Last night, the Boston City Council approved three new petitions that will try to stem problem of foreclosures in Boston. I previously wrote about the 5 Boston neighborhoods that have been hardest hit by foreclosures and posted a map of all foreclosures sold in Boston, so in those posts you can see the foreclosure problem in Boston that the city councilors are now trying to do something about. Overall, in 2008 there were 1,219 foreclosures in Boston and 257 so far this year (according to Warren Group data).
From the Boston Globe article about the council decision today:
The first petition seeks to protect tenants and former owners in foreclosed buildings from eviction. Residents would be required to pay rent until the distressed properties were resold.
The second petition would impose a 180-day moratorium on foreclosures for owners of some homes. The moratorium would be limited to borrowers whose loans were considered unfair.
The third petition would create a foreclosure mediation program.
Do these petitions make sense?
I think the first petition and third petition make plenty of sense. Many times, when a multifamily home is foreclosed, it is occupied by tenants who have done nothing wrong. They paid their rent on time, they've been good neighbors, etc., but the property owner is foreclosed for not paying their mortgage and the tenants get screwed. The bank forecloses, comes in, and evicts the tenants in order to sell the property. Many times this is unnecessary and unwarranted. Is it a little bit harder to sell an occupied home - yes. But if the bank is collecting rent all the while, then it may even be a net positive rather than holding a vacant property. Basically, the tenants keep their home, the bank collects rents, and the only negative is that it makes the job of the real estate agent selling the property bit more difficult. But I, for one, am certainly willing to take that additional hassle because it keeps more people in their homes. Sometimes there are mitigating circumstances that may not allow tenants to stay, like desperately needed repairs, but there are ways to handle that too.
As for the third petition, trying to prevent more foreclosures from happening makes sense, but it's tough to say whether the specifics of a plan are viable, because there are no specifics yet.
But the second petition is the one I worry about. It is tough to judge because I don't have specifics, but does a 180 moratorium just delay the inevitable and stretch this foreclosure problem further? And who decides and how do they decide which mortgages were "unfair". Programs with lots of room for subjectivity always worry me, but again we'll have to wait for the specifics.
Where do we go from here?
First Mayor Menino must sign off (which is expected), then these petitions must each go to the state Legislature for approval as what's called a "home rule petition". When one city enacts certain regulations that are different from what state law currently is, the city must go to the state to get approval. I don't expect it to be held up though since several other cities have enacted home rule petitions specifically for foreclosure prevention.
Once we get the specifics of these new rules, we'll have a better idea of what changes will occur, but I do think a lot of this makes sense and hopefully will help stem the tide of foreclosures, and keep more people in their homes. Plus, by potentially slowing the tide of foreclosures, there should be a leveling effect on prices in the hardest hit neighborhoods of Boston (see the 5 lowest priced condos sold in Boston in April for an idea of where prices are there now). Slowing home price declines is in everybody's interest at this point to help get the economy back on track.
What do you think? Comment below!
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