Massachusetts has become the first state in the nation to order what is, in effect, a two-month cease-fire on foreclosures.
Last week, Gov. Deval Patrick directed the Commonwealth's Division of Banks to seek delays of up to two months "on a case-by-case basis" for any Massachusetts home owner who has filed a compliant with that office.
"All we seek is for individuals and families to have a little time to work with lenders and non-profits toward a solution that might just save their homes," Gov. Patrick said.
While the order makes the state the first to put a temporary hold on repossessions, it apparently is not without precedent.
Years ago, shortly before adjustable rate mortgages were approved by federal authorities, states held sway over institutions in their jurisdictions which made what were then knows an variable rate mortgages.
And one, Wisconsin, refused to allow lenders to reset loans to higher levels when the market rate moved into double digit territory, according to news clips from the files of "Savings Institutions," the now defunct monthly publication of the former U.S. League of Savings Institutions, which is now the Association of Community Bankers.
As far as can be determined, no other state followed Wisconsin's lead back then. But this time around, housing advocates are hoping Massachusetts' move will set the pattern for other states.
"Massachusetts is setting the standard on how to address the subprime problem, and we're going to take it nationwide," said Bruce Marks, head of the Neighborhood Assistance Corp. of America, a non-profit community advocacy and home ownership organization based in Jamaica Plain, Mass.
Gov. Patrick said his order is in response to the "state's foreclosure crisis" and intended to provide relief to those who are in the "late stages of a personal financial crisis."
The state didn't issues any figures, but Marks, whose organization has offices throughout the country, said foreclosure proceedings in the state are up four-fold. And that's just the first indication of the "tsunami" that lies ahead, he added.
"Luckily, we're seeing the wave coming," the community activist said, explaining that because Massachusetts is a non-judicial foreclosure state, it takes eight or nine months to actually take someone's home.
However, other sources maintain the number of actual complaints taken by the banking division is far lower than consumer interests indicate.
"We have learned that there are only 40 grievances pending on loans originated by some 15 different lenders, says Nanci Weissgold of K&L Gates, a Washington, D.C., law firm.
Moreover, she said, the authorities would generally be requesting 30 to 60-day forbearance periods on those anyway, and would be asking loan servicers to consider various workout scenarios as a matter of course.
"The directive appears to be of limited application," Ms. Weissgold says, pointing out, too, that the division does not regulate many of the servicers involved.
The Governor also is asking lenders to consider modifying the terms of their loans to assist borrowers in switching from adjustable to fixed-rate mortgages, and to utilize the forbearance period to work in good faith with owners who are struggling to make their monthly house payments.
He also has instructed state banking regulators to review complaints and refer home owners to reputable, private ownership counseling firms. The state's Department of Housing and Community Development operates a network of nine regional housing consumer education centers which can offer foreclosure counseling, and the banking division has a mortgage hotline than now runs on extended hours, from 7:30 a.m. to 6 p.m.
"It is critically important that folks reach out to us at the first signs of trouble so that we can provide them with as much direction and assistance as possible," said Commissioner of Banks Steven Antonakes.
These measures and other recently announced initiatives "will be featured" in a forthcoming legislative package designed to help home owners facing foreclosure, the Governor's office said in a statement.
And because of their comprehensiveness, Marks believes the state's actions will set the bar for others to follow.
"It's a huge deal," he said. "They can't use the word moratorium,' but it is just that, a defacto moratorium that effectively puts a blanket on foreclosures."
"They're not just putting off the day of reckoning with a 60-day rolling blackout" for anyone who already has complained prior to the order or will complain in the future, he added. "They are saying we're not just going to stop your auction, we're going to make you do more."