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Foreclosure Mediation Ordinance on Hold in Worcester until Springfield Lawsuit is Resolved

Tuesday, October, 22, 2013


A lawsuit in Springfield, Massachusetts is keeping a revised foreclosure mediation ordinance in Worcester, Massachusetts on hold until a resolution is determined regarding the legality of the ordinance.  According to a report released from City Solicitor David Moore, banks have appealed the courts, stating that the mediation ordinance is against the law. 


Until that case has been settled, officials in Worcester have decided that they would put the ordinance on hold, fearing their own backlash from bank lawsuits. Worcester’s At-Large Councilor Joe O’Brien issued the following statement in a memo to the City Council: "It is not prudent ... to move forward with adoption of such an ordinance until [the Springfield] review is complete.” 


The City Council requested that Moore draft a different version of the ordinance that would make sure the proposal conforms to the city charter’s requirements.  However, even in that revision, Moore included language that explicitly stated that the "legal basis for this type of ordinance is under review" in the town of Springfield.


One of the legal issues in question in the Springfield-based lawsuit is whether individual city laws can be preempted by foreclosure and mortgage modification state laws.  Additionally, there is question regarding the Constitutionality of the $10,000 bond imposed as a tax rather than as a fee in the ordinance. 


According to Moore, "The city of Springfield has agreed with the banks not to implement the ordinance pending a resolution of the lawsuit…and is not going forward with implementing the mandatory mortgage mediation ordinance."  However, the city is looking at other methods of resolving the foreclosure crisis that it still faces, including rules requiring mortgage servicers to look for further options, including loan modification and foreclosure mediation, to avoid initiating the foreclosure process for struggling homeowners.