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Municipalities and their Requirements affecting Residential Foreclosures: Massachusetts

Posted By USFN, Friday, January 29, 2016
Updated: Friday, February 19, 2016

January 29, 2016


by Francis J. Nolan
Harmon Law Offices, P.C.
USFN Member (Massachusetts, New Hampshire)

In the past seven years, over 25 Massachusetts cities and towns have enacted ordinances purporting to affect properties in foreclosure. Older ordinances typically focused on the establishment of property registration programs, requiring mortgagees to pay an annual fee ranging between $100 and $300 and to identify a local representative (typically, someone located within 20 miles of the property) who can be contacted in case of emergency. Although locating a representative within 20 miles of the property has sometimes posed logistical problems for servicers, these local property preservation programs have generally had minimal impact on the processing of foreclosures.

More recently, a number of municipalities that have been particularly hard-hit by the foreclosure crisis have sought to use local ordinances to effectuate changes to foreclosure practice that the Massachusetts legislature has been unwilling or unable to pass into law statewide. These more recent ordinances often included a revised property registration program, in which the annual fee is replaced by a cash bond between $5,000 and $10,000 for each property registered; a mandatory pre-foreclosure mediation program; and an expansion of the commonwealth’s post-foreclosure eviction protections for tenants to former owners.

At the end of 2014, the Massachusetts Supreme Judicial Court opined that both the cash bond element of the property preservation ordinances and the mediation ordinances generally were preempted by state law. In response to the court’s ruling, several of the municipalities that had enacted the more aggressive ordinances took steps to revise or repeal their ordinances. For example, Lynn simply repealed its mediation and property preservation ordinances, while Worcester replaced the $5,000 cash bond component of its property preservation program with a $3,000 “fee.” It remains to be seen whether the city’s fee will be challenged and, if so, whether the courts will deem the fee unconstitutional.

The element of the more recent municipal ordinances that has not been addressed by the Supreme Judicial Court (because it was not part of the ordinances in the city that was involved in the relevant litigation) pertains to the expansion of post-foreclosure eviction protections to former homeowners. These ordinances preclude mortgagees who were successful high bidders at auction from evicting their former borrowers unless: (a) they have “just cause” to do so; or (b) a mortgagee has a fully executed Purchase and Sale Agreement of the foreclosed property to an arm’s-length third-party purchaser for value. The cities of Lynn and Lawrence enacted ordinances with anti-eviction provisions in 2013, and Brockton followed suit in 2015. All three municipalities are major cities with particularly high levels of foreclosures and evictions.

While the constitutionality of the eviction ordinances is in question, insofar as the eviction ordinances appear to conflict with existing state eviction laws, lenders have been reluctant thus far to challenge the ordinances. Many lenders have chosen to refrain voluntarily from evicting a former owner in contravention of the municipal ordinances.

Proponents of the cash bond registration provision, the pre-foreclosure mediation requirement, and the expansion of eviction protections have introduced a number of bills in the Massachusetts legislature. These bills would allow cities such as Worcester and Lynn to reinstate their cash bond requirements, establish a statewide mediation program, and expand the existing statutory post-foreclosure eviction framework to include holdover former owners. Thus far, none of the bills has advanced to a vote; however, it seems likely that anti-foreclosure advocates will push hard for action when the legislature returns to formal session in the New Year.

Establishment of mandatory mediation would have a particularly significant effect on foreclosures: no framework currently exists in Massachusetts for the management of such a program, and the entire program — including staffing, training, and procedural rules — would need to be built from scratch, potentially triggering a de facto moratorium on Massachusetts foreclosures. Despite these logistical concerns, the legislature is likely to give serious consideration either to allowing cities and towns to implement more aggressive foreclosure ordinances or to applying these local initiatives statewide, particularly in light of pressure from municipalities and an increase in foreclosure activity throughout Massachusetts.

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Winter 2016 USFN Report

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