As previously discussed on this blog, Worcester housing prices are increasing and generally positive signs are beginning to emerge in the local housing market. Despite these improving trends, many people are still facing foreclosure of their residential real estate and fighting their lenders to work out reasonable repayment plans. While some have managed to stay in their homes, others have lost their battles with the banks and had to move out.
Worcester’s Vacant and Foreclosing Property ordinance was enacted to prevent banks and financial lenders from letting vacant and foreclosed properties from falling into disrepair. Fearful that empty residential real estate would become unkempt and therefore detrimental to property values of nearby properties available for purchase, the ordinance requires lenders to place $5,000 in an account with the community for each property the lender repossesses and that can be used for upkeep if the lender fails to maintain the property on its own. The lender may get its deposit back when it sells or transfers the property to a new owner.
While the intent of the ordinance clearly reflects the community’s interest in keeping property values in the area up, lenders have begun assessing an additional $5,000 against the former owners of the homes to cover the costs of the ordinance fee. Stating that Massachusetts’ general mortgage contract allows a lender to charge a borrower with costs associated with the borrower’s failure to pay, a Bank of American spokesperson claims the lender has the right to assess the $5,000 fee.
City leaders have expressed outrage over lenders passing the costs of the ordinance on to foreclosed former owners. Individuals who were unable to pay their mortgages prior to foreclosure must now under the ordinance incur an additional $5,000 charge attached to their outstanding debt, making repayment of the loan even more challenging. With one affected debtor noting that even after her lender sold her mortgage to another bank and recouped its $5,000, the ordinance charge remained on her debt statement. It is unclear of how Worcester community leaders will address this challenging situation.
Source: Worcester Telegram, “Worcester fees for foreclosed properties backfires on borrowers,” Thomas Caywood, April 28, 2013