Patrick-Murray Administration Calls for Closer Lender Scrutiny of Mortgage Documents Following Ibanez Decision
Office of Consumer Affairs Undersecretary calls for regulations,
The testimony came at the first of three public hearings on regulations being drafted by the Division of Banks regarding foreclosure right-to-cure notices and reverse mortgages. The regulations are mandated as part of legislation signed by Governor Deval Patrick in August 2010 that increases consumer protection for homeowners facing foreclosure.
Earlier this month, the Supreme Judicial Court ruled in the Ibanez decision that two foreclosures should have been postponed because the properties did not have clear title. The decision reaffirms long-standing state law that a creditor must have proven, clear rights to a mortgage prior to foreclosure.
"The ownership of a mortgage should be a basic fact that is clear to a homeowner not just during foreclosure, but at any point in a loan relationship," said Barbara Anthony, the Undersecretary of the Patrick-Murray Administration's Office of Consumer Affairs and Business Regulation. "These proposed reforms will ensure that homeowners are not dealing with a lender with no right to pursue foreclosure, and will give potential buyers confidence they are purchasing property with a clear title."
The regulatory proposal would mandate the right-to-cure notice to a consumer include proof from the lender that it is the rightful mortgage holder. The right-to-cure period of 150 days gives homeowners the opportunity to solve their foreclosure problem before the property is taken by the lender. Lenders are currently mandated by statute to include their name, address and contact information in the right-to-cure notice.
The legislative proposal would mandate lenders also include proof of mortgage ownership when filing for foreclosure in Land Court. Currently lenders must submit to the Court proof that it provided a homeowner with the right-to-cure notice.
"Foreclosures have had a devastating effect on Brockton families and communities. Homeowners have lost their American Dream and our neighborhoods have seen a rise of deteriorated foreclosed buildings. Given the widespread evidence that big banks did not follow the legal process when they chose to foreclose on many of our families, the regulatory and legislative proposals of Undersecretary Anthony and the Patrick Administration will help insure big banks give more regard to the laws and rules before taking the terrible step of foreclosing on a person's home," said Janine Carreiro of the Brockton Interfaith Community. " Though a step in the right direction, BIC also looks to see legislation for mandatory mediation and judicial foreclosure be seriously considered by the Legislature as well."
The proposals and the regulatory hearings currently underway are part of the Patrick-Murray Administration's comprehensive effort to battle the foreclosure crisis in Massachusetts. The legislation signed by the Governor in August 2010 included the regulatory provisions currently underway at the Division of Banks, along with new protections for tenants renting apartments in foreclosed buildings and establishing mortgage fraud as a crime.
The ongoing regulatory hearings focus on the right-to-cure notice and reverse mortgages. On the right-to-cure notices, the Division of Banks is accumulating testimony regarding information about the timing of the cure period, counseling options, alternatives to the foreclosure sale, and the language in which the notice is printed. On reverse mortgages, the Division is focusing on opt-in and counseling certification requirements, along with current counseling options and personal experiences in reverse-mortgage counseling.
Upcoming hearings are scheduled in Lawrence on Tuesday, Jan. 25, and in Springfield on Thursday, Jan. 10.
The Division of Banks oversees state-chartered banks, check sellers, debt collectors, foreign transmittal agencies, lenders, and mortgage brokers, and is an agency within the Office of Consumer Affairs and Business Regulation. Follow the Office at www.mass.gov/consumer, its Consumer Connections Blog and at its Twitter feed, @Mass_Consumer.