Urgency. Tears. And attempts to put things in perspective. Massachusetts’ foreclosure crisis has inspired these and other reactions in recent months as it has hit homeowners across the state. And in two bills filed at the State House this year, it’s also inspired plenty of suggestions for fixing the problem.

Many lay the blame squarely at the feet of subprime mortgage lenders.

Such loans make up just 13 percent of loans nationwide, but high-cost loans – as defined in Home Mortgage Disclosure Act data that lenders provide, and often equated with subprime – account for a much greater share in many Massachusetts communities.

Lenders started off on the defensive last Tuesday as the state Legislature’s Joint Committee on Housing spent four hours listening to stories of the mortgage crisis fallout and discussing the pair of bills aimed at repairing it

“We may be the sacrificial lambs in the lion’s den,” remarked Massachusetts Mortgage Bankers Association Executive Director Kevin Cuff, who revealed that MMBA has kicked two major subprime lenders – Ameriquest and New Century – out of its membership after regulators took cease-and-desist actions against them.

Subprime loans have evolved over the past 20 years to serve borrowers with less-than-perfect credit. John Battaglia, immediate past MMBA chairman and president of Cambridge Mortgage Group, said they work for four out of five people who get them.

The real abuses, according to Battaglia, are found within certain types of subprime products, such as loans that don’t require income to be documented.

Senate Bill 747, with its counterpart House Bill 1290, was filed by Sen. Jarrett Barrios, D-Cambridge, and Rep. David Torrisi, D-Lawrence, with backing from a coalition of nonprofit housing and low-income advocates.

“It’s appreciated that this is at the front of your agenda, because this is a crisis,” Barrios told supporters.

Torrisi said Lawrence is now seeing five to eight foreclosure petitions filed daily. He said the goal of S. 747 is “to help professionalize the industry and help those who have gotten into trouble.”

A related piece of legislation, House Bill 1237, was filed separately by Rep. Kevin G. Honan, D-Boston and House chairman of the housing committee, and Boston Mayor Thomas M. Menino.

Similar Goals
The bills have similar goals but don’t always overlap. A major provision only found in S. 747, for example, would apply the Community Reinvestment Act to non-bank brokers and lenders who make more than 50 residential loans per year. Currently, CRA – a 1977 federal law that encourages financial institutions to help meet the credit needs of their communities for housing and other purposes – applies only to banks and credit unions, prohibiting them from restricting credit in low-income or minority neighborhoods in their business area. But today, unlike 30 years ago, non-bank lenders make the majority of mortgage loans.

Advocates, including the Massachusetts Bankers Association and bill sponsors, say applying CRA across the board would cover 16 of the top 20 subprime lenders not now affected by that law, leveling the playing field for borrowers and lenders.

Both the Barrios/Torrisi legislation and the other bill would establish a homeowner protection fund; H. 1237 would fund it with fees from newly required licensing for all loan originators.

S. 747 would license originators who don’t work in banks or credit unions, but its Home Preservation Fund – which, like H. 1237’s, pays for foreclosure prevention counseling and refinancing assistance to homeowners in trouble – would be funded with $10 million in new state money.

Mortgage trade associations support the licensing of loan officers – in fact, according to Massachusetts Mortgage Association Executive Director Denise M. Leonard, MMA filed its own bill that would have established it in 2003. But the Massachusetts Bankers Association does not, as it believes it does nothing to identify or penalize “bad actors who were abusing customers,” and would cost up to $10 million to enforce, when there are more pressing problems to address.

S. 747 also would establish a 30-day freeze, once a foreclosure notice is filed, meaning that no additional attorneys’ or other fees could be added to the amount a homeowner knows is due at that time. The provision is supported by both housing advocates and the mortgage industry.

H. 1237 would extend that period to 60 days, provided a homeowner signed up for foreclosure prevention counseling. It also would require lenders to provide consumers with “plain-language summaries” of the expected cost of a loan up to 10 years out.

Menino told the housing committee that “too-good-to-be-true loan officers have been able to operate too long in our low-income neighborhoods without reprisal.”

Through its own foreclosure assistance program, the city last fall began sending out letters, offering help to residents who get foreclosure notices, he said. Bank partners have been able to help 67 of the 200 who have responded into more appropriate loans.

Massachusetts Secretary of State William F. Galvin, whose office does not supervise the mortgage industry but oversees the Bay State’s registries of deeds, where foreclosure notices are filed, said the state should help Massachusetts homeowners currently facing foreclosure by allowing some of their cases to be heard by a judge before a lender can take their home. Some 19,500 foreclosure applications were filed in 2006.

“In Massachusetts, you have the right to ask for a hearing on a parking ticket, but not on whether you’re going to lose your home,” he pointed out.

Twenty-eight other states, including Connecticut, allow court hearings before foreclosures are finalized.

Galvin said his suggestion could be implemented in the district courts since the 2,000 to 3,000 homeowners who actually could benefit from it is a “manageable” number.

Massachusetts Attorney General Martha Coakley later countered such a proposal would have the potential to “clog the courts,” and Torrisi agreed.

Kevin Kiley, the Massachusetts Bankers Association’s executive vice president and chief operating officer, and MMBA’s Cuff expressed similar concerns.

The state Division of Banks supports S. 747, Chief Operating Officer David Cotney said, because it believes state law will resolve mortgage-lending problems in Massachusetts faster and more efficiently than Congress, which is considering similar matters.

DOB believes that “each aspect of [S. 747] Â… will ultimately, if not immediately, help to eliminate ongoing problems within the mortgage industry and therefore reduce foreclosures in Massachusetts,” Cotney said.

Department of Housing and Community Development Undersecretary Tina Brooks said one of her department’s chief concerns with subprime lending is that minority borrowers, the elderly and the poor have a disproportionate share of them.

Citing the conclusions of a study released last month by the Massachusetts Affordable Housing Alliance, a S. 747 backer, Brooks said the far-reaching effect of racial disparity in lending is that communities with large minority populations – the state’s “gateway cities” for immigrants – will end up with fewer homeowners, which is something they cannot afford.