Today, June 6 the Massachusetts Senate will debate legislation to address the foreclosure crisis in the Commonwealth filed earlier this session by Senator Karen Spilka (D-Ashland), who represents Framingham.
The legislation, An Act to Prevent Unlawful and Unnecessary Foreclosures, filed with Attorney General Martha Coakley and lead House sponsor Representative Steven Walsh (D-Lynn) would prevent foreclosures by requiring loan modifications when it is commercially reasonable to do so and ensuring that creditors have the authority to foreclose.
“This bill takes a practical and reasonable approach to address the unprecedented rate of foreclosures we are seeing and the devastating impacts the foreclosure crisis is having on our homeowners, our communities and the Commonwealth as a whole,” said Spilka in a press release.
An Act to Prevent Unnecessary and Unreasonable Foreclosures aims to prevent additional foreclosures by requiring loan modifications in certain circumstances. Specifically, the loan modification legislation requires creditors to take commercially reasonable efforts to avoid foreclosure of certain mortgage loans. Additionally, these loans must contain certain risky features, such as interest-only loans, adjustable rate mortgages, and loans with short-term introductory interest rates. The legislation also provides a safe harbor for creditors to comply with this requirement of commercial reasonableness.
The legislation also addresses problems with foreclosures highlighted in the recent decision by the Massachusetts SJC, U.S. Bank v. Ibanez by prohibiting foreclosures where creditors lack the documents supporting their purported right to foreclose, and prohibits passing on certain fees and costs to homeowners.
“By ensuring fair negotiations, this bill will help keep our residents in their homes, which will stabilize the housing market and the overall economy of the Commonwealth,” continued Spilka.
Spilka has also filed an amendment to the bill which establishes a foreclosure mediation program administered by the Office of Public Collaboration. This optional program provides a neutral forum for residential borrower-homeowners and their lenders to avoid foreclosure by working out new mortgage terms or other agreements mutually acceptable to both parties.
The bill was reported favorably out of the Joint Committee on Financial Services and the House passed their version of the bill in May.
If it passes the Senate, the bill may need to go to a conference committee to resolve any differences between the House and Senate versions of the bill.