In Massachusetts, the foreclosure rate is up 76 percent in the past year, with 1,000 foreclosures in Boston in the past six months. The wave of foreclosures is not expected to crest until 2008, when many variable-rate mortgages readjust.
“The problem of mortgage foreclosures is only going to worsen so acting now with bold measures is critically important,” said House Speaker Salvatore F. DiMasi. “In passing this legislation, the House of Representatives voted to protect future home-buyers from predatory lending and bring meaningful help to those facing foreclosure.”
“While we clearly had some unscrupulous actors working in the mortgage industry, the real problem was that homebuyers were not financially astute to see through the double talk,” said Representative Ronald Mariano (D-Quincy), chairman of the Joint Committee on Financial Services and sponsor of the bill. “This legislation takes an important step to help level the playing field and give consumers the financial information they need to make educated decisions.”
Under this legislation, homeowners would be protected from foreclosure by the 90 day right-to-cure provision, which would require lenders to give homeowners 90 days to repay the interest and payment balance accumulated, before starting foreclosure proceedings.
If the borrower successfully completes this payment, their mortgage would be reinstated without penalty or foreclosure. This clause insures that consumers are not saddled with the weight of enormous legal fees associated with a foreclosure filing for simply falling behind on payments for a short period.
This bill will also encourage mortgage lenders to work with borrowers to avoid foreclosures in the coming months and years. Under this legislation, mortgage lenders will be motivated to shift adjustable rate mortgages to fixed rates. Borrowers can request to extend the length of their loan or increase their interest rate to achieve a fixed rate if they pay lenders a 1 percent fee on the cost of their mortgage. This one-time fee would enable mortgage holders to secure a fixed rate and encourage lenders to provide this security to homeowners.
Hoping to guard against future problems, the bill would require licensure of 20,000 loan originators with an annual license fee of $500, allocating $3 million to employ regulators under the Division of Banking to more aggressively regulate mortgage lending practices across the Commonwealth.
The bill also mandates that the Division of Banks keep a record of the mortgage practices of each loan originator in Massachusetts. The DOB will evaluate this information and rate lenders performance in the market. Poor performance may result in loss of license. By giving the commissioner the authority to hold these lenders accountable, questionable lending practices will be sharply curtailed.
Unique to this bill is the creation of counseling requirements for first-time homebuyers entering into subprime loans to insure they fully understand the financial commitment of their home loan.
The bill also:
* Adds reporting requirements for non-bank lenders of more than 50 loans.
* Protects renters as tenants-at-will, post-foreclosure.
* Creates a pilot program for impacted communities provides $2 million for foreclosure and mortgage counseling centers.
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