Mass. Gov. to Press Mortgage Companies

The Boston Globe reports:

Governor Deval Patrick plans to introduce an ambitious program today to assist Massachusetts communities in preventing foreclosures by pressing lenders to accept losses on their mortgages so that homeowners are able to sell their properties and pay off smaller loan balances.

The initiative would start with a pilot program in cities with the highest incidence of foreclosures, including Lawrence and Springfield, where delinquent borrowers with subprime mortgages are prevalent. Other cities being considered are Boston, Brockton, New Bedford, and Worcester.

"We're identifying where the maximum need is," said an administration official briefed on the plan, who did not want to be identified prior to the governor's official announcement. "We want to stabilize these neighborhoods, and we need the lenders to be part of the solution."

In one key part of the plan, the state would press lenders to agree to a "short sale" with homeowners late on their monthly payments. In a short sale, lenders accept less than the full value of the loan, so that the homeowner can sell the house at today's market price - typically less than he or she paid for it - and use the proceeds to pay off the smaller loan balance. Short sales are a way for borrowers to prevent foreclosure.

The coalition for artificially high real estate prices.