The city's anti-foreclosure ordinances, facing state and federal court reviews, call for banks or property owners to place a $10,000 bond on any property vacated or in the process of foreclosure.
SPRINGFIELD – Two city ordinances that are aimed at addressing the problems of foreclosed properties in Springfield were recently referred for review by the Massachusetts Supreme Judicial Court while already challenged by a group of banks in a federal lawsuit.
The two anti-foreclosure ordinances, passed by the City Council in 2011, and upheld by a U.S. District Court ruling in July 2012, remain under review by the U.S. Court of Appeals in Boston.
The federal appeals court, while keeping jurisdiction, ruled on Nov. 22 that the matter is also in need of review by the Supreme Judicial Court in Boston, the highest court in Massachusetts.
The case was referred because “the outcome of this case turns on unresolved questions of Massachusetts law and raises significant policy concerns better suited for resolution” by the state’s highest court, the federal appellate court stated.
Under one of the challenged ordinances, the owner or bank must register with the city and place a $10,000 cash bond within 30 days of the property becoming vacant or within 15 days of the foreclosure being initiated. The bond funds can be accessed by the city if the property is not properly secured or managed, under the law.
The second ordinance would establish a city-approved, mandatory mediation program to assist homeowners faced with foreclosure. The bank or other mortgagee would be responsible for paying about 85 percent of the cost of mediation, according to the appellate court opinion.
City Solicitor Edward M. Pikula said the case is important to Springfield because the local law “strives to fight blight that has been exacerbated by the foreclosure crisis.” However, it is also important to all cities and towns in the state because it will address their “home rule” authority over the foreclosure issue, he said.
Tani Sapirstein, of Springfield, lawyer for the banks, argued before the federal appeals court that the ordinances conflict with several state laws and regulations and are unconstitutional. In addition, she argued that the $10,000 bond, that includes an administrative fee for the city, is “not a fee, it’s a tax,” and is thus illegal because any new tax levied by the city needs approval from the state Legislature.
The federal appeals court opinion states in part that Springfield “was particularly hard-pressed by foreclosures and concluded that properties left vacant during or after foreclosure can threaten the public safety by, among other things, attracting criminal activity or drawing squatters who, without any available utilities, may cause fires. These harms can in turn lower the values of neighboring properties, causing more foreclosures and creating a vicious circle.”
The city in response created the ordinances, the court stated.
The federal suit was filed by Easthampton Savings Bank, Chicopee Savings Bank, Hampden Bank, United Bank, Monson Savings Bank and Country Bank for Savings, all of Western Massachusetts.
The Supreme Judicial Court has considered multiple other Springfield cases. In 2012, the court sided with an appeal by St. George Greek Orthodox Cathedral, and overturned a city requirement for a specific fire detection system at such public halls.