Mortgage Summit Working Groups Release Report
Governor Patrick Applauds Bold Recommendations to Prevent Foreclosures, Save Homes and Improve Consumer Education
"The efforts of these working groups reflect the kind of aggressive, industry wide reforms that need to be made in order to solve the rising foreclosure issues that currently plague Massachusetts," said Governor Deval Patrick. "It is vital that we utilize all tools at our disposal to save homes and provide stability to families and communities throughout the Commonwealth."
In response to rising foreclosures both locally and nationally, increasing evidence of mortgage fraud, and other developments in the mortgage market, Commissioner of Banks Steven L. Antonakes convened a Mortgage Summit in November 2006 with nearly 50 participants from government agencies, non-profit organizations, and the mortgage lending industries to develop a foreclosure prevention strategy. After this Summit, two Working Groups were formed in December 2006 and began meeting in January 2007: one looking at rules and enforcement and the second focusing on consumer education and foreclosure assistance. The purpose of the Working Groups was to take the ideas of the Summit and develop concrete recommendations to both help consumers confronted with the loss of their homes as well as to address longer-term issues affecting communities across the Commonwealth of Massachusetts.
Some of the longer term issues affecting the state were revealed in a study recently conducted by Massachusetts Affordable Housing Alliance, which revealed that African-Americans and Latinos in the Boston metropolitan area who own single-family homes are much more likely to have a subprime loan than their white counterparts. Thomas Callahan, Executive Director of MAHA says of the Mortgage Summit Report, "MAHA looks forward to implementing the Working Group recommendations and other long-term solutions to all of the problems that rob homeowners of the American Dream."
Director of Consumer Affairs and Business Regulation Daniel C. Crane stated, "When implemented, the recommendations of the Mortgage Summit Working Groups will help consumers confronted with the loss of their homes. The Office of Consumer Affairs is committed to working with the Division of Banks and other stakeholders to ensure that consumers realize the benefits of these recommendations." Director Crane further stated, "I want to thank all of the members of the Mortgage Summit and the Working Groups who devoted their time and energy to address growing foreclosure problems in Massachusetts."
The report released today summarizes the recommendations of the Working Groups and is intended to be used by all stakeholders, including legislators, regulators, law enforcement, the mortgage lending industry, community and non-profit groups, and others to help address the rising number of subprime and nontraditional mortgage loans, growing evidence of mortgage fraud, and the subsequent rise in foreclosures in Massachusetts.
Commissioner Antonakes stated, "We cannot allow the record gains in homeownership over the past 15 years in low and moderate-income communities across the Commonwealth to be lost. The Mortgage Summit Working groups have presented a series of recommendations that will better protect consumers and enhance the supervision of the mortgage lending industries."
Below is a summary of some of the recommendations of the Mortgage Summit Working Groups:
- Criminalize the act of mortgage fraud.
- Support the multi-state licensing system for mortgage lenders and brokers being developed by the Conference of State Bank Supervisors.
- Raise the standards for applicants to become licensed as a mortgage lender or mortgage broker.
- Prohibit abusive foreclosure rescue schemes.
- Increase enforcement resources at the Division of Banks to supervise existing mortgage lenders and brokers and, if applicable, mortgage loan originators.
- Implement changes to the foreclosure process to better protect consumers, including a required Notice of Intention to Foreclose, during which no additional fees could accrue, and a right to cure provision to allow a consumer the ability to pay all payments in default.
- Stop unfair and deceptive marketing and advertising practices.
- Recommend guidance to clarify that borrowers should be qualified based on their ability to repay a loan at a fully-indexed rate, particularly non-fully amortizing mortgages or so-called Hybrid adjustable rate mortgages.
- Increase funding for pre- and post-purchase homebuyer counseling.
- Create a dedicated website devoted to financial education resources in Massachusetts.
- Increase support and resources for foreclosure prevention counseling and intervention to help consumers facing the loss of their homes.
- Encourage lender forbearance as an alternative to foreclosure.
- Develop a foreclosure intervention mortgage program for those persons at risk of foreclosure who could still qualify for financing with flexible terms and credit enhancements.