April 24, 2013

The Honorable William Lantigua

Mayor
City of Lawrence
City Hall
200 Common Street
3rd. Floor, Room 309
Lawrence, MA 01840

Dear Mayor Lantigua:

On behalf of our 180 member banks located throughout the Commonwealth and New England, the
Massachusetts Bankers Association (MBA) is writing to express our strong objections to the proposed
ordinance to create Chapter 8.30 of the Municipal Code, Mediation of Foreclosures of Owner-Occupied
Residential Properties) and the ordinance to amend Chapter 8.28 of the Municipal Code, Regulating the
Maintenance of Abandoned and Foreclosing Residential Properties (“Ordinances”). The Ordinances, if
adopted, would place substantial new burdens on all banks making mortgage loans in the City, thereby
reducing the availability of and increasing the cost of credit for all homebuyers.

Since 2007, the Legislature has enacted three separate foreclosure laws, including: Chapter 206 of the
Acts of 2007; Chapter 258 of the Acts of 2010; and Chapter 194 of the Acts of 2012. These state laws
have created substantial new protections for homeowners and tenants in the Commonwealth, including
providing all delinquent borrowers with a 150-day right to cure a default together with a myriad of other
rights. The most recent foreclosure law (Chapter 194) further extends homeowner rights by establishing a
new right to request a loan modification for borrowers in certain “higher-risk” mortgage loans.

During the past six years, MBA and our member institutions, including large multi-state national
banks and community banks, have taken a pro-active role in assisting borrowers at risk for foreclosure.
Not only have these banks been working to implement these laws, many local banks also participate and
assist in financing numerous state and federal programs to help at-risk borrowers and have initiated their
own bank-specific loss-mitigation efforts.

In addition to placing significant new burdens on the banking industry, many of the provisions of the
Ordinance are vague, conflict with current Massachusetts General Laws, or with established case law in
the Commonwealth. We also believe that the Ordinance may exceed the legal authority of the City of
Lawrence in preempting specific state laws. Therefore, we respectfully request that you veto the
Ordinances at this time until the City can undertake a full examination of the myriad legal, financial and
operational issues they create. Approval of the Ordinances will ultimately create a patchwork of local
rules and regulations adopted in individual cities and towns throughout the Commonwealth that will
undermine existing property rights and foreclosure laws and create chaos in the lending industry.

One Washington Mall, 8th Floor, Boston, MA 02108-2603 ♦ Tel. 617-523-7595 ♦ Fax. 617-523-6373 ♦ www.massbankers.org
 
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April 24, 2013
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A preliminary list of specific legal and procedural issues and inconsistencies regarding the various
provisions in the Ordinances is below:

Chapter 8.28: Regulating the Maintenance of Abandoned and Foreclosing Residential Properties

Section 8.28.020: Definitions

While many of the definitions appear to conflict or be inconsistent with current state law, we are
particularly concerned that the Ordinance defines “Owner” as:

(7) is a trustee who holds, owns, or controls mortgage loans for mortgage backed
securities transactions and has initiated the foreclosure process.

This definition appears to confer significant new responsibilities on mortgagees prior to a foreclosure
sale and before the mortgagee is legally permitted to enter the property. This would place banks and
other lenders in the position of trespassing on an individual borrower’s property in order to comply with
the Ordinance.

Sections 8.28.030 through 8.28.070

The Ordinance also places a variety of new, burdensome maintenance requirements on lenders
owning foreclosed properties, which, in some cases, conflict with current state law and could create
significant new liabilities for banks and other lenders that have not yet taken possession of a property. In
addition, the Ordinance requires banks to post a $10,000 cash bond with the City for each vacant and
“foreclosing” property, an unspecified portion of which will be retained by the City as an “administrative
fee.” Under the provision, there does not appear to be any accounting requirement for these funds.

MBA strongly objects to many of the requirements under the Ordinance and believes that it will be
impossible in some cases for banks to comply with these onerous standards. For example, the Ordinance
requires that the mortgagee provide certain information to the City, such as the length of time the
Building has been vacant; the estimated time the Building will remain vacant; and the nature of the
contents of the Building. A mortgagee would have no access to any of this information until after it takes
possession at the foreclosure sale, if at all.

In addition, under established Massachusetts case law, the mortgagee does not have any legal
obligation to maintain the property, and in fact may be considered trespassing if any repairs are
undertaken by the mortgagee prior to possession, there is no legal basis to require a mortgagee which is
not in possession to post a bond as mandated by Section 8.28.030 (A)(11). It is well established under
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April 24, 2013
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Massachusetts law that the owner of the property and not the secured lender is responsible for
maintenance and repair of properties.

Chapter 8.30: Mediation of Foreclosures of Owner-Occupied Residential Properties

The Ordinance seeks to establish a mandatory foreclosure mediation program for all delinquent home
mortgages in the City of Lawrence. The program, which would be administered by mediation program
managers appointed by the City, is overly complex and is inconsistent with current Massachusetts
foreclosure law (M.G.L. Chapter 244), including the recently-enacted Chapter 194 of the Acts of 2012.

In addition to potentially lengthening the foreclosure timeframe and imposing substantial new costs
on lenders, we are extremely concerned that the Ordinance requires mortgagees to “bring and make
available the mortgage, note, all assignments” to all mediation sessions. There is no legal reason for a
mortgagee to have these documents available during the mediation process and this provision is in direct
conflict with Massachusetts foreclosure law. Clearly on its face these provisions are intended to delay the
foreclosure process and create new avenues for delinquent borrowers to challenge the validity of
foreclosures.

Additionally, Section 8.30.070 of the Ordinance states that “the City shall obtain a copy of all notices
filed pursuant to MGL c. 244 § 35A(g), (h), within 10 days of receipt by the Commissioner of the
Division of Banks pursuant to MGL c. 244, § 35A(k), that relate to residential properties in the City of
Lawrence.” However, according to the Division of Bank’s interpretation, notices required under c. 244 §
35A are not required to be filed with the Division the mortgagee files under the requirements of the
Servicemembers' Civil Relief Act, after the right to cure period has expired. If the City’s mediation
period did not begin until after the SCRA filing, then the foreclosure process would be significantly
extended beyond what is established in state law.

Finally, the you may be aware that Chapter 194 of the Acts of 2012 created a task force that is chaired
by the Attorney General and is charged with conducting a comprehensive review and evaluation of the
existing mediation programs throughout the United States as well as the feasibility of allowing a
foreclosed homeowner to continue to occupy the foreclosed property until purchased by a third party.
The task force has been meeting over the last several months and is scheduled to report its findings and
any recommendations by December 31, 2013. We would strongly urge you to defer any action on the
Ordinance until the final report of the task force is released.

Conclusion

MBA and our member institutions have serious concerns with the proposed Ordinances. We believe
that it will have a significant negative impact on the availability of mortgage credit in the City of
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April 24, 2013
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Lawrence and place undue burdens on banks of all sizes. We strongly urge you to veto the proposed
Ordinances.

Thank you for considering our views. If you have any questions or need additional information,
please contact me or Jon Skarin at (617) 523-7595.

Sincerely,

Kevin F. Kiley
Executive Vice President