The Legislature has approved a bill that establishes greater protections for homeowners. The legislation aims to prevent unnecessary and unlawful foreclosures, reduce the number of abandoned properties across the Commonwealth, and help remove one of the biggest remaining barriers to our economic recovery.
Among other important provisions, 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.
Senator Katherine Clark (D-Melrose) said, “When facing the devastating prospect of a foreclosure, families deserve a fighting chance and a fair shake. This important bill assists those who continue to struggle in the wake of the housing crisis while helping to stabilize the housing market and our overall economy. It represents a thoughtful, common sense approach to keep families in their homes by ensuring fair negotiations and avoiding unnecessary and unlawful foreclosures.”
Senate President Therese Murray (D-Plymouth) and House Speaker Robert A. DeLeo (D-Winthrop) praised this important legislation, as did Attorney General Martha Coakley, who commended the House and Senate for “passing this critical legislation to assist struggling homeowners and help Massachusetts fully recover from the foreclosure crisis.” Coakley explained that “this bill establishes first-in-the-nation standards that will promote reasonable loan modifications and keep people in their homes without requiring banks to sacrifice the bottom line.”
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. Under this bill, 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.
“This bill is a balanced, positive step that will allow greater opportunities for people struggling to maintain their home in these challenging economic times,” said House Minority Leader Bradley H. Jones Jr. (R-North Reading).
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 eligible for assistance from loan modification specialists in the Attorney General’s Office.
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.
In addition, the legislation prohibits lenders from passing along costs of prior improper foreclosures or imposing fees for services not provided in connection with a foreclosure. And, 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.
This legislation is one more step forward in the Legislature’s effort to ensure that homeowners are treated fairly and that mortgage lenders work with families to keep them in their homes.