Blue Mass Group

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Public Hearing next week on Foreclosure Bill

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There has been scores of discussion on this site in recent weeks about predatory lending and the high rate of foreclosures in Massachusetts.  In addition, a bill (S. 747) filed by State Rep. David Torrisi and myself, which would give several additional protections to consumers has been mentioned.  I am pleased to report that Secretary of the Executive Office of Economic Development has come out in favor of this bill and it seems that the legislature is moving quickly to act on this, if I say so, important piece of legislation.

In fact, next Tuesday, March 27th at 10:00 a.m.,in Room B-2 of the State House, our foreclosure bill will be up for a public hearing in front of the Housing Committee.

To show your support, please contact your local Representative and Senator.  If you are unaware of who your local official is, or you would like more information on the bill, please contact my office and we will assist you. (617) 722 1650

Jarrett Barrios

State Senator

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  1. That way, we can all read the legislation in adance of deciding to support it.

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    The title sounds great, but this is a thorny issue and informed support is the best kind.

      • They want to set up a fund of Ten Million to bail out homeowners who are at 135% of poverty level, more than 60 days in arrears, being foreclosed on, and who MAY be able to make apyemnts again in 12 months (with no language saying – one bailout to a customer).

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        And in return, the banks can be sued for foreclosing, and will be monitored by the AG if they give out too many low income loans, but at the same time must contribute to the low income housing of the commonwealth – if they make 50 mortgage loas per year.

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        How many banks will now make 49 loans?

        • …is restricted to mortgages on owner occupied property.  Since an owner can only hold one property as “owner occupied” constructively the bill say only one to a customer.

            • ….you can only be considered an owner occupant at one property.  If you have six houses and all are in foreclosure only one is being occupied by the owner and only that property is eligible for protection. 

              • You buy a house.  It is foreclosed on.

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                You inherit a house (I would LIKE to think you couldn’t get another purchase loan, but in AmeriWorld, who knows?).

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                You max out the equity on a credit line, and default.  It is foreclosed on.

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                NOTHING in this bill would prevent an infinite number of bailouts for the feckless.

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                THAT is what I mean by One to a Customer.

                • ….very improbable events.  Even if someone were to get bailed out of one home loan, ultimately default leaving the state out its investment and then inherit a home at a later date for which they were able to secure an equity line of credit, any loan on the equity of the second home would have to be predatory in nature for that home owner to qualify and I find it difficult to imagine a loan secured with equity in property to be predatory because it would be fully collateralized and negotiated under the other terms in this legislation that have been put in place to shut off predatory practices.

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                  Moreover, this proposition does not contemplate the terms for the interim loan.  Perhaps it will include a right to put a lien on any future property owned by the defaulter which would help to indemnify the Commonwealth.

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                  I’m not necessarily a fan of this proposal as is myself, but there are a number of reasons to oppose this if you are so inclined.  The fear of double dippers just seems to be a non-issue.

        • to see how such a provision plays out.  When the state becomes a player in the mortgage business, and then has to collect on mortgage payments from Mike Mortgagor. 

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          What happens when Mike Mortgagor again defaults on payments to the Commonwealth?  Is the Commonwealth now the Note holder?  What happens when the City of Malden decides to sue the Note holder because the property is not up to Code? (Yes, that happens…)

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          Watch out for the unintended consequences.  Good times, good times…

        • Banks (and credit unions) are already covered by CRA requirements. The section you’re talking about would extend to mortgage companies what banks and credit unions are already covered under.

        • On one hand we are going to punish banks for foreclosing. On the other hand we are going to punish banks for writing loans to people who are a “risk”. AND the icing on the cake, we are going to financially punish banks for being in the business by subsidizing folks who engage in financial responsibility.

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          Oh, this is a great idea!We will be paying people to NOT pay their mortgage. Will someone please pass a bill that will financially reward  me to avoid paying my taxes, the same deal that Ms. Wilkerson received!

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          I don’t think that Speaker Di Masi will look kindly on this for several reasons, one being that we don’t have the revenue stream to support present spending, but it is feel good legislation to let everyone know that we want “to do the right thing” even though it is the wrong thing.

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          Where’s my maalox?

    • The link Sen. Barrios provided has the full bill with its number – printable at that.

  2. The bill number is Senate 747.

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    Here is a summary of what the bill does:

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    SECTION 1:  ESTABLISHING A HOME PRESERVATION FUND.  The fund shall be used for the following purposes:

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    ? For grants and loans to homeowners facing foreclosure of their owner-occupied homes because they have been victims of abusive mortgage lending practices.
    ? For grants and loans to non-profit organizations to conduct public education campaigns, to provide counseling, legal services, and refinance assistance to homeowners at risk of foreclosure or who are in foreclosure.

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    SECTION 2.  REQUIRING IN PERSON COUNSELING FOR HIGH COST LOANS.  This section would amend the Chapter 183C of the MGL, the chapter which regulates high cost loans, to require in-person counseling to a prospective homeowner before a homeowner accepts a high cost loan.  Currently, the law allows for over the phone counseling.

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    SECTION 3. GOOD FAITH AND FAIR DEALING IN HOME LOAN SERVICING.  This section would increase the protection to mortgagors when dealing with loan servicers and therefore minimize the chance that servicers will drive mortgagors into default and foreclosure.  The section requires that:

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    ? Fees that servicers add to loans are reasonable and authorized by statute or the loan itself;
    ? Servicers respond in writing to mortgagors written requests for information on their loans;
    ? All payments received by servicers are posted promptly to the mortgagor’s account;
    ? Servicers must make timely payments to the mortgagors escrow account. 

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    SECTION 4. ESTABLISHING A MORTGAGOR’S RIGHT TO CURE A LOAN DEFAULT. 
    This section establishes a borrower’s right to cure a loan default initiated by the mortgagee/servicer and thereby stop a foreclosure action from proceeding.  It provides that a borrower would be entitled to:
    ? A written notice from the lender/servicer outlining the nature of the breach and the specific means and amount to cure it;
    ? A 30 day “cooling off” period during which the lender/servicer is not allowed to send the loan to an attorney’s office and during which the lender/servicer cannot charge any fees or charges, including any attorneys’ fees and during which time the borrower can redeem the property by paying back to the lender the total amount owed.
    ? To cure a default up until the home is sold at auction or otherwise transferred by the lender/servicer.

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    SECTION 5.  ESTABLISHING HOUSING INVESTMENT OBLIGATIONS FOR CERTAIN MORTGAGE LENDERS (Mortgage Company CRA).  This section adds in, word for word, the Mortgage CRA bill (S.562) that was filed in 2005.  This section would impose a “continuing and affirmative obligation” on all mortgage lenders who make more than 50 residential loans a year to help meet the credit needs of the communities where they do business. 

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    SECTIONS 6 & 7.  LICENSING MORTGAGE ORIGINATORS.  This section amends Chapter 255E of the MGL by deleting the exclusion for individuals who work for licensed mortgage brokers and mortgage lenders from licensing requirements; these individuals currently do not need a license themselves.  The bill would require that any individual who deals directly with borrowers in arranging mortgage loans, except those who work for banks and credit unions, must be licensed by the state. 

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    SECTION 8.  APPOPRIATION FOR THE HOME PRESERVATION FUND.  This section provides for a $10m for the Home Preservation Fund. 

    • Why should I bail out someone who can’t afford theirs?  Aren’t their better things we can do with that money? Like return the tax rate to 5.0% like the voters of the Commonwealth demanded?

      • …sake can we just let the tax rollback go already.  We all know.  The public voted.  Then the economy tanked.  Then the legislature trumped the people’s vote.  End of story.

        • What happened to upholding democracy?  Even Jim Braude’s with us on this one.

          • …democracy.  Not majority rule.  Your representatives made a choice.  Democracy duly upheld.

        • “The public be damned”

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          Yes, that was then and this is NOW. Massachusetts voters have absolutely no right to even dream that the state legistlature cares what those fools think. Tom Birmingham and Tom Finneran knew best. Anyone who is annointed to the position of senate president or house speaker knows best. It goes with the office. The public? Screw the public!

      • …a statute enacted through the initiative petition process was just that–a statute–and that the legislature could subsequently amend the statute.  I guess I was wrong.  But the subsequent amendment by the legislature is part of the democratic process, too.

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        The subsequent amendment by the legislature may have its political consequences for those legislators who voted in favor.  But apparently, in this case, those political consequences were minimal.

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        On the subject matter of the bill, it strikes me that the bill is pretty much ill-advised, for many of the reasons that have been posted in comments here by others.  If the state can do so, it probably should make high-risk (so-called “subprime,” but why euphemise it?) lending in the state.  I’m not sure how to go about it and define “high-risk,” but I’m sure there’s a way. 

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        That won’t happen, of course, because there’s too much money to be made by too many interest groups that would not want high-risk lending abolished.  But the state should not be in the business of using taxpayer money to bail out high-risk lenders–and that’s what it would do–who knew or should have known what they were getting into when they issued the high-risk loans.  That’s it, pure and simple.  The bill would bail out the lenders.

    • Abusive lending practices? Please identify each and every abuse and the intended victim and the level of harm.

  3. Has ther been some consideration of whether this bill will have the effect of making credit to expensive for many of the non-affluent?

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    That could be a good way to keep the poor, you know, poor.

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    I would be skeptical of the effctiveness of disclosure-type requirements, which will just add more paperwork that the borrower doesn’t read to the already-oversized pile at the closing.

    • ?Same as is frozen, yes.  But the competition for money appears to be ferocious this year.  I also note that as infrastructure is as important to attracting business as a part of the climate – and maybe more so – the neglect of our universities and roads is not going to help Massachusetts get jobs, nor will neglect of housing stock.

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      There are just certain functions that government can do [road and public education come to mind] that do not privatize, cannot be done by individuals, and require taxes that keep up with inflation.

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      What I do not understand is how and why government, and paying for government via taxes, was ever framed as evil.

      • No, what is evil is the fraud, watse and abuse, that’s what is evil. I was a state and federal employer for years. The frivolous waste of the taxpayers money is mind numbing. Government spends. The more you give it, the more it spends. There is little to no quality control. Embezzlement or outright theft though not condones is often ignored.

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        That’s what burns people up. If my tax dollars were well spent, you wouldn’t get an arguement out of me.Even the average taxpayer isn’t that stupid. They read newspapers and watch TV. How can you defend a cop standing over a hole getting $40.00 an hour? A governor who wants to ride around in a caddy. “Nonessential employees” go home every time it snows. The Big Dig? Ad nauseum.

        • How can you defend a cop standing over a hole getting $40.00 an hour?

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          He’s not being paid through taxes…  0 for 1

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          A governor who wants to ride around in a caddy.

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          Not being paid through taxes… 0 for 2

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          “Nonessential employees” go home every time it snows.

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          Not quite every time, but yeah, it would be nice if those hours got made up…  0.5 for 3

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          The Big Dig?

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          Yip…  1.5 for 4

          • The only way to eliminate waste or fraud is an attentive, aroused, and watchful citizenry that votes and holds government accountable…how many are even paying attention?

          • Police details – and police are paid on municipal payrolls – are 100% reimburseable under the state Ch. 90 program which gives money back to towns for the expense of maintaining public roads.

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            So actually, the town pays, and the state reimburses the.  So – he’s 2 for 2!

            • are private.  Perhaps it’s renovation on a building, working on trees, whatever.  Those who are doing the renovation have to pay.

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              It’s those cases (most of the cases!) it’s not coming out of the taxpayers funds — it’s coming from a building owner, a construction company, a utility company, a landscaping company, etc.

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              So, that’s an o-fer… or at least a small fraction-fer.  I have no idea how much detail duty is for public expenditure projects, but it’s a small fraction.

              • ANY detail work on a public, not private, street – not just a state highway but ANY public street – is fully reimburseable under chapter 90, whether a town or a contractor does the work.

  5. I’m no friend of the sub-prime lenders who created this foreclosure mess by making unsuitable loans, relaxing their underwriting beyond reason. A lot of homeowners are now going to be displaced.

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    But whom does a bill like this help? It seems to me that if I were a rotten, usurious sub-prime lender, I would be delighted with this bill. Remember, these lenders made loans at high interest rates, which supposedly are justified by the high risk of the loans. Now we will loan homeowners money to repay the arrears on their homes. (This is an oversimplification, since the bill also provides that the new funds can be used for refinancing rather than payment of amounts in arrears). So the nasty, rapacious lenders get to keep their profit, and now the public will bear the risk of a future default by the homeowner, to the extent of the loans the government makes.

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    This creates a moral hazard problem. Lenders will not have the proper incentive to use discipline when making loans in the future.

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    The bill is well-intentioned. But if we believe that some mortgage loans should not have been made, it follows that some current homeowners should be renting instead. We should let the market shake out and not set the stage for the next sub-prime lending crisis.

    • This bill rewards bad behavior on everyones part except the poor taxpayer and legitimate businessman.

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