A Conference Committee is looking at Foreclosure Legislation this week. Please ask your representative to do two things:

Massachusetts Alliance Against Predatory Lending

[email protected]www.MAAPL.info

H4096    “Prevent Unlawful & Unnecessary Foreclosures”    S2298

Conference Language Fact Sheet

In 2010, the Legislature passed a foreclosure prevention law with incentives to banks to meet with homeowners to prevent foreclosures. The banks chose not to use these incentives and just wait a little longer to foreclose.  In 2011, Attorney General Coakley and many legislators filed legislation to strengthen this statute in the face of on-going large numbers of foreclosures that were hurting homeowners, property values, safety regarding vacant homes, and the housing market.  The House passed a strengthened bill in May and the Senate passed a bill in June that added the important provision for mandatory mediation to prevent many foreclosures.

Please ask the Foreclosure Conference Committee to adopt the following, critical elements:

• ·Mandatory Mediation as added in the Senate version – this proven process shows significant success in 23 jurisdictions across the U.S. and in all New England states except Massachusetts.

• ·Maintain consistency with federal standards on terminology and process hammered out over recent years of the crisis. They have a successful record of clarity. Adopting federal standards avoids adding additional burdens on homeowners during the modification process. Ensure calculations of homeowner ability to pay (NPV) meets federal standards, for example;

• ·Notification details that clarify new homeowner opportunities and obligations;

• ·Limiting “points of contact” lender may appoint to negotiate with the homeowner (Senate);

• ·Protecting homeowner’s access to damages if they can prove legal violations of their rights;

• ·Clarification of loans covered by the Attorney General’s standard in cases where determination may be unclear to lenders. Preserve Senate Language;

• ·A task force to revise legislation on Preventing Unnecessary Vacancies in the Commonwealth to secure future passage of said legislation (Senate).

The Foreclosure crisis is now returning to worst proportions

• Ø  Petitions to foreclose in the Commonwealth are up 47% since this time last year and continue to increase. They approach figures in the hardest hit quarter since the foreclosure crisis began.
• Ø  Massachusetts is back on track for 10,000 foreclosures per year, with an estimated 100,000 more before the end of the crisis unless significant immediate steps are taken.
• Ø  Our state is the 4^th hardest hit for percentage of underwater homeowners – the necessary though not sufficient condition for default and foreclosure. Property values are dropping quickly again.
• Ø  Massachusetts saw a 72.2% increase in residential vacancies between 2000 and 2010: 10th highest increase nationally with concomitant damage to our communities and unprecedented homelessness.

Massachusetts cannot wait another two years

to join every other New England state in having Mandatory Mediation.

How does Mandatory Mediation work?

Proposed process – At 3 months delinquency/beginning of 150 day Right to Cure period, the Mass Foreclosure Mediation Program would receive notice then notify homeowners of their eligibility to participate. Within 45 days the MFMP would schedule mediation with homeowners who opt in, an authorized lender representative and a neutral third party mediator. Both sides would provide documents in advance and lender would share the net present value calculation and projected loss from foreclosure at the session. Following state and federal guidelines, the figures then inform mediated alternatives to foreclosures such as a loan modification, short sale or deed-in-lieu. If both sides agree, a second session could be scheduled. The process is legislated to complete within 120 days from receipt of default notice.

• ·Bring a proven track record of success – often 80% for those who participate get an alternative solution to foreclosure – over 65% achieve an affordable loan modification!

• ·The AG’s new standard shows what loan modifications a homeowner can afford and also what the bank would lose by foreclosure.  This information provides homeowners additional leverage to negotiate lenders into real, affordable loan modifications rather than foreclosure.

• ·The AG and others agree that no entity at the state level by themselves possess the staff to advocate for all the homeowners covered by the new standard. Mandatory Mediation provides a knowledgeable, neutral third party and a venue so homeowners who are our most motivated and numerous advocates can advocate for themselves and thus fulfill the promise of this new standard.

• ·Mandatory mediation is simpler and more straightforward for borrowers and banks to participate in than the proposed negotiation process.

• ·Mandatory mediation process is legislated to take a maximum of 120 days, replacing the present proposed process’s possible 150 day deadline.

• ·Establishes a neutral agency to shepherd and oversee each case – ensuring timely compliance and streamlining negotiation to one (or if mutually agreed, two) face-to-face sessions.

• ·This process mandates all materials from both homeowner and lender be gathered by a specific deadline and the lender representative be authorized to come to final agreement with the borrower at the time of the meeting.

Use language which makes process in the current bill transparent and protects borrowers: It will

• ·Bring the process for borrowers with loans with certain predatory characteristics covered by the new Commercially Reasonable standard into alignment with federal and state procedures;

• ·Clarify for the borrower what it means to be covered by the new law and both their opportunities and obligations in the new procedures under the new standard, and

• ·Ensure the process is not so burdensome that many borrowers cannot participate effectively in it or lose opportunities that others with loans without predatory characteristics enjoy, and

• ·Once process is clarified and aligned with federal and state standards, it will not limit legal options and will remove exclusions so more borrowers are covered.

Massachusetts cannot afford the continuing additional losses of vacating foreclosures. Appoint a Task Force to explore the benefits of lender rental of the home to the foreclosed homeowners. Freddie and HUD already do this. Banks that do rent find they make, not lose, money when they do.

• ·  The 2010 law allowed tenants to remain in their home while the bank owns it – unevicted – unless and until a new owner/occupant or their family had a signed offer to move in. This taskforce explores a similar option for the former owner to become a rent-paying tenant who would meet all standard tenant requirements but still be subject to eviction if a new owner or family buys to move in.

Mass Alliance Against Predatory Lending - Contact Grace Ross - 617-291-5591