State officials say more federal help needed on foreclosures

A.J. Bauer

State officials and industry experts told U.S. Rep. William Delahunt on Wednesday that more federal intervention is required to stem an epidemic of residential foreclosures in the wake of the subprime mortgage meltdown.

“We have done what we can do and we desperately need assistance from the federal government,” Attorney General Martha Coakley told Delahunt during a House Judiciary Committee hearing that the Quincy congressman hosted Wednesday on Beacon Hill.

The hearing came on the same day that The Warren Group released new state foreclosure statistics, which showed foreclosure deeds leveling off in September, as the monthly number of initial petitions to foreclose again surpassed 2,000.

The number of foreclosure petitions filed each month dropped sharply in May after a state law took effect that required a 90-day waiting period before foreclosure proceedings could be initiated.

While petitions appear to have rebounded in September, the 2,258 petitions that were filed represented a 12 percent decline from the 2,566 that were filed last September. Such petitions are the first step in the foreclosure process.

Foreclosure deeds, which represent the last step in the foreclosure process, are still rising compared with last year. The number of foreclosure deeds filed in the state last month rose to 798, up 18.6 percent from September 2007. However, the percentage increase is much smaller than what the state has seen for much of this year.

Through the first nine months of this year, 9,609 foreclosure deeds were recorded statewide, up from the 5,593 recorded during the same period last year.

Warren Group CEO Timothy Warren stressed in a statement accompanying the new statistics that foreclosure activity has not reached its peak.

“Even though foreclosure deeds have declined for four consecutive months, the increase in petition activity shows that there are borrowers who are struggling to save their homes,” Warren said.

Warren’s sentiments echoed those of Ellen Harnick, a senior policy counsel with the Durham, N.C.-based Center for Responsible Lending. Speaking at Wednesday’s hearing, Harnick said as many as 6.5 million mortgages nationwide – 13 percent of all current outstanding mortgages – could be expected to end in foreclosure by 2012.

Several hearing participants expressed their approval of a proposal Delahunt promoted at the start of the hearing: a bill before Congress that would allow bankruptcy courts to modify the terms of predatory loans when foreclosure becomes unavoidable.

“We do not contend that every loan should be restructured,” Coakley said. “But there are a large amount that are salvageable.”

Secretary of State William Galvin, who also addressed the hearing, agreed with Coakley that efforts to promote the voluntary modification of loans have failed. But he suggested the state could further address the issue by allowing state judges to review foreclosures – an issue he said he fought unsuccessfully to have included in last year’s homeowner protection law.

Harvard Law School professor Elizabeth Warren took the debate a step further, urging that the federal government create a “financial product safety commission” that would act to make sure financial products are safe for the economy before they are sold to consumers.

“There have been profound changes in the lending industry, and when the lending industry changes, the law has to change,” Warren said.

The Patriot Ledger