MA criminalization mortgage fraud

Update (June 28, 2010): The bill is heading up to Gov. Patrick’s office for approval.

The Massachusetts Senate recently passed wide-ranging legislation that updates the homestead law, protects tenants in foreclosed properties from arbitrary evictions, criminalizes mortgage fraud and certain unsolicited loans. The legislation, part of a series of consumer protection bills that passed the Senate, was approved unanimously.

Metrowest Senator Karen Spilka, who spearheaded the changes, writes about them on her blog (and she has a Facebook Page!).

Foreclosure Bill

  • Tenants in foreclosed buildings can only be evicted for just cause, or if the building is purchased by a third party. Also, a lender cannot evict a tenant for failure to pay rent unless it has posted and delivered a written notice including critical information, including a contact number for the new owner. This does not prohibit a lender from evicting tenants for other valid reasons, such as interfering with the quiet enjoyment of other tenants, using a unit for illegal purposes, or refusing to allow the lender to enter the unit to make repairs.
  • For homeowners, the legislation temporarily extends 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 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.
  • Bill requires at least one meeting or telephone conversation between the homeowner and the lender to discuss a commercially reasonable alternative to foreclosure. The lender’s representative must have the authority to agree to the revised terms. The right to cure period can be reduced from 150 days to 90 days if the lender makes a good faith effort to negotiate a commercially reasonable alternative to foreclosure.
  • Allows the 150-day right to cure to be granted once every 3 years; currently, the 90-day right to cure is only available once every 5 years.
  • Creates a 2-year pilot program within the Division of Banks that requires all property owners, including lenders, trustees, and service companies, to register and maintain vacant and/or foreclosing properties in the Commonwealth.

Coverage on this bill from the Boston Globe can be found here.

Homestead Law Update

  • Updates the homestead law to protect up to $500,000 of a home’s value. It also includes unsecured debts, such as credit card debt, that were incurred before the homestead was filed.
  • Extending homestead protection to manufactured homes, and multifamily properties of up to 4 units.
  • Requiring homeowners with more than one property to file a declaration, signed under the penalty of perjury, of which dwelling is their primary residence and therefore eligible for homestead protection to avoid fraud.
  • Clarifying that the proceeds of fire/casualty insurance or sales/takings are protected from creditors. Fire/casualty proceeds are protected until re-occupancy; a homestead is declared on new home; or for 2 years after the date of the fire/casualty.
  • Protecting the proceeds from sales or taking until a new homestead is declared or for 1 year, whichever occurs first.
  • Allowing trustees of trusts to file homestead declarations on behalf of trust beneficiaries who reside in the property as their principal place of residence.
  • Creates an automatic homestead of $125,000 for all homeowners.

Other Consumer Protection Provisions

  • As advocated by the Attorney General, the bill would criminalize residential mortgage fraud.
  • Prohibits financial institutions and lenders from sending consumers unsolicited loans which are a negotiable check, money order, draft or other instrument that may be used to unknowingly activate a loan that was not solicited by the consumer.  10 day right of rescission on these loan products.

The three bills now move to the House of Representatives for further action.

The homestead law update is long-awaited and much needed. I wrote about it in the Fall here.

The foreclosure bill is quite a victory for tenant and distressed property owner advocates.

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