BOSTON -- (June 11, 2007) -- Today Governor
Deval Patrick (
www.mass.gov)
filed legislation to criminalize mortgage fraud as part
of a comprehensive plan to prevent predatory lending and
protect families facing foreclosures. The bill follows several
regulatory changes already put in place by Governor Patrick
to address the rising tide of foreclosures in Massachusetts.
In April, the Commonwealth established a hotline for consumers
and began assisting homeowners in crisis.
“We must help homeowners facing foreclosures,”
said Governor Patrick. “The problem is complex and
requires a comprehensive approach that provides for greater
education and information for consumers before securing
a mortgage; a more responsive legal framework for homeowners
facing foreclosure, and clear consequences for those who
engage in mortgage fraud. Massachusetts homeowners and
their families deserve no less.”
Today’s legislation, “An Act Implementing
the Division of Banks Mortgage Summit Recommendations,”
implements recommendations from the Mortgage Summit Working
Group that was convened in response to rising foreclosure
rates. The Working Group, led by Commissioner of Banks
Steven L. Antonakes, included nearly 50 participants from
government agencies, non-profit organizations, and the
mortgage lending industries who convened to develop a
comprehensive foreclosure prevention strategy.
This legislation increases protections for consumers
and provides penalties for mortgage fraud.
The bill includes the following provisions:
* Criminalizing mortgage fraud. In response to rising
instances of mortgage fraud, the bill would define mortgage
fraud in statute and create criminal penalties for violations.
* Prohibiting abusive foreclosure rescue schemes. With
many people facing the threat of foreclosures, unscrupulous
individuals and groups have preyed upon consumers’
fears of losing their homes by promising to allow homeowners
to stay in their home in exchange for signing over the
property. Many people who fall victim to this scheme think
that they are making mortgage payments when in fact they
are paying rent. This bill would prohibit such agreements
unless the purchaser is a direct relative.
* Requiring a Notice of Intent to Foreclose and Right
to Cure. The bill sets out a right to cure for a consumer
that is in default and requires the holder of a mortgage
to inform the consumer of this right in addition to the
intent to foreclose if the consumer does not cure the
default.
* Prohibiting a lender from making an adjustable rate
subprime loan unless the borrower opts-out. In reviewing
default rates and foreclosure information, subprime fixed
rate loans have performed well and allowed consumers with
impaired credit to reestablish their credit history. Subprime
adjustable rate mortgages (ARMs), on the other hand, have
very high default rates and higher foreclosure rates.
This bill would prohibit any lender from making a subprime
ARM unless the consumer affirmatively opts-out of the
fixed rate product and presents a certificate indicating
that they have received homebuyer counseling.
* Establishing a central repository of foreclosure information
at the Division of Banks. The bill would require lenders
and servicers to send a copy of the Notice of Intent to
Foreclose and Right to Cure to the Division of Banks as
well as the details of any final foreclosure. In addition,
the bill requires the Division to establish a database
of foreclosure information to track geographic and industry
trends relative to foreclosures.
Several other provisions of the legislation address other
lending and foreclosure issues identified by the Mortgage
Summit Working Group.
Since April, when Governor Patrick first instructed the
Division of Banks to seek case-by-case foreclosure delays
for homeowners who filed complaints, more than 400 people
have reached out to the Division. Just under half of those
individuals were already in foreclosure and needed immediate
relief. The Division was able to secure 30- to 60-day
stays in the foreclosure process in most of those cases.
Due to these stays, many individuals and families were
able to refinance or are in the process of refinancing
their loans, were able to modify their loan terms, have
received credit counseling, or were able to sell their
homes. In addition, homeowners who contacted the Division
and were in financial distress but not yet in foreclosure
were partnered with counseling agencies that offer comprehensive
services that can help them change direction and hopefully
prevent foreclosure from occurring.
In addition, the Division of Banks is also continuing
work on the other Working Group recommendations. These
include implementing regulatory changes that increase
licensing and education requirements for mortgage lenders
and brokers to eliminate disreputable firms and practices,
and building on the partnerships between government, non-profit
organizations, and the mortgage industry to improve the
support for homeowners and monitoring of the industry.
SOURCE: The Commonwealth of Massachusetts Executive Department
