Despite increased scrutiny of mortgage lending practices, many banks are still violating basic legal requirements when foreclosing on properties in Massachusetts, according to housing attorneys who represent borrowers fighting to save their homes.
In particular, they say, lenders do not always adhere to a 2007 state law, amended in 2010, that provides homeowners 150 days to catch up on missed mortgage payments before a foreclosure can begin.
Under the law, banks and mortgage companies are required to send so-called right-to-cure notices to delinquent borrowers that provide basic information about the foreclosure process, including whom to contact and who holds the mortgage.
Some homeowners who say they were not treated fairly during the foreclosure process are going to court and — increasingly — winning rulings that force lenders to reverse completed property seizures.
Eloise Lawrence, an attorney at the Harvard Legal Aid Bureau in Cambridge, said she has helped more than two dozen homeowners overturn their foreclosures in Lynn alone based on problems with right-to-cure notices.
Lawrence said it is especially important that lenders follow the letter of the law in Massachusetts, a state where foreclosures do not go before a judge for final review.
“The bank can take your house without ever going to court, and so properly notifying homeowners of their rights is a critical safeguard against wrongful foreclosures,” she said.
Jon Skarin, senior vice president of the Massachusetts Bankers Association, said some courts interpret Massachusetts law differently than banks do. Lenders send tens of thousands of such delinquency notices statewide annually without problems, he said.
“The number that have been successfully challenged is very small compared to the amount of notices that get sent out,” Skarin said.
The latest allegations follow years of complaints about sloppy and fraudulent practices by mortgage companies here and across the country.
In May, Massachusetts Attorney General Martha Coakley said the country’s major lenders were disregarding sections of a $25 billion mortgage settlement reached between the companies and attorneys general nationwide to address problems endemic to the foreclosure process.
Among the problems, Coakley said, is that lenders fail to offer help in a timely fashion, send borrowers inaccurate and confusing information, and deny them assistance without specifying why.
Coakley declined to comment on complaints about the right-to-cure notices. Brad Puffer, her spokesman, said the agency has received complaints and is “still exploring the extent of those violations.”
Last month, the debate reached the state Supreme Judicial Court, which agreed to consider the case of a Clinton homeowner who lost his home to foreclosure.
John Schumacher claims in court documents that in 2008 he was not given adequate notice of his right to resolve his mortgage problems, as required by law, because the official holder of his loan was misidentified in the right-to-cure letter. For that reason, he argues, his 2009 foreclosure should be voided.
“Attorneys all across the state see violations of the statute all the time,” said Schumacher’s attorney, Max Weinstein, who works with the Jamaica Plain-based Legal Services Center, a Harvard Law School group that helps low-income clients. “You would think banks would be doing their best to cross their ‘i’s and dot their ‘t’s.”
Concerned about the issue, the nonprofit Massachusetts Alliance Against Predatory Lending recently conducted an investigation into 151 notices filed at the Worcester District Registry of Deeds and found widespread problems.
The alliance is expected to release a report that claims the country’s biggest lenders — Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citibank, and Ally Financial Inc. — all violated the state law by, among other things, failing to provide the name of the loan’s originator or including the name of a bank contact.
The alliance contends thousands of foreclosures statewide should be invalidated because of the violations.
“This is an ongoing issue that the banks continue to disregard our laws,” said Grace Ross, coordinator for the Worcester-based alliance.
Banks contest the report’s findings. Chase said it meets all “filing requirements,” while Citi officials said they “aim to be compliant” with the law.
Bank of America said its notices “supply the homeowners with the necessary information required by law,” and Wells Fargo officials said they reject the alliance’s conclusions.
Ally officials, saying they no longer handle foreclosures, declined to comment.
Housing attorneys seeking to overturn foreclosures have been bolstered by a May 2012 Suffolk Superior Court decision that supported their claims. Justice Elizabeth M. Fahey ruled in favor of Revere homeowner Maria Vasquez, formerly known as Maria Bravo-Buenrostro, who contested her foreclosure based on a faulty right-to-cure notice.
Vasquez said her foreclosure was invalid because the mortgage holder was misidentified in the letter she received notifying her of the right to resolve her mortgage problems.
In court documents, Fahey wrote that Vasquez received the notice from IndyMac Federal when the mortgage was actually held by the Mortgage Electronic Registration Systems Inc., or MERS, a Virginia-based company that serves as mortgage holder for loans registered in its database.
Fahey ruled the foreclosure void. Vasquez was then able to negotiate a new mortgage payment that allowed her to stay in her home.
Dan Hyman, Vasquez’s attorney, said identifying the mortgage holder is crucial for troubled homeowners like Vasquez who are trying to stave off foreclosure. Between 2010 and 2012, more than 28,000 Massachusetts homeowners have lost properties to foreclosure, data show.
“If you don’t have the name of who actually owns the mortgage, how can you possibly come to any sort of agreement?” he asked. “If you are going to sit down at the table, you have to have someone on the other side.”