BOSTON: State Representative James Miceli (D-Wilmington)
joined with his colleagues in the Legislature in sending legislation to the
Governor 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.
“This bill puts teeth into a regulation that will help to
prevent the tragedies that have fallen on our local families,” said
Representative Miceli.
The bill requires banks and lenders to offer loan
modifications to borrowers in certain circumstances to avoid foreclosures.
Lenders must 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 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 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 Attorney General Martha Coakley’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.
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.
