In his June 26 op-ed “Making banks justify foreclosures,” Paul McMorrow was correct in saying that the foreclosure bill being considered on Beacon Hill pushes foreclosure prevention more than any other state. Unfortunately, it also penalizes local banks, which are major economic drivers through residential and small-business lending.
While local banks are sensitive to the plight of distressed homeowners and work aggressively to find alternatives to foreclosure, Massachusetts already grants borrowers a 150-day delay to cure the default and allow for ongoing lender discussions to resolve the delinquency. However, there is no requirement that borrowers respond in a timely manner — often the difference between a successful workout and a foreclosure.
In fact, a recent study by three economists from the Federal Reserve Bank of Boston concluded that foreclosure delays had no measureable long-term benefits and often prolonged housing market problems. Therefore, reasonable state legislation should strike a balance between assisting borrowers and protecting local banks that extended credit in good faith. Requiring delinquent borrowers to act will be an important step toward creating a healthier economy, stabilizing home values, and benefiting the vast majority of homeowners who, often at great personal sacrifice, are current on their mortgages.