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This bill was passed on November 29, 2007.

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Legislation as Filed

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AN ACT IMPLEMENTING THE DIVISION OF BANKS MORTGAGE SUMMIT RECOMMENDATIONS

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. Chapter 10 of the General Laws is hereby amended by inserting after section 35CC the following section:-
Section 35DD. (a) There shall be established on the books of the commonwealth a separate fund to be known as the Division of Banks Trust Fund, to be expended, without prior appropriation, by the division of banks. The fund shall consist of 100 per cent of the fee revenue collected under subsection (b). Funds from the account shall be expended solely in connection with establishing, administering, operating and updating a mortgage foreclosure database in the commonwealth and providing reports from information in that database. No expenditure shall be made from the fund which shall cause the fund to be in deficit at the close of any fiscal year. Moneys deposited in the fund that are unexpended at the end of the fiscal year and that exceed 20 per cent of the fund's expenditures for the previous fiscal year shall revert to the General Fund.
(b) Notwithstanding any general or special law to the contrary, the secretary of administration and finance shall adopt regulations to establish a fee for the filing of a Notice of Intent To Foreclose and Right To Cure with the division under section 14A of chapter 244.

SECTION 2. Chapter 183 of the General Laws is hereby amended by inserting after section 6C the following section:-
Section 6D. Every mortgage and assignment of mortgage secured by residential property, as defined in section 1 of chapter 255E, presented for record, in which a mortgage broker, as defined in section 1 of chapter 255E, is involved shall contain or have endorsed upon it the name, post office address and license number of the mortgage broker and, if applicable, the mortgage loan originator responsible for placing the mortgage loan with the mortgagee. This endorsement (or notation that no mortgage broker or mortgage loan originator was involved in the mortgage) shall be recorded as part of the mortgage or assignment of mortgage. Failure to comply with this paragraph shall not affect the validity of any mortgage or assignment of mortgage or the recording of any mortgage or assignment of mortgage. No register of deeds shall accept a mortgage or assignment of a mortgage for recording unless it is in compliance with the requirements of this section.
For the purposes of this section, "mortgage loan originator" shall mean a natural person: (a) who is employed by or associated with a mortgage lender or mortgage broker and (b) who negotiates, solicits, arranges, provides or accepts residential mortgage loan applications, or assists consumers in completing those applications.

SECTION 3. Section 27 of chapter 183, as appearing in the 2004 Official Edition, is hereby amended by adding the following paragraph:-
The holder of a mortgage of real estate, or the holder's representatives, shall provide to the mortgagor or the mortgagor's heirs, successors or assigns a written notice containing an itemized accounting of the disposition of the proceeds arising from a sale under the power of sale, including but not limited to the sale price, legal fees, auctioneer fees, publication costs, and other fees, and any surplus due to the mortgagor or the amount of any deficiency, within 30 days after the date of the sale.

SECTION 4. Chapter 183 is hereby further amended by adding the following section:-
Section 69. No mortgagee who makes a loan to be secured by a mortgage on owner-occupied, 1 to 4 family real estate in the commonwealth shall make the loan at a variable or adjustable rate of interest unless: (i) the loan meets all of the standard underwriting criteria for a conventional mortgage loan as established by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and is rated "A" paper under those criteria; or (ii) the mortgagor affirmatively opts in writing for the variable or adjustable rate loan and receives certification from a counselor with a third-party nonprofit organization approved by the United States Department of Housing and Urban Development, a housing financing agency of the commonwealth, or the regulatory agency which has jurisdiction over the creditor, that the mortgagor has received counseling on the advisability of the loan transaction. Counseling shall be allowed in whole or in part by telephonic means. The commissioner shall maintain a list of approved counseling programs. At or before closing such a loan, the mortgagee shall obtain evidence that the mortgagor has completed an approved counseling program. If a mortgage loan is made by a mortgagee in violation of this section, the variable or adjustable rate terms of the loan shall not be enforceable and the mortgagee shall only be entitled to collect an interest rate equal to the lesser of the original interest rate, including any discounted rate, or the current adjusted interest rate throughout the remaining term of the loan. The commissioner may issue directives or guidelines or adopt regulations in order to administer and carry out this section and to further define the terms used in this section.

SECTION 5. Chapter 244 of the General Laws is hereby amended by inserting after section 14 the following 4 sections:-
Section 14A. (a) After a breach of condition of a mortgage loan secured by residential property in the commonwealth, a mortgagee or holder of the mortgage shall not proceed against the mortgaged premises under a power of sale unless the mortgagee or holder of the mortgage gives the mortgagor the notice described in this section.
(b) The notice shall be in writing and shall be mailed, postage prepaid, by certified mail with return receipt requested, to the mortgagor at his last address then known to the mortgagee, at least 90 days before exercising any rights under a power of sale.
(c) The notice shall conspicuously state the rights of the mortgagor upon default in substantially the following form:
The heading shall read: "Notice of Intent To Foreclose and Right To Cure." The body of the notice shall read: "You are now in default on a mortgage loan transaction dated ______. This mortgage loan is secured by property located at ______. This loan was originated by (name of mortgagee), assigned to ______ (if applicable) and is being serviced by ______ (if applicable). The mortgage broker/mortgage originator for this mortgage loan transaction was ______. You may cure your default by paying all sums due on the mortgage loan on or before (a date which is at least 90 days after the notice has been mailed). If you pay this amount within the time allowed, you are no longer in default and may continue on with the transaction as though the default had not occurred. You may contact the mortgagee or the mortgagee's agent at (telephone number of mortgagee or mortgagee's agent) in order to obtain the amount due to cure the default on your mortgage loan.
If you do not cure your default by the date stated above, (name of mortgagee) may begin foreclosure proceedings against you, and you could lose your home."
(d) A copy of the notice described in this section shall be filed with the commissioner of banks and shall include the rate of interest on the loan and whether it was a variable or fixed rate of interest. The filing fee for the notice shall be determined annually by the Secretary of administration under section 3B of chapter 7.
(e) No attorney's fees or other fees or charges other than per diem interest may be charged to the mortgagor during the mortgagor's 90-day right to cure.

Section 14B. If after receiving a Notice of Intent To Foreclose and Right To Cure from the mortgagee under section 14A, the mortgagor fails to cure a default on a mortgage loan secured by residential property, as defined in section 1 of chapter 255E, within the time permitted by the Notice (which shall be at least 90 days after the Notice has been mailed), the mortgagee may do all acts authorized or required under the power of sale. If the residential property securing the mortgage loan is sold at a foreclosure sale, the mortgagee shall notify the commissioner of banks, in writing, of the date of the foreclosure sale and the purchase price obtained at the sale, and shall include a copy of the notice required under section 14A.

Section 14C. (a) For the purposes of this section, the following terms shall have the following meanings:
"Default", a condition in which a homeowner is 1 or more months in arrears on the mortgage payments.
"Foreclosure", a condition in which a homeowner has received a notice issued by a court under chapter 57 of the acts of 1943 or has received a notice under section 14A of this chapter.
"Purchaser", any person who acquires title to residential property.
"Transfer of title", the transfer of a mortgagor's interest to a purchaser by purchase agreement, option to purchase, lease, or any other means, or by the creation of a mortgage or other lien or encumbrance that allows the purchaser to obtain legal or equitable title to all or part of the property.
(b) The transfer of title to residential property, as defined in section 1 of chapter 255E, by a mortgagor who is in default or foreclosure during the time of default or foreclosure, made in contemplation of a subsequent conveyance of an interest back to the mortgagor by the purchaser, that allows the homeowner to regain possession of the residential property is prohibited unless the purchaser is a spouse, parent, grandparent, child, grandchild, sibling, aunt, or uncle of the mortgagor.

Section 14D. The commissioner of banks shall maintain a foreclosure database that shall include, but not be limited to, foreclosure activity by mortgage lenders, mortgage holders and mortgage servicers, as well as the mortgage brokers and loan originators who placed these mortgage loans in the commonwealth, including information relative to the original mortgagee, and any subsequent assignee. Based on the information received, the commissioner shall produce a report at least annually to track developments and trends of mortgage foreclosure on residential property in the commonwealth, including but not limited to an analysis of the pre-foreclosure notices submitted to the commissioner compared to the final foreclosure notices, and any trends or patterns relative to the geographic location of the residential properties, and interest rates. The report shall be available to the public upon request, and the commissioner shall make it available in any other manner that he may choose.

SECTION 6. Section 2 of chapter 255E of the General Laws, as so appearing, is hereby amended by striking out, in lines 34-39, the words "or to any nonprofit agency or corporation incorporated under the laws of the commonwealth for the purpose of assisting low to moderate income households in the purchase or rehabilitation of family residences of four units or less and which holds tax-exempt status granted under the provisions of Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code,".

SECTION 7. Chapter 266 of the General Laws is hereby amended by inserting after section 35 the following section:-
Section 35A. (a) For the purposes of this section, the following terms shall have the following meanings:-
"Material omission", the omission or concealment of a material fact necessary in order to make the statement made, in the light of the circumstances under which it is made, not misleading.
"Mortgage lending process", the process through which a person seeks or obtains a residential mortgage loan, including, but not limited to, solicitation, application or origination, negotiation of terms, third-party provider services, underwriting, signing and closing, and funding of the loan. Documents involved in the mortgage lending process include, but are not limited to, uniform residential loan applications or other loan applications; appraisal reports; HUD-1 settlement statements; supporting personal documentation for loan applications such as W-2 forms, verifications of income and employment, bank statements, tax returns, and payroll stubs; and any required disclosures.
"Pattern of residential mortgage fraud", 1 or more material misstatements, material misrepresentations, or material omissions made during the mortgage lending process in connection with 3 or more residential properties within a 5 year period, which have the same or similar intents, results, participants, victims, or methods of commission or otherwise are interrelated by distinguishing characteristics.
"Person", a natural person, corporation, company, limited liability company, partnership, trustee, association, or any other entity.
"Residential mortgage loan", a loan to a natural person made primarily for personal, family or household purposes secured wholly or partially by a mortgage on real property located in the commonwealth containing a dwelling house with accommodations for 4 or fewer separate households and occupied, or to be occupied, in whole or in part by the obligor on the mortgage debt.
(b) A person commits the offense of residential mortgage fraud when, with the intent to defraud, the person knowingly:
(1) makes or causes to be made any deliberate material misstatement, material misrepresentation, or material omission during or in connection with the mortgage lending process with the intention that it be relied on by a mortgage lender, mortgagor, or any other party to the mortgage lending process;
(2) uses or facilitates the use of any deliberate material misstatement, material misrepresentation, or material omission during the mortgage lending process with the intention that it be relied on by a mortgage lender, mortgagor, or any other party to the mortgage lending process;
(3) receives any proceeds or any other funds in connection with a residential mortgage closing that the person knew resulted from a violation of paragraph (1) or (2) of this subsection;
(4) coerces or induces a real estate appraiser to inflate the value of real property used as collateral for a residential mortgage loan;
(5) represents or implies that a real estate appraiser will not be selected to conduct an appraisal of the real property or selected for future appraisal work unless the appraiser agrees in advance to a value, range of values or minimum value for the real property;
(6) represents or implies that a real estate appraiser will not be paid for an appraisal unless the appraiser agrees in advance to a value, range of values or a minimum value for the real estate;
(7) conspires to violate any of the provisions of paragraphs (1) through (6) of this subsection; or
(8) files or causes to be filed with the official registrar of deeds of any county of the commonwealth any document that the person knows to contain a deliberate material misstatement, material misrepresentation, or material omission.
(c) For the purpose of venue under this section, any act of residential mortgage fraud under this section shall be considered to have been committed:
(1) in the county in which the residential property for which a mortgage loan is being sought is located;
(2) in any county in which any act was performed in furtherance of the violation;
(3) in any county in which any person alleged to have violated this section had control or possession of any proceeds of the violation;
(4) if a closing occurred, in any county in which the closing occurred; or
(5) in any county in which a document containing a deliberate material misstatement, material misrepresentation, or material omission is filed with the official register of deeds.
(d) District attorneys and the attorney general shall have the authority to conduct the criminal investigation and prosecution of all cases of residential mortgage fraud under this section.
(e)(1) Any person committing the offense of residential mortgage fraud under this section shall be guilty of a felony and, upon conviction, shall be punished by imprisonment in state prison for up to 5 years or in a house of correction for up to 2 ½ years, by a fine not to exceed $10,000 for a natural person or $100,000 for any other person, or by both such fine and imprisonment.
(2) If an act of residential mortgage fraud under this section involves engaging or participating in a pattern of residential mortgage fraud or a conspiracy or endeavor to engage or participate in a pattern of residential mortgage fraud, the violation shall be punishable by imprisonment in state prison for up to 15 years, by a fine not to exceed $50,000 for a natural person or $500,000 for any other person, or by both such fine and imprisonment.
(3) Each residential property transaction that effects a residential mortgage fraud under this section shall constitute a separate offense and shall not merge with any other crimes set forth in this section.
(f) All real and personal property used or intended for use in the course of, derived from, or realized through, an act of residential mortgage fraud under this section shall be subject to forfeiture to the commonwealth. Forfeiture shall be had by the procedure set forth in section 47 of chapter 94C. District attorneys and the attorney general may commence forfeiture proceedings under this section.

SECTION 8. Notwithstanding section 35DD of chapter 10 of the General Laws, as inserted by section 1 of this act, for fiscal years 2008, 2009 and 2010, moneys deposited in the Division of Banks Trust Fund that are unexpended at the end of the fiscal year shall remain in the fund.

SECTION 9. This act shall take effect upon its passage.