate before a foreclosure. “The (Springfield) mediation ordinance alters what the Legislature determined, as a matter of policy, to be the just medium between the parties involved in the contemplation of a mortgage foreclosure,” Spina wrote.
The court found that Springfield’s foreclosure law is similarly preempted by a state laws that set out specific requirements a property owner must abide by regarding the disposal of hazardous material and adherence to sanitary codes. State laws have a narrower definition of who owns a property and establish a different mechanism for paying for repairs.
The SJC did rule in favor of Springfield in determining that the bond is a legal fee, rather than an illegal tax. The court accepted the city’s argument that foreclosed properties can cause urban blight, and the fees would help the city cover its costs of cleaning up blighted properties.
The justices said the city could seek new laws through the legislature. “We recognize that the city of Springfield has attempted to address the serious problem of urban blight within its borders through these ordinances,” Spina, who is from Pittsfield, wrote. “Although we conclude that the city may not achieve its goal by ordinance as it has here attempted, a solution may be provided through the Legislature.”
The U.S. Court of Appeals must still issue its ruling, but the SJC ruling appears to make it nearly impossible for the federal court to uphold the ordinances.
A similar case is pending in federal court in Worcester, relating to foreclosure ordinances in Worcester and Lynn that are similar to those in Springfield. The SJC ruling could affect those cases as well.
Thomas Moore, Springfield’s associate city solicitor, said city officials are still reviewing the decision to determine the city’s next steps.
Kevin Kiley, executive vice president and chief operating officer of the Massachusetts Bankers Association, said he is “extremely pleased” with the ruling. “We think it’s a very well reasoned and well thought-out decision,” Kiley said.
Kiley said the ruling addresses the concern that bankers had about “a potential patchwork of municipal ordinances in numerous communities.”
Lawmakers have previously filed bills in the state legislature to require mandatory mediation in cases of foreclosure, so that that no home could be foreclosed on without giving the homeowner the option of mediation. Banks have opposed these bills, which have never passed. The SJC ruling makes it increasingly likely that a similar bill will be considered again during the next legislative session.
The SJC case was Easthampton Savings Bank v. City of Springfield.
Please click here to view the article online.
Please click here to view the SJC decision.
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