SENATE, No. 747

By Mr. Barrios, a petition (accompanied by bill, Senate, No. 747) of Jarrett T. Barrios, David M. Torrisi, Mark C. Montigny, Brian A. Joyce and other members of the General Court for legislation to preserve home ownership. Housing.
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The Commonwealth of Massachusetts

Seal of the Commonwealth of Massachusetts

In the Year Two Thousand and Seven.


AN ACT to preserve home ownership

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. The General Laws are hereby amended by inserting after chapter 121D the following new chapter:-

Chapter 121E. Home Preservation Fund

Section 1.  There is hereby established and placed upon the books of the commonwealth a home preservation fund to be administered by the department of housing and community development, into which shall be credited:

  (a) any appropriations or other monies authorized by the general court and specifically designated to be credited to the fund;

  (b) grants, gifts or any other monies directed to the fund;

  (c) any income derived from an investment of amounts credited to the fund; and

(d) the repayment of loans made to qualified homeowners as set forth in this section.

Section 2.  The department shall hold the fund in an account segregated from other department funds and accounts and shall utilize, invest or reinvest the proceeds of the fund and income derived therefrom for the following general purposes:

(a) For grants to non-profit organizations approved by the department to provide services as part of a Massachusetts home preservation initiative. Those services shall include, but not be limited to: providing outreach and education to Massachusetts homeowners and potential homeowners to expand the awareness about the rise in mortgage foreclosures, the warning signs of predatory loans, the steps they can take to protect their property and finances and where to go for assistance; providing in person counseling and legal services to Massachusetts homeowners who are facing foreclosure of their owner-occupied homes or are at risk of foreclosure, working with lenders to resolve issues of arrears owed on mortgages of such homeowners, and assisting homeowners to refinance their home mortgages when possible;

For grants and loans to provide payment relief to Massachusetts homeowners facing foreclosure of their owner-occupied homes because they have been victims of abusive mortgage lending practices, as defined by the department of housing and community development.  The Fund may be used to refinance, assist in refinancing, or pay the arrearage due on loans as described in this section. Assistance may be provided in accordance with this section if:

The property securing the mortgage, or other security interest in the case of units in cooperative projects, is a dwelling house of 4 or less separate households or a residential condominium or cooperative unit that is owner-occupied, serves as the principal residence of the mortgagor, and is located in Massachusetts; 

The mortgagor is a resident of Massachusetts and is suffering financial hardship, including a lack of assets, which render the mortgagor unable to correct the delinquency or delinquencies within a reasonable time and make full mortgage payment;

The mortgagor earns no more than 135% of the area median income, adjusted for family size;

Any mortgagee has indicated to the mortgagor its intention to foreclose;

Payments under any mortgage have been contractually delinquent for at least sixty days; and

The department has determined that there is a reasonable prospect that the mortgagor will be able to resume full mortgage payments within twelve months after the beginning of the period for which assistance payments are provided under this section.

SECTION 2.  Section 3 of Chapter 183C of the General Laws is hereby amended by striking out the second sentence and inserting in place thereof the following new sentence:-

Counseling shall be performed in person and shall include, at a minimum, a review of the mortgagor’s income and expenses, the terms of the proposed loan transaction, and the truth in lending and good faith estimate statements provided by the lender. 

SECTION 3.   Chapter 183 of the General Laws is hereby amended by adding the following new section:- Section 57A: Good Faith and Fair Dealing in Home Loan Servicing

(a)  For the purposes of this section, the following words, unless the context otherwise requires, shall have the following meanings:

“Accelerated”, means any action by the mortgagee or servicer to declare the entire mortgage amount due before the maturity date following the mortgagor’s breach of any covenant or agreement in the security instrument.

"Home loan", any loan secured by a first lien or second or subsequent lien on a dwelling house of 4 or less separate households or on a residential condominium or cooperative unit occupied or to be occupied in whole or in part by the mortgagor.

"Mortgagee" or "mortgage holder", the holder of record of a mortgage deed;  provided, however, that if the mortgage deed has been assigned of record, mortgagee or mortgage holder shall mean the last person to whom such mortgage deed has been assigned of record.

"Mortgage servicer", the last person servicing a home loan, whether or not appearing of record as the mortgagee or the mortgage holder.

"Person", an individual, corporation, business trust, testamentary trust, partnership, association, joint venture, government, governmental subdivision or department or other legal or commercial entity.

 (b) Duty of Good Faith and Fair Dealing.  The servicer is the agent of the mortgagee or mortgage holder, and both owe a duty of good faith and fair dealing to the mortgagor in all dealings related to a home loan. 

 (c)  Rules for Assessment of Fees. The following rules shall be applicable to every home loan:

No mortgagee or servicer shall assess or receive any fees or charges other than interest, late charges or penalties as specifically authorized in section 59, fees authorized by section 63A,or fees assessed for non-sufficient funds, and charges allowed pursuant to the section, until the loan is accelerated.

Any fee charged by a mortgagee or servicer must be i) reasonable, ii) for services actually rendered, and iii) specifically authorized by the loan contract and this chapter.

A fee which is otherwise legal under this section shall be i) assessed within 30 days of the date on which the fee was accrued; and ii) explained clearly and conspicuously in the next periodic statement provided to the mortgagor. Failure to provide this information or charge the fee within the allowable time and in the manner required, shall be a waiver of the fee.

A monthly periodic statement shall be provided to the mortgagor which includes, but is not limited to the following information: (i) the application of the prior month’s payment including the allocation of the payment to interest, principal, escrow and fees; (ii) the status of the escrow account, including the payments into and from the escrow account; (iii) the assessment of fees, accruing in the previous month, including their cause and the date they accrued; and (iv) a local or toll-free telephone number that allows the mortgagor access to a live person with the information and authority to answer questions and resolve disputes regarding the account.

(d)  Information Exchange and Dispute Requirements – The servicer shall respond in writing within 10 days of receipt of a mortgagor’s written request for information and resolution of disputes.  This obligation shall include, but not be limited to –

Correcting of errors relating to allocation of payments;

Providing the current balance due on the loan, including the principal due, interest, late fees due, the escrow balance, and the amount of any escrow deficiencies or shortages;

Providing a full payment history; and

Providing the identity, address and other relevant information about the owner or assignee of the loan.

(e)  Notwithstanding the forgoing, section (d) shall not apply to a mortgagee’s or servicer’s duties under sections 54 to 55, inclusive.

(f) Prompt Posting of Payments Required – All amounts paid to a mortgagee or its servicer shall be credited on the date it is received against payments due. 

 (g)  Obligations of Servicer to Handle Escrow Funds - The servicer shall make all payments from the escrow account held for the mortgagor for insurance, taxes and other charges with respect to the property in a timely manner. 

Penalties.  Any person who fails to comply with any requirement imposed under this section, shall be liable to a mortgagor in an amount equal to the actual damages sustained by the mortgagor as a result of the failure, but in no event less than $1,000.

An action under this section shall be brought in any court within three years from the date of the occurrence.  This paragraph does not bar a person from asserting a violation of this section in an action to collect the debt, or foreclose upon the home, or to stop a foreclosure upon the home, which was brought more than three years from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action. An action under this section does not create an independent basis for removal of an action to a court.

An action to enforce a violation of this section may also be brought in any court, by the attorney general of the commonwealth within three years of the violation. An action under this section does not create an independent basis for removal of an action to a court.

The prevailing party in an action brought pursuant to this section shall be awarded the costs of the action and a reasonable attorney’s fee as determined by the court.

SECTION 4. Chapter 244 of the General Laws is hereby amended by adding the following new section 35A:-

Section 35A.  Right to Cure

A mortgagor shall have the right at any time, up to the time the property is sold at auction or otherwise transferred, to cure a default or breach of the security instrument and reinstate the loan.

Following a mortgagor’s breach of the security instrument, and prior to acceleration, a notice of the right to cure the default must be delivered to the mortgagor informing the mortgagor of the following:

(1)        The nature of the default claimed on the home loan and of the mortgagor's right to cure

the default by paying the sum of money required to cure the default. If the amount necessary to cure the default will change during the 30 day period after the effective date of the notice due to the application of a daily interest rate or the addition of late fees, the notice shall give sufficient information to enable the mortgagor to calculate the amount due at any point during the 30 day period;

 (2)       The date by which the mortgagor shall cure the default to avoid acceleration and initiation of foreclosure or other action to seize the home, which date shall not be less than 30 days after the date the notice is mailed and the name, address and local or toll free phone number of a person to whom the payment or tender shall be made;

 (3)       That, if the mortgagor does not cure the default by the date specified, the mortgagee or servicer may take steps to terminate the mortgagor's ownership in the property by commencing a foreclosure proceeding or other action to seize the home; 

(4)        The name and address of the mortgagee or servicer and the toll-free telephone number of a representative of the mortgagee or servicer whom the mortgagor may contact if the mortgagor disagrees with the mortgagee's or servicer's assertion that a default has occurred or the correctness of the mortgagee's or servicer's calculation of the amount required to cure the default;

 (5)       That a repayment plan, forbearance, loan modification, or other workout tool may be available to help the mortgagor repay the arrears and the name, address, and local or toll free telephone number of the creditor or servicer whom the mortgagor may contact to request this assistance; and

 (6)       That the mortgagor may be eligible for assistance from the home preservation fund created pursuant to chapter 121E to cure the default, a short description of the eligibility requirements, and the name, address, and local or toll free telephone number the mortgagor may call to request this assistance.

            To cure a default prior to acceleration, a mortgagor shall not be required to pay any charge, fee, or penalty attributable to the exercise of the right to cure a default. The mortgagor shall not be liable for any attorneys' fees relating to the mortgagor's default that are incurred by the mortgagee or servicer prior to or during the period set forth in the notice required by  section (b).  

If a creditor or servicer asserts that grounds for acceleration of a  home loan exist and requires the payment in full of all sums secured by the security instrument, the mortgagor or anyone authorized to act on the mortgagor's behalf shall have the right at any time, up to the time title is transferred by means of a sale or otherwise, to cure the default and reinstate the home loan by tendering the total amount of principal, interest, late fees, escrow deposits in arrears, reasonable and necessary expenses incurred by the mortgagee or servicer,  and reasonable attorney fees.  Cure of default as provided in this paragraph shall reinstate the mortgagor to the same position as if the default had not occurred and shall nullify as of the date of the cure any acceleration of any obligation under the security instrument or note arising from the default.  The cure shall constitute payment in full satisfaction of all delinquent principal, interest, late fees, escrow shortages, legal fees, and costs of any kind.

After the mortgagee or servicer initiates a foreclosure action or takes other action to seize or transfer ownership of the home, the mortgagor shall only be liable for attorneys' fees that are reasonable and actually incurred by the mortgagee or servicer based on a reasonable hourly rate and a reasonable number of hours plus any other reasonable and necessary expenses incurred by the creditor or servicer.

If a default is cured after the initiation of any action to foreclose, the creditor or servicer shall take such steps as are necessary to terminate the foreclosure proceeding or other action. 

A copy of the notice required by section (d) and an affidavit demonstrating compliance with the section shall be filed in any action or proceeding to foreclose on a home loan.  

Penalties.  Any person who fails to comply with any requirement imposed under this section with respect to a mortgagor shall be liable to the mortgagor in an amount equal to the actual damages sustained by the mortgagor as a result of the failure, but in no event less than $1,000.

Any action under this section shall be brought in any court within three years from the date of the occurrence.  This paragraph does not bar a person from asserting a violation of this Chapter in an action to collect the debt, or foreclose upon the home, or to stop a foreclosure upon the home, which was brought more than three years from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action. An action under this section does not create an independent basis for removal of an action to a court.

An action to enforce a violation of this section may also be brought in any courtby the attorney general of the commonwealth within three years of the violation. An action under this section does not create an independent basis for removal of an action to a court.

The prevailing party in an action brought pursuant to this section shall be awarded the costs of the action and a reasonable attorney’s fee as determined by the court.

SECTION 5.   Chapter 255E of the General Laws, as appearing in the 2000 Official Edition is hereby amended by inserting after section 10 the following section:-

Section 11. It shall be the continuing and affirmative obligation of each mortgage lender, who is licensed pursuant to this chapter and who, directly or indirectly, makes more than fifty residential real estate mortgage loans in the commonwealth in any calendar year, as reported under the Home Mortgage Disclosure Act, 12 USC 1801 et seq., to help meet the housing credit needs of the communities in the commonwealth, including low and moderate income neighborhoods and residents, consistent with laws, rules and regulations of the commonwealth and the federal government relative thereto, and with safe and sound business practices.

The Commissioner of Banks shall assess the record of each such lender in satisfying this continuing and affirmative obligation. To assist in carrying out the provisions of this section, the commissioner shall promulgate regulations which shall include, but need not be limited to, a consideration of such mortgage lender’s (a) origination of loans and other efforts to assist low and moderate income residents, without distinction, to be able to acquire or to remain in affordable housing in their neighborhoods, (b) origination of loans that show an undue concentration and a systematic pattern of lending resulting in the loss of affordable housing units, and (c) such other considerations, including notice of the schedule of  examinations and the right of interested parties to submit written comments relative to any such examination to the commissioner, as, in the judgment of the commissioner, reasonably bear upon the extent to which a mortgage lender is helping to meet the housing needs of communities in the commonwealth.

The Commissioner shall file any regulation proposed pursuant to this section, excluding emergency regulations adopted pursuant to section 2 of chapter 30A, or any amendment or repeal thereof with the clerks of the senate and house of representatives, together with a statement that the pertinent provisions of chapter 30A have been complied with and a summary of the regulations in ordinary language.  The clerk shall refer such filing to the joint committee on banks and banking within 5 days of the filing thereof.  No regulation shall take effect until 90 days after it has been so filed; provided, however, that such 90 day period shall not include days when the general court is prohibited by law or rule from meeting in formal session.

In considering an application from a licensed mortgage lender for a renewal of a license under this chapter, the commissioner shall consider, but shall not be limited to, the record of performance of any such lender relative to the provisions of this section. Said record of performance may be the basis for the denial of any such renewal application.

Upon the completion of the examination of a mortgage lender under this section, the commissioner shall prepare a written evaluation of such lender’s record of performance which shall be open to public inspection upon request. Said written evaluation shall include: -

(1)   the assessment factors utilized to determine the mortgage lender’s descriptive rating;

(2)   the commissioner’s conclusions with respect to each such assessment factor;

(3)   a discussion of the facts supporting such conclusions; and

(4)   the mortgage lender’s descriptive rating and the basis therefore.

Based upon such examination, the mortgage lender shall be assigned one of the following ratings: -

(a)  outstanding record of performance in meeting the housing credit needs of communities in the commonwealth;

(b)  high satisfactory record of performance in meeting the housing credit needs of communities in the commonwealth;

(c)  satisfactory record of performance in meeting the housing credit needs of communities in the commonwealth;

(d)  needs to improve record of performance in meeting the housing credit needs of communities in the commonwealth; or

(e)  substantial noncompliance in meeting the housing credit needs of communities in the commonwealth.

Notwithstanding the foregoing, the commissioner shall establish an alternative examination procedure for any mortgage lender, which, as of the most recent examination, has been assigned a rating of outstanding or high satisfactory for its record of performance in meeting its community housing credit needs.

For the purposes of this section, no mortgage lender may include a loan origination or loan purchase for consideration as part of its review under this section if another mortgage lender claims the same loan origination or purchase for its review under this section or under section 14 of chapter 167 of the General Laws.  

SECTION 6.  Section 2 of Chapter 255E of the General Laws is hereby amended by striking out in the first sentence the words:- provided, however, that any person who is employed by or associated with a licensed mortgage broker or mortgage lender in the capacity of a mortgage broker or mortgage lender under the direction of said licensed mortgage broker or mortgage lender shall not be required to obtain such license.

SECTION 7. Section 2 of Chapter 255E of the General Laws is hereby amended by inserting in the fourth sentence the words:- “a person employed by” before the words “a bank.”

SECTION 8.

7004-XXXX For the home preservation fund established pursuant to chapter 121E…. $10,000,000.