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Senate Moves to Protect Borrowers from Deceptive Mortgage Practices - July 25, 2007
Bill Encourages Responsible Lending and Establishes Assisted Housing Program
Boston - The Senate on Tuesday unanimously approved legislation to prevent mortgage foreclosures and crack down on deceptive lending practices, announces Senator Benjamin B. Downing (D – Pittsfield). The bill would make mortgage fraud a felony and require anyone arranging mortgage loans to be licensed. The bill also includes a section establishing a program for employees seeking housing.
"This bill strikes a balance between the responsibilities of borrowers and lenders," said Downing. "It requires irresponsible lenders to change their practices, and it also requires borrowers to educate themselves on their mortgage options."
Senate President Therese Murray said the consensus bill will prevent future foreclosure crises.
"The rate of mortgage foreclosures in Massachusetts has been alarming," the Senate President said. "This legislation takes aim at predatory lenders and gives homeowners and borrowers a fighting chance."
The bill includes an "in-person counseling" requirement that was proposed by Governor Deval Patrick. Its purpose is to help educate any borrower who is considering a mortgage loan at a variable or adjustable rate of interest.
The new "responsible lending" language relevant to mortgage foreclosures was added to an existing Senate bill meant to establish an employer assisted housing program, allowing businesses to provide funds and incentives to help their employees obtain housing.
The Department of Housing and Community Development would provide matching grants to businesses that establish such a program, contributing $1 for every $2 expended by the business. The maximum matching contribution each business could receive would be $100,000.
Under that section of the bill, businesses would provide grants or loans to employees whose incomes do not exceed 120 percent of the area median income, with at least one-half of the funds going to employees whose incomes do not exceed 80 percent of the area median income. The funds could be used for down payments, closing costs, security deposits and first-month's rent.
The following are additions to the bill regarding consumer protection and the prevention of unfair mortgage practices:
o The bill ensures that a homeowner receives an itemized accounting of the disposition of proceeds from a foreclosure sale of their property at auction.
o It establishes responsible lending practices through added requirements of mortgage lenders and borrowers, including in-person counseling.
o The bill provides guidelines and procedures to avoid deceptive mortgage loan advertising practices.
o The bill also instructs the Division of Banks to maintain a foreclosure database to track developments and trends of mortgage foreclosure on residential property.
o It establishes a borrower's right to cure a loan default initiated by the mortgagee/servicer and thereby stop a foreclosure action from proceeding.
o The bill creates a system for the Division of Banks to rate mortgage lending companies on lending practices.
o It requires mortgage originators to be licensed.
o The bill would also make mortgage fraud a felony, punishable by incarceration in state prison for not more than 5 years, or the house of correction for not more than 2 1/2 years, or by a fine of not more than $10,000.
The bill will now go to the House of Representatives for consideration. |
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