SENATE DOCKET, NO. 185        FILED ON: 1/14/2013

SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 492

The Commonwealth of Massachusetts

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PRESENTED BY:

Karen E. Spilka

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To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:

The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act to establish a foreclosure mediation program.

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PETITION OF:

SENATE DOCKET, NO. 185        FILED ON: 1/14/2013

SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 492

The Commonwealth of Massachusetts

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In the Year Two Thousand Thirteen

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An Act to establish a foreclosure mediation program.

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 amended by chapter 194 of the Acts of 2012, is hereby amended by inserting after section 35C the following section:-

Section 35D. (a) As used in this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:-

“Borrower”, a mortgagor of a mortgage loan.

“Creditor”, a person or entity that holds or controls, partially, wholly, indirectly, directly or in a nominee capacity, a mortgage loan securing an owner-occupied residential property, including, but not limited to, an originator, holder, investor, assignee, successor, trust, trustee, nominee holder, mortgage electronic registration system or mortgage servicer, including the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; provided, that “creditor” shall also include any servant, employee or agent of a creditor.

“Creditor’s representative”, a person who has the authority to negotiate and approve the terms of and modify a mortgage loan, under a servicing agreement.

“Modified mortgage loan”, a mortgage modified from its original terms including, but not limited to, a loan modified under 1 of the following: (i) the Home Affordable Modification Program (ii) the Federal Deposit Insurance Corporation’s Loan Modification Program, (iii) any modification program that a lender uses which is based on accepted principles and the safety and soundness of the institution and authorized by the National Credit Union Administration, the division of banks or any other instrumentality of the commonwealth, (iv) the Federal Housing Administration or (v) a similar federal loan modification plan.

“Mortgage loan”, a loan to a natural person made primarily for personal, family or household purposes secured wholly or partially by a mortgage on residential property.

“Net present value”, the present net value of a residential property based on a calculation using 1 of the following: (i) the federal home affordable modification program base net present value model, (ii) the Federal Deposit Insurance Corporation’s loan modification program, (iii) the Massachusetts Housing Finance Agency’s loan program used solely by the agency to compare the expected economic outcome of a loan with or without a modified mortgage loan or (iv) any model approved by the division of banks to consider the total present value of a series of future cash flows relative to a mortgage loan.

“Residential property”, real property located in the commonwealth, on which there is a dwelling house with accommodations for 4 or fewer separate households and occupied, or to be occupied, in whole or in part by the obligor on the mortgage debt; provided, however, that residential property shall be limited to the principal residence of a person; provided, further, that residential property shall not include an investment property or residence other than a primary residence; provided, further, that residential property shall not include residential property taken in whole or in part as collateral for a commercial loan.

(b) There shall be a Massachusetts foreclosure mediation program administered by the Massachusetts office of public collaboration at the University of Massachusetts at Boston.

(c) A creditor shall, concurrently with the notice sent to the borrower of residential property under section 35A, give notice to the borrower of the borrower’s right to participate in the Massachusetts foreclosure mediation program by attaching to the right to cure default notice (i) notice of the availability of foreclosure mediation, in such form as the office of public collaboration prescribes and (ii) a foreclosure mediation request form, in such form as the office of public collaboration prescribes. The notice shall include a declaration in the 5 most common languages other than English, appearing on the first page and stating: “This is an important notice regarding a possible foreclosure on your home. Have it translated immediately.”

A borrower may request foreclosure mediation by submitting the foreclosure mediation request form to the creditor not more than 30 days after receipt of the notice.

(d) An in-person mediation session shall be conducted by a neutral third-party mediator between the borrower, the borrower’s representative or housing counselor and the creditor’s representative, who shall have the authority to negotiate an alternative to foreclosure, including, but not limited to, (i) a modified mortgage loan, (ii) a reduction in principal, (iii) a reduction in interest rate or (iv) an increase in the amortization period of the mortgage loan; provided, however, that an alternative form of meeting may be mutually agreed upon by the mortgagor, the mortgagee and the mediator. As early as possible, but not later than 5 days before the scheduled mediation, the creditor shall provide proof of ownership, a written net present value analysis and the creditor’s anticipated net recovery at foreclosure to the borrower and the Massachusetts foreclosure mediation program. When required, the creditor shall bring additional documents supporting the net present value analysis to the mediation session. If the initial mediation does not result in an agreement, the parties may agree to a second mediation session. If mediation results in an agreement, the borrower shall have not fewer than 7 days to review and sign the mediation agreement and return it to the Massachusetts foreclosure mediation program and the creditor. Not later than 5 days after the mediation session is complete, the mediator shall write a report setting forth the result of the mediation and send a copy of the report to the borrower and the creditor. The mediation period shall conclude not more than 120 days after the borrower elects to participate in mediation. The right to foreclosure mediation under this section shall be granted once during any 3-year period, regardless of the mortgage holder.

(e) If the borrower does not elect to participate in mediation and does not pursue a modified mortgage loan under section 35B, if eligible, foreclosure may proceed under this chapter. If a borrower elects to participate in the Massachusetts foreclosure mediation program, a creditor shall not accelerate the note or otherwise initiate foreclosure proceedings unless the mediator has certified that the creditor participated in the Massachusetts foreclosure mediation program and engaged in mediation in good faith, made all reasonable efforts to find an alternative to foreclosure and any agreement is in full compliance with all state and federal guidelines.

(f) Any costs necessary to establish and operate the Massachusetts foreclosure mediation program shall be borne by the parties to the mediation under the guidelines developed under subsection (g) and by a $50 surcharge on the filing fee for foreclosure complaints filed under the Servicemembers Civil Relief Act. A borrower’s portion of the mediation fee shall not exceed 15 per cent of the total cost of the mediation. A borrower’s inability to pay for mediation shall not be a bar to participation in the Massachusetts foreclosure mediation program.

(g) The Massachusetts office of public collaboration shall develop guidelines for the mediation process, subject to approval by the attorney general.

(h) The borrower’s or creditor’s rights or defenses in the foreclosure action are not waived by participating in the foreclosure mediation program.

(i) Nothing in this section shall require a creditor to modify a mortgage or change the terms of payment of a mortgage.