SENATE DOCKET, NO. 543        FILED ON: 1/13/2009

SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 471

The Commonwealth of Massachusetts

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In the Year Two Thousand Nine

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An Act relative to preserving homeownership..

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

SECTION 1.  Chapter 244 of the General Laws, as appearing in the 2006 Official Edition, is hereby amended by inserting, after section 35A, the following section:—

Section 35B.  Partial Payment

(a) For purposes of this section, the following words shall, unless the context otherwise requires, have the following meanings:-

“Borrower”, the owner of a one-to-four family residential real property located in the state that is occupied in whole or in part by the owner or of a condominium unit created pursuant to chapter 183A of the general laws that is occupied in whole or in part by the owner, who is the obligor on the mortgage debt encumbering such real property or condominium unit.

“Mortgagee”, a creditor that makes a loan secured by residential real property or a condominium created pursuant to chapter 183A of the general laws, or any successor in interest and/or assignee of the mortagee’s rights, interests or obligations under the mortgage agreement. 

“Mortgage Servicer”, an entity which administers the mortgage loan, including, but not limited to, calculating principal and interest, collecting payments from the mortgagor, acting as an escrow agent, and foreclosing in the event of a default by the borrower.

“Partial Payment”, payment of at least 60% of the total monthly mortgage payment.

“Total Monthly Mortgage Payment”, principal, interest, and any taxes and insurance paid by the mortgagee or mortgage servicer on behalf of the borrower.

(b) A partial payment by a borrower shall be accepted by a mortgagee or mortgage servicer and applied to mortgage debt, provided that the debt arises from a mortgage loan with high points, fees or interest in violation of chapter 183C or a mortgage loan having the following characteristics: (i) adjustable rate loans with an introductory period of three years or less; (ii) a debt-to income ratio in excess of 50% of recurring debt under the fully indexed rate; (iii) the loan was approved on a stated income basis; (iv) interest only loans or (v) the loan-to-value ratio is 100% or the loan carries pre-payment penalties of greater than three months interest.

(c) The partial payment shall be applied in the following priority order: (i) interest, (ii) principal, and (iii) any taxes and insurance that the mortgagee or mortgage servicer is obligated to pay on the mortgage loan on behalf of the borrower.  A regularly scheduled mortgage payment subsequent to a partial payment shall be applied as if the partial payment was a full payment. 

(d)  No mortgagee or mortgage servicer shall be required to accept a partial payment in consecutive months or more than two partial payments in a twelve month period.  A partial payment shall not constitute a default of the mortgage loan if made in accordance with this section, provided that the difference between the total monthly mortgage payment and the partial payment is remitted within ninety (90) days of the date that the total monthly mortgage payment was due and the mortgagee has paid the amount of monthly mortgage payment owed by that date in full by said date. 

(e) Upon receipt of a partial payment, the mortgagee or mortgage servicer shall issue to the borrower a statement reflecting the deficiency payment due and specifying that the next regularly scheduled payment will not be reduced by the amount of any deficiency payments.  A borrower who has made a partial payment under this section shall clearly identify the funds being remitted to complete the mortgage payment on which a partial payment was previously made. 

(f) Late fees shall not be assessed in connection with a partial payment or deficiency payment made in accordance with this section.  Nothing in this section shall preclude or limit the right to initiate a foreclosure proceeding pursuant to chapter 244.              

(g) The attorney general shall enforce this section and may obtain injunctive or declaratory relief for this purpose.