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"The problem is that our foreclosure laws in Massachusetts havent been significantly reformed since before the Civil War,'' Galvin said. "In Massachusets, if you're a tenant, you have more rights to maintain occupancy of your property than if you're a homeowner with a mortgage -- because you can't evict a tenant unless they go court and they're able to tell a judge what's the problem" with the renter not keeping up on payments.
Galvin's office plays an important role in the Bay State real-estate market because it oversees registries of deeds -- where foreclosures and sales are recorded -- in all the counties from Boston to the northern and western ends of Massachusetts. He said he has no strong preference on what kind of judges would get authority for approving foreclosures, but said he thinks the state's existing housing courts "are a very logical" venue for handling at least residential foreclosures. Commercial foreclosures might go to a specialized court like the Business Session in Suffolk County.
Opposing Galvin's legislation are lenders' groups like the Massachusetts Bankers Association. Executive vice president Kevin Kiley said the group strongly supports protections and good processes for borrowers facing foreclosure, but said data show that "in states that do have judicial review, the process is even longer" than in Massachusetts, where foreclosures can easily take six months. "We're very concerned that going to a system of judicial review will result in significant increased costs,'' Kileuy said, and further clog up a battered housing market that's struggling to hit a bottom and rebound.
In the first 10 months of this year, 11,334 Massachusetts homeowners were foreclosed on, according to Boston realty experts The Warren Group. That compares to 9,269 in all of 2009 and 12,430 in all of 2008. By way of context, Massachusetts has about 2.74 million total housing units, according to the Census Bureau -- so the current rate of foreclosures in Massachusetts amounts to about 1 in every 250 homes facing foreclosure annually, a rate far below what states like Arizona, California, Florida, and Nevada are facing.
Critics of the Galvin bill note that Massachusetts already has many protections for homeowners with delinquent loans -- including, as a result of a law enacted last year, a mandatory 150-day "cooling-off period" after a bank first notifies a borrower they're in danger of being foreclosed on, so a struggling borrower has time to try to modify the loan or get it made current.
Kiley also said that "banks do not want to own property" and as a rule take all steps they can, including modifying loans or negotiating "short sales," in order to avoid foreclosure.
But Galvin says given all the mortgage paperwork messes plaguing the market -- uncertainty around whether banks even own mortgages that have been sliced up and put into Wall Street "collateralized mortgage obligations," and the problem of "robo-signers" at banks signing thousands of foreclosure affidavits without reading them -- the current system is broken. He says only judges' powers can fix it.
"If the system were working so well, we wouldn't have all these foreclosed properties sitting around out there,'' Galvin said, nor would the state see foreclosure actions delayed repeatedly while auctioneers try to sort out whether banks have all their legal paperwork in proper order.
"You have to create a forum where you adjudicate these things,'' Galvin said. "That's the only way you can unscramble this mess.''
One thing that's for sure: The Galvin-Scaccia legislation promises to be one of the Massachusetts Legislature's big debates of 2011.
With videographer Abbas Sadek
