State Seeks Tighter Foreclosure Rules
The state’s banking division is pushing regulations that would prohibit lenders from foreclosing on properties if modifying mortgage terms would prove to be less expensive.
The proposed regulations come on the heels of a law signed by Gov. Deval Patrick last year that requires lenders to conduct an analysis of a property’s value prior to foreclosing on certain mortgage loans, including those with “teaser rates,” interest-only payments or loans that were originated without full documentation. The law also requires lenders to send a notice to borrowers of their right to request a loan modification for certain mortgage loans.
"The new rules are not only in line with Massachusetts’ strong foreclosure protection efforts, but they go a step further by requiring that the lenders do the math to determine whether foreclosing makes the most economic sense," said Undersecretary of Consumer Affairs Barbara Anthony.
The proposed regulations establish the process for lenders to notify borrowers about their rights and defines the “good faith” efforts lenders are required to take to avoid foreclosure. The regulations include a timeline for lenders to send notices and respond to borrowers. They also set expectations for how and when lenders should communicate with borrowers, and how and when borrowers should respond to lenders. They also establish standards to determine if lenders have met the requirements of the law.
"Early intervention is key to avoiding foreclosure," banking commissioner David Cotney said. "The proposed changes encourage lenders to perform loan modifications earlier on in the process so that more borrowers can be helped and more homes can be saved."
A copy of the proposed regulation is available on the Division’s website at www.mass.gov/dob. The public hearing during which the Division will accept testimony and comments is scheduled for Wednesday morning in Boston. Written comments may be submitted to the Massachusetts Division of Banks, 1000 Washington St., 10th Floor, Boston, MA 02118-6400 or at dob.comments@state.ma.us. All comments to the Division must be submitted by 5 p.m. on Friday, Feb. 15.
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