A new Massachusetts law, as part of last year's ‘An Act Protecting and Preserving Home Ownership,’ has changed a number of regulations related to foreclosure practices, post-foreclosure accounting, post-foreclosure evictions and loan modifications.
The law's foreclosure provisions took effect on May 1, and the servicing industry should familiarize itself with how foreclosure-related matters – particularly the 90-day right of reinstatement – must now be handled in the state. The Massachusetts attorney general's office has vowed to strictly enforce the 90-day right to reinstate.
{OPENADS=zone=17}This piece of the new legislation applies to residential mortgage loans secured by borrower-occupied, one- to four-family homes, where default was accelerated after May 1 of this year. Borrowers are now entitled to a one-time, 90-day right to cure a monetary default before the loan can be accelerated. Borrowers are allowed this right one time in five years.
The burden, however, is on the mortgage holder or servicer to determine if the borrower is occupying the home. Servicers cannot rely upon the occupancy status of the property when the loan was originated.
The 90-day notice must be mailed by first-class mail to the last known address of the borrower or mortgagor. During the 90-day cure period, mortgage holders and servicers are prohibited from commencing foreclosure, as well as from charging or collecting attorneys' fees or other costs of collection, except late fees or per diem interest.
However, an unresolved issue currently being considered is whether the legal fees and costs incurred during the 90-day period for entering into a loan modification agreement or a deed-in-lieu of foreclosure may be charged to the borrower or mortgagor.
The 90-day letter must include:
- a description of the default and amount needed to cure, the actual date by which the borrower or mortgagor must cure (90 days after service of the notice) and the consequences if the borrower or mortgagor fails to reinstate (acceleration);
- the name, address and local or toll-free phone number for a person to whom payment must be made and the name, address and local or toll-free phone number for the person in the department to whom disputes about the arrearage or default should be addressed;
- the name of any current or former mortgage broker who was involved in the loan and, after July 1, 2008, the name of any loan originator who was involved in the loan; and
- a statement that the mortgagor or borrower may be eligible for assistance from MassHousing and the Massachusetts Division of Banks (DOB), along with the toll-free or local phone numbers of those agencies.
Additional requirements include:
- an affidavit certifying compliance with the law and a copy of the 90-day letter filed with the Massachusetts Land Court complaint;
- in the event a foreclosure complaint is not accompanied by the required affidavit and 90-day letter, a statement explaining why no 90-day letter accompanies the complaint; and
- a copy of the 90-day letter filed with the DOB within five business days of filing a foreclosure complaint.
{OPENADS=zone=18}The DOB has stated it will not accept any papers in connection with this requirement by facsimile, by mail or in person. Instead, to comply with the DOB filing requirement, the information must be input electronically in an online database (see www.mass.gov/dob). However, of concern to the industry is the DOB's statement that the password used to create the record (when the first filing is input) will be the only password for future access.
Finally, the governor, DOB, attorney general, legislators and consumer advocates believe mortgage holders and servicers have an absolute obligation to reach out to borrowers during the 90-day period to explore loan modifications, forbearance agreements, loan restructurings, refinancings and other avenues to avoid foreclosure and loss of property.
Patricia Antonelli (pa@psh.com) and Charles Lovell (cal@psh.com) are attorneys with Partridge Snow & Hahn LLP.