Attorney General Martha Coakley to Testify in Support of Foreclosure Prevention Legislation
Attorney General Martha Coakley to testify in support of SB 1848, An Act to Require Commercially Reasonable Efforts to Avoid Foreclosure
Thursday, October 15, 2009
Massachusetts State House
Attorney General Martha Coakley
Senator Susan Tucker
Representative Steven Walsh
Immediately following their testimony, Attorney General Coakley, Senator Tucker, and Representative Walsh will hold a brief media availability outside of the hearing room.
"Modification of monthly loan payments to sustainable, affordable levels makes economic sense for lenders and borrowers alike," said Attorney General Coakley. "Loan modifications allow the lender or investor a continuing, though decreased, income stream, the value of which exceeds the expected losses suffered at foreclosure. At the same time, meaningful loan modifications are key to keeping families in their homes, and preventing the damage that can result from abandoned properties in our neighborhoods."
An Act to Require Commercially Reasonable Efforts to Avoid Foreclosure aims to prevent additional foreclosures and would require lenders or servicers to offer loan modifications in certain circumstances. Specifically, the loan modification legislation requires that creditors take commercially reasonable efforts to avoid foreclosure upon mortgage loans securing homes that are owner-occupied. This would apply only to loans on principal residences, and to loans with certain risky features, such as interest-only loans, adjustable rate mortgages, and loans with short-term introductory interest rates. The legislation also provides a safe harbor for creditors to comply with this requirement of commercial reasonableness.
"It is time for new innovative tools to bring borrowers and lenders to the table. Clearly, some foreclosures are unavoidable, but each day we are losing opportunities to modify loans that are in the best interest of the lender, the homeowner, and the neighborhood," said Senator Susan Tucker (D-Andover).
"Attorney General Coakley has made it a major priority to address the foreclosure crisis in Massachusetts, which has hit communities such as mine, particularly hard," said Representative Steven Walsh (D-Lynn). "This legislation will benefit working families as well as creditors and I am eager to work with Attorney General Coakley towards its passage."
In addition to Attorney General Coakley, Senator Tucker, and Representative Walsh, representatives of the following advocates are also expected to testify in support of this legislation:
- Stuart Rossman, National Consumer Law Center (NCLC)
- Sean Caron, Citizens' Housing and Planning Association (CHAPA)
"The concept of reviewing a homeowners' status is a very reasonable one that would benefit both borrowers and lenders," said Barbara Anthony, the Undersecretary of the Patrick Administration's Office of Consumer Affairs and Business Regulation, who will testify at tomorrow's hearing. "This will be another tool to go along with other efforts to help families stay in their homes and keep neighborhoods stable."
Attorney General Coakley has been advocating for meaningful loan modifications for over two years. As part of the State Foreclosure Prevention Working Group, Attorney General Coakley has urged Federal regulators to encourage national banks and federal thrift servicing operations to modify large numbers of mortgage loans that are becoming unaffordable for consumers. The working group has also contacted lenders and servicers directly to push them to offer modifications to struggling borrowers, but has met with great resistance from those lenders and servicers. After the state passed legislation required a "90 day right-to-cure" period, the Attorney General's Office undertook to bring meaning to the 90-day period by engaging three of the nation's largest creditors-Wells Fargo, Citi and Bank of America-and urging them to take on wide-scale loan modifications that could keep people in their homes while maximizing the value of the loan portfolios for their investors. Each entity promised to the Attorney General that they would be "part of the solution" to the foreclosure crisis, but were unwilling to commit to any of these promises in writing to borrowers, investors or Massachusetts government officials.
Since taking office in January 2007, Attorney General Coakley has made addressing the foreclosure crisis a priority of her administration. In addition to sponsoring this legislation and advocating for modifications, the Attorney General's Office has brought several civil enforcement actions against subprime lenders - including a lawsuit against Fremont Investment & Loan which resulted in a $10 million settlement in June 2009, and a case currently pending against Option One and its parent company, H&R Block, Inc., in June 2008, alleging that they originated thousands of risky subprime loans in Massachusetts, with reckless disregard as to whether borrowers would be able to afford their loan payments. The Attorney General's suit against Option One also alleges that the lender discriminated against black and Latino borrowers. The Attorney General's May 2009 settlement with Goldman Sachs, whereby the investment bank agreed to approximately $50 million in consumer relief and a $10 million payment to the Commonwealth related to its role in securitizing subprime mortgage loans, marked the first time an investment bank was held accountable for its role in the subprime mortgage meltdown. In addition to these and other civil cases the Attorney General's Office has brought criminal prosecutions against individual brokers and other professionals who took advantage of consumers. The Attorney General's Office also implemented regulations banning foreclosure rescue schemes and barring unscrupulous mortgage broker and lender conduct in the Commonwealth.
For more information about the Attorney General's foreclosure prevention efforts, please visit the Foreclosures and Mortgage Lending section of the Attorney General's website.