AG Coakley Pushes Loan Modification Bill in Speech Before Chelsea Chamber of Commerce
Says Bill Important Step to Addressing Foreclosure Crisis and Restoring a Healthy Economy
CHELSEA – Before the Chelsea Collaborative, Chelsea Chamber of Commerce, and local officials at City Hall this morning, Attorney General Martha Coakley advocated for legislation her office filed that would prevent unnecessary foreclosures.
Senate Bill 868/House Bill 1219, An Act to Prevent Unlawful and Unnecessary Foreclosures was filed in January 2011 by AG Coakley and co-sponsors Senator Karen Spilka (D-Ashland), and Representative Steven M. Walsh (D-Lynn). The proposed bill would establish standards that require banks to analyze every loan prior to proceeding with a foreclosure and offer a reasonable loan modification where the analysis shows modifying the loan is more profitable for the bank than foreclosure.
“This bill would help homeowners achieve loan modifications, allowing people to stay in their homes and avoiding the negative impact of increased abandoned properties in our communities,” said AG Coakley. “It does this without asking the banks to sacrifice their bottom lines to do it. Addressing the foreclosure crisis is the single biggest thing we can do to help restore a healthy economy.”
During her remarks, AG Coakley pointed out that despite promises from the major banks, loan modifications are not occurring in Massachusetts on the scale needed to prevent further harm to communities and families. AG Coakley explained that the legislation would require creditors to modify loans when an analysis shows that it’s more profitable to modify the loan than to foreclose. She told members of the Collaborative and Chamber that loan modifications based on a net-present value test are economically sound for both lenders and borrowers. The legislation would only apply to loans that have been identified as having certain risky features, typically associated with subprime loans, and in which the banks knew or should have known were destined to fail.
The legislation would also codify two recent Massachusetts Supreme Judicial Court decisions, Ibanez and Bevilacqua, by requiring a creditor commencing foreclosure to show it is the current legal holder of the mortgage.
Her remarks come two days after filing the national state-federal settlement over robo-signing in federal court. During her remarks, AG Coakley described how more than $300 million in assistance will soon flow to Massachusetts borrowers. She explained how her office secured an additional “carve-out” to enable her office to continue litigation and pursue claims over “MERS” and “Ibanez” issues which was an important part of her office’s own lawsuit filed against the five major banks.
AG Coakley has taken other numerous actions to address the foreclosure crisis, including against Fremont, Option One , Countrywide , Morgan Stanley , Goldman Sachs and Royal Bank of Scotland which all resulted in loan modifications designed to remedy unfair and unsustainable loans in Massachusetts. Not including the national state-federal settlement, AG Coakley’s office has already recovered more than $600 million in relief for investors and borrowers, helped keep more than 25,400 people in their homes, and returned nearly $60 million in taxpayer funds back to the Commonwealth.
During the speech, AG Coakley also highlighted her office’s enforcement actions around worker’s rights. She explained that the AG’s office is working to send a clear message that workers must be paid, and paid in accordance with the law. AG Coakley says these efforts help level the playing field for all businesses in Massachusetts.