State Roundup
House Passes Foreclosure Prevention Bill
The House of Representatives passed a strong piece of legislation to address the foreclosure crisis yesterday. Drafted by a team of House leaders and Speaker Salvatore DiMasi, the legislation includes provisions to assist those currently struggling with foreclosure challenges and safeguards to prevent risky lending in the future. A summary of the bill is available on CHAPA's website. The full text of the bill will be posted when available.
House Bill 4306 includes $2 million for homebuyer counseling and requires counseling for sub-prime loans with adjustable rates to ensure informed decision-making. It includes a 90-day right to cure when mortgagees fall behind on a loan without excess fees being assessed. The legislation requires foreclosure notices to include a contact name, address and local and/or toll-free telephone number to address the problem of mortgagees not being able to contact the holder of the mortgage. In addition, it authorizes the Division of Banks (DOB) to ensure that mortgage lenders offer fair and sensible loans and meet the needs of the communities where they do business. There is also $3 million appropriated for the DOB to regulate mortgage lenders and maintain a foreclosure database.
CHAPA is very pleased with the legislation and thanks the Speaker, Chairman Ronald Mariano, Chairman Kevin Honan, Chairman David Torrisi and Chairman Eugene O'Flaherty for their efforts. The bill represents the hard work of the Foreclosure Prevention Coalition, including: the Massachusetts Affordable Housing Alliance, the Massachusetts Association of CDCs, the Massachusetts Non-Profit Housing Association, and the National Consumer Law Center.
In July, the Senate passed similar legislation (S.2299), including mandatory counseling for high-risk loans, a strong right to cure, and monitoring and oversight of mortgage lenders. However, the major difference is that the Senate also included an employer-assisted housing program in their bill. CHAPA looks forward to a quick conference committee to ensure prompt enactment of this important legislation.
Governor Announces Foreclosure Prevention Plan
Governor Patrick also announced a multi-faceted foreclosure prevention plan yesterday to stabilize neighborhoods with high foreclosure rates, to provide transition assistance to owners losing their homes, and to expand foreclosure prevention efforts generally.
DHCD is establishing neighborhood stabilization pilot programs in targeted neighborhoods in six cities (Lawrence, Boston, Brockton, New Bedford, Springfield and Worcester) with high numbers of foreclosures. It will work with lenders and non-profits to reclaim foreclosed and pre-foreclosure properties there and resell them to first-time homebuyers as quickly as possible.
The plan also encourages lenders to provide funding of up to $5,000 per household to support nonprofit programs to assist at-risk owners through counseling and refinancing assistance and to provide "transition resources" for those who are losing their homes and need help with first and last month's rent and moving expenses.
The plan also expands consumer outreach and education efforts in several ways. It establishes a single point of contact for foreclosure prevention services for consumers that will be open 24 hours a day/7 days a week and link consumers with services. It will also publicize the availability of MassHousing refinancing programs for struggling owners. A final element calls on mortgage lenders and servicers to follow a number of best practices, such as giving at least three months advance notice of interest rate resets, allowing loan modifications and refinancing into more affordable products, and allowing pre-foreclosure sales and deeds in lieu of foreclosure.
State Attorney General Issues Final Mortgage Broker and Lender Regulations
On October 17, Attorney General Martha Coakley issued final mortgage broker and lender consumer protection regulations. The new regulations, initially proposed in August, prohibit a number of unfair lending practices in connection with mortgage loans. They forbid lenders and brokers from making loans when it is not likely that the borrower will be able to repay the loan and ban the steering of borrowers to more expensive loan products when the borrower can qualify for a less expensive product. They require fuller disclosure of how fees and payments will increase over time under "no doc" loans and require borrowers to provide signed statements of income.
They also make it illegal for brokers to arrange or process loans that are not in the borrower's interest and impose conflict of interest restrictions on brokers. Most of the new provisions will go into effect on November 15th.
