Brewer Announces Legislation Preventing Mortgage Foreclosures Sent to Governor
(Boston) – Senator Stephen M. Brewer (D-Barre) announced today that the Senate and the House of Representatives have agreed on legislation that will prevent unnecessary and unlawful foreclosures, reduce the number of abandoned properties across the Commonwealth and help remove one of the biggest remaining barriers to the state’s ongoing economic recovery.
“The residents of Massachusetts, much like the rest of the nation, have felt the effects of the economic downturn,” said Brewer. “This bill will protect hard-working homeowners who were victims of predatory lending by providing real solutions and keeping families in their homes.”
The bill requires banks and other lenders to offer loan modifications to borrowers in certain circumstances to avoid foreclosures. Lenders must conduct a complete financial analysis of the loan and offer a modification if it would be more beneficial to receive lower monthly mortgage payments than to foreclose on the home.
There is a 150-day timeframe for deciding whether or not to offer the loan modification which may come in the form of a reduced interest rate or principal, or an extension of the loan repayment period. The modified loans would allow borrowers to stay in their homes, lenders to avoid foreclosure costs and potential market losses, and neighborhoods to avoid the problem of abandoned properties and vacant lots.
Loan modifications would be available for owner-occupied homes and apply to loans that are considered risky, such as mortgages with teaser rates, loans made with no income documentation, and interest-only loans. Borrowers who qualify will be provided with contact information for loan modification specialists in the Attorney General’s Office who assist borrowers in their negotiations with lenders.
The bill also incorporates two recent Supreme Judicial Court decisions requiring lenders to prove they are the current legal holder of a mortgage and the holder of the mortgage note before beginning a foreclosure.
The legislation also prohibits lenders from passing along costs of prior improper foreclosures or imposing fees for services not provided in connection with a foreclosure. Furthermore, it requires the Division of Banks, in consultation with the Attorney General’s Office, to track the resolution of certain mortgage loans and report to the Joint Committee on Financial Services within 90 days of the end of each calendar year through December 31, 2017.
The Legislature had consistently worked to protect homeowners and residents. In 2010, legislation passed that prevented tenants in foreclosed buildings from being evicted without just cause. It also required written notice with proper contact information to be posted and delivered before evicting a tenant for failure to pay rent.
For homeowners, that legislation temporarily extended the 90-day right-to-cure period, enacted by the Legislature in 2007, to 150 days. The 2007 law gave homeowners 90 days to come up with past due payments on their mortgage before the lender could require full payment of the unpaid balance. This was intended as a cooling off period for the lender and homeowner to work out a new payment plan to avoid foreclosure.
The bill now goes before the Governor for his final approbation.
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Posted: Thu, Jul 26, 2012
Updated Thu, Jul 26, 2012