HOUSE DOCKET, NO. 3276        FILED ON: 1/18/2019

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 3563

The Commonwealth of Massachusetts

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PRESENTED BY:

Peter Capano

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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 establishing foreclosure mediation programs.

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PETITION OF:

HOUSE DOCKET, NO. 3276        FILED ON: 1/18/2019

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 3563

The Commonwealth of Massachusetts

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In the One Hundred and Ninety-First General Court
(2019-2020)

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An Act establishing foreclosure mediation programs.

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

Chapter 244 of the General Laws, as appearing in the 2016 Official Edition, is hereby amended by inserting after section 35C the following section:-

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

“Certificate of mediation completion”, a certificate issued by the mediation program manager upon good faith effort in mediation if a mutually-agreeable commercially reasonable alternative to foreclosure cannot be reached.

“Commercially reasonable alternative”, an alternative based on a comparison of the net present value of receiving payments pursuant to a modified mortgage loan, or the likely financial recovery from other foreclosure alternatives, to the anticipated net recovery following foreclosure incorporating an assessment of the borrower’s current circumstances, including, without limitation, the borrower’s current income, debts, and obligations.

“Entity”, a business organization, or any other kind of organization, including without limitation, a corporation, partnership, trust, limited liability corporation, limited liability partnership, joint venture, sole proprietorship, or any other category of organization, and any employee, agent, servant or other representative of such entity.

“Eviction”, any action, without limitation, by a foreclosure sale purchaser of residential property, which is intended to compel an occupant to vacate or to be constructively evicted from such residential property.

“Fair market rent”, an amount equal to that established by the United States Department of Housing and Urban Development pursuant to 42 U.S.C. § 1437f(c)(1), as it exists or which may be amended, for a unit of comparable size in the area in which the residential housing is located.

“Fire chief”, the chief of the city or town fire department or the fire chief’s designee.

“Foreclosed property”, a property on which a foreclosure deed has been recorded until such property has been purchased from a mortgagee or its mortgage servicer.

“Foreclosing property”, a property on which the mortgagee or its agent has filed a complaint with the land court or superior court pursuant to the Massachusetts Soldiers’ and Sailors’ Civil Relief Act (St. 1943, c. 57 (1943), as amended through St. 1988, c. 142) until such time as a foreclosure deed has been recorded in the registry of deeds in which the property is located.

“Foreclosure”, termination of a mortgagor's equity of redemption in property, by action, bill in equity, entry or power of sale.

“Foreclosure sale”, the foreclosure of a mortgage of a residential property pursuant to a power of sale in a mortgage and as described in this chapter.

“Foreclosure sale purchaser”, a foreclosing owner or a person or entity who purchases residential property from a foreclosing owner and not intending to reside or have a family member reside in such residential property as the primary residence.

“Foreclosing owner”, an entity that either: held or owned a mortgage loan in the property at any point prior to the foreclosure of the property or is the subsidiary, parent, or agent of, or otherwise is related to any entity which held or owned the mortgage in the property at any time prior to the foreclosure of the property; and holds title to this property that it acquired at a foreclosure sale or by any other method of foreclosure and holds a security interest in 3 or more mortgage loans. For purpose of this definition, the phrase 'holds title' shall include an entity which holds title in any capacity, directly or indirectly, without limitation, whether in its own name, as trustee or as beneficiary.

“Good faith effort”, each party to the mediation is present, has decision-making authority to negotiate and agree upon a commercially reasonable alternative to foreclosure, provides required documentation, and actively participates in the mediation process.

“Mediation conference”, the formal discussion and negotiation undertaken by the parties in a good faith effort to negotiate and agree upon a commercially reasonable alternative to foreclosure, and held in the municipality or at a location mutually convenient to the parties. Both the mortgagor and mortgagee or its mortgage servicer must be physically present for the mediation conference unless telephone participation is mutually agreed upon and the mediation program manager certifies that the mortgagor has been made aware of the mortgagor’s right to an in-person mediation conference. The mortgagor shall be allowed to have a lawyer, an interpreter, and up to 3 additional persons of the mortgagor’s choosing present at the mediation conference. The mortgagor shall be notified of this right at the time the mediation conference is scheduled by the mediation program manager.

“Mediation program”, the foreclosure mediation program established by a municipality pursuant to this section.

“Mediation program manager”, a neutral not-for-profit organization, attorney, or qualified third party experienced in the mediation of the foreclosure process, familiar with all programs available to help homeowners avoid foreclosure, knowledgeable of the mortgage foreclosure laws of the commonwealth, and having no ownership interest or management interest in residential housing in the municipality other than their primary residence. The mediation program manager shall sign a user agreement with the municipality authorizing the receipt and use of personal and financial information for the purposes of the mediation program only. the mediation program manager shall ensure the security and confidentiality of any and all information received or exchanged under the program consistent with applicable federal, state, and municipal laws. Access to such program information shall be limited to those officers and employees of the organization who require the information to properly perform services under the mediation program, and that the organization and its officers and employees may not access, modify, use or disseminate such information for inconsistent or unauthorized purposes.

“Mediator”, an individual: (i) whose training complies with the qualification standards for neutrals specified in the guidelines for training mediators adopted by the Supreme Judicial Court of Massachusetts pursuant to Rule 8 of the Uniform Rules for Dispute Resolution; (ii) who has completed training on foreclosure mediation; and (iii) who has a working knowledge of all federal, state, and municipal programs available to help homeowners retain their homes

“Mortgage documents”, shall include the promissory note, including any allonges, additional pages, and other evidence of all endorsements; mortgage; loan agreement; assignments (recorded and unrecorded); powers of attorney granted by the mortgagee or homeowner to entities acting on its behalf; and any other documents evidencing or securing a mortgage loan.

“Mortgage loan”, a loan, in the form of a promissory note, to 1 or more natural persons, or to a nominee trust or residential trust on behalf of 1 or more natural persons, made for non-commercial purposes and secured wholly or partially by a mortgage on residential property in the municipality, which is the principal residence of 1 or more borrowers of the loan or their family members, or in the case of a nominee trust, 1 or more of the beneficiaries of the trust.

“Mortgage servicer”, an entity that administers or services or at any point administered or serviced the Mortgage Loan; provided, however, that such administration or servicing shall include, but not be limited to, calculating principal and interest due on the mortgage loan, assessing fees and costs onto a mortgagor’s loan account, collecting regular payments from the mortgagor, acting as escrow agent for the owner of the mortgage loan or foreclosing on a mortgage loan in the event of a default.

“Mortgagee”, an entity that is the present holder of the mortgage Loan.

“Mortgagor” or “Homeowner”, a natural person or residential trust who received a mortgage loan secured by a residential property located in the municipality, and for whom such residential property is the person’s principal residence.

“Net recovery following foreclosure”, a monetary value that includes, but is not limited to, projected costs from: (i) delinquency, interest, fees incurred by the date of foreclosure sale based on average length of Massachusetts foreclosure process; (ii) costs of all legally required actions to foreclose and percentage loss from foreclosure sale; (iii) meeting all sanitary code requirements; (iv) property maintenance; (v) eviction; and (vi) other ownership costs until projected sale or re-sale to third party purchaser.

"Occupant", any person or group of persons, including the mortgagor, who occupied residential property prior to a foreclosure sale.

“Parties”, the mortgagor and the mortgagee or its mortgage servicer.

“Person”, any individual, corporation, partnership, limited liability partnership, limited liability company, trust or other entity.

“Property”, any real property, residential or commercial, or portion thereof, located in the municipality, including building or structures situated on the property.

“Residential property", real property that is either a single family dwelling or a structure containing not more than 4 residential units, and shall also include a residential condominium unit or a residential co-op unit.

“Responsible party”, (i) every person, entity, servicer, property manager, or real estate broker, who or which, alone or severally with others: (ii) has care, charge or control of Property, including but not limited to any dwelling, dwelling unit, mobile dwelling unit or parcel of land, vacant or otherwise, including a mobile home park, or any administrator, executor, trustee or guardian of the estate of the holder of legal title; (iii) is a mortgagee of any such property who has filed a complaint with the Land Court or Superior Court pursuant to the Massachusetts Soldiers’ and Sailors’ Civil Relief Act (St. 1943, c. 57 (1943), as amended through St. 1988, c. 142), including its successors or assigns; (iv) is an agent, trustee or other person appointed by the courts and vested with possession or control of any such property; (v) is a mortgagee who has made entry on any such property, pursuant to the terms of the mortgage, in order to make repairs upon mortgagor's failure to do so.

"Vacant property", a structure or building not legally occupied.

"Unit" or "residential unit", the room or group of rooms within a property, located in the municipality, which is used or intended for use as a residence by 1 household.

(b) A mortgagee who has sent the notice of the right to cure pursuant to section 35A pertaining to residential property in a city or town accepting the provisions of this section pursuant to section 4 of chapter 4, shall engage in a mediation program as set out in this section.

(c) A municipality may establish a foreclosure mediation program by ordinance or by-law and enter into any agreements necessary to implement the program in accordance with this section.

(d) The foreclosure mediation program shall provide mediation prior to all foreclosures of residential property in which the mortgagor or mortgagor’s family resides. The program shall address all issues reasonably related to foreclosures on residential property, including but not limited to all commercially reasonable alternatives to foreclosure. The parties shall make a good faith effort in mediation. Mediations conducted pursuant to the program shall use the calculations, assumptions and forms that are established by or are made available through:

(i)the Federal Deposit Insurance Corporation and published in the Federal Deposit Insurance Corporations Loan Modification Program Guide available on the Federal Deposit Insurance Corporation's publicly accessible website;

(ii)the Home Affordable Modification Program;

(iii)any modification program that a mortgagee may use which is based on accepted principles and the safety and soundness of the institution and recognized by the National Credit Union Administration, the division of banks;

(iv)the Federal Housing Authority; or

(v)similar federal loan modification programs.

(e) A municipality shall provide for a means of evaluating and selecting qualified mediation program managers. The municipality shall also provide for a means of assessing and evaluating annually the municipality’s mediation program, including reports and data related to:

(i)the number of mortgagors who are notified of mediation;

(ii)the number of mortgagors who attend mediation and who receive counseling or assistance;

(iii)the number of certificates of mediation completion issued under the program; and

(iv)the results of the mediation program, including the number of loans restructured, number of principal write-downs, total value of principal write-downs, number of interest rate reductions and, to the extent such information is available, the number of mortgagors who default on mortgages within a year after restructuring, and the number of short sales and any other alternatives to foreclosure.

(f) The municipality may terminate a mediation program manager's participation in the mediation program for good cause. In such case, the mediation program manager shall deliver to the municipality all records and information in its possession for appropriate preservation and storage.

(g) Except for financial information otherwise permitted by law to be disclosed, any financial statements or information provided to the municipality or its approved independent counseling agencies or provided to the mortgagee or its mortgage servicer or mortgagor during the course of mediation in accordance with this article is confidential and shall not be available for public inspection. Any financial statement or information required to reasonably facilitate the mediation shall be made available as necessary to the mediator and to the attorneys or representatives, if any, of the parties to the mediation. Any financial statement or information designated as confidential under this section shall be kept separate and apart from other papers and matters not the subject of the mediation. No mortgagee or its mortgage servicer shall be required to disclose information in violation of chapter 93H, and 201 CMR 17. No information provided by the mortgagor in the course of the mediation may be used by the mortgagee or its mortgage servicer or its agents in a subsequent legal proceeding.

(h) For the purpose of the mediation program established by the municipality, a mortgagee shall send a copy of all notices given to a mortgagor pursuant to subsections (g) and (h) of section 35A, which relate to residential property in the municipality, to the clerk of such municipality, within 10 days of giving such notices to a mortgagor. The receipt by the municipality of said notice, or of a request for mediation from the mortgagor made within 15 days of receipt of a mortgagor's notice pursuant to subsections (g) and (h) of section 35A, shall constitute the beginning of the mediation process as set forth in this section. At that time the municipality shall notify a mortgagee and a mortgagor of their rights and responsibilities under this section regarding mediation.

Mediation shall commence within 45 days of the mortgagor receiving notice of the mortgagor’s right to cure as provided in subsections (g) and (h) of section 35A. The municipality shall refer the matter for mediation to an approved mediation program manager, which shall have the responsibility of assigning a mediator and scheduling the parties to immediately commence mediation pursuant to this section. The mediation shall proceed with the parties' good faith effort to negotiate and agree upon a commercially reasonable alternative to foreclosure. The mediation shall continue without delay until completion, but shall in no way constitute an extension of the foreclosure process, nor an extension of the right to cure period. Notwithstanding the limitation in the previous sentence, the mediation may be extended by mutual agreement.

(i) The municipality’s mediation program established by this section shall include, but is not limited to, the following steps:

(1)The parties shall participate in a mandatory mediation conference at a location mutually convenient to the parties. All parties or their respective representatives present at the mediation conference must have authority to enter into any agreements renegotiating the mortgage that is the subject of the foreclosure, or to otherwise resolve the pending foreclosure.

(2)The mediation conference shall be scheduled at a time and place to be determined by the mediation program manager, but not later than 45 days following the mortgagor's receipt of the mortgagor’s notice of right to cure under subsections (g) and (h) of section 35A. The parties shall be sent notice under the mediation program by certified and first class mail at the parties’ last known address(es), if any, or if none, then to the address to which the tax collector last sent the tax bill for the property. The notice shall contain the following declaration on the first page in English, Spanish, Cambodian, Russian, Greek, Vietnamese, French, Haitian Creole, and in any other language which the mortgagee or its mortgage servicer knows is the mortgagor’s primary language, and any other language deemed appropriate by the mediation program manager: “(insert city or town name) has a mediation program that may help you negotiate more affordable mortgage payments and avoid foreclosure however there is no express or implied guarantee foreclosure will be avoided. Have this notice translated at once and contact us for help.”

(3)If a mortgagor does not respond to the initial notice, the mediation program manager shall, to the extent possible, utilize additional outreach methods to supplement mailed notices.

(4)Prior to the scheduled mediation conference, the mortgagor shall be assigned a municipally approved loan counselor. If the mortgagor is already working with a municipally approved loan counselor, no assignment is necessary. However, such loan counselor must agree to work with the mortgagor during the mediation process in accordance with this section or any by-law or ordinance established under this section.

(5)The mortgagor shall be encouraged to attend a group orientation, if available, prior to the mediation conference. Such orientations shall be scheduled as necessary at times convenient to mortgagors. Interpretation shall be offered to mortgagors ahead of time, and provided at the orientation if deemed necessary by the mortgagor. The following shall be invited to participate in the design and implementation of the orientation: mediation program manager; 1 or more local legal services organizations; and 1 or more community organizations operating in the municipality that provide advocacy and peer-to- peer support for distressed homeowners.

(6)The orientation shall familiarize mortgagors with the full range of options that are available as commercially reasonable alternatives to foreclosure, with the foreclosure process, and with obligations of mortgagee or its mortgage servicers under the mediation program.

(7)The mortgagor and mortgagee or its mortgage servicer shall cooperate in all respects with the mediation program manager. The mortgagor shall complete any and all loan resolution proposals and applications as appropriate and provide evidence of all current income. The mortgagee or its mortgage servicer’s representative shall bring and make available the mortgage documents, as well as a detailed accounting of the outstanding balance, costs and fees.

(8)If, after 2 attempts by the mediation program manager to contact the mortgagor by mail, the mortgagor fails to respond to the mediation program manager's request to appear for the mediation conference, the requirements of this section shall be deemed to be satisfied upon verification by the municipally-approved mediation program manager that the required notice was sent. If these conditions are met, a certificate of mediation completion shall be issued immediately by the mediation program manager certifying that the mortgagee or its mortgage servicer has satisfied the mediation requirements of this section.

(9)If it is determined, after a good faith effort, that the parties cannot come to a mutually agreeable, commercially reasonable alternative to foreclosure, such good faith effort on behalf of the mortgagee or its mortgage servicer shall be deemed to satisfy the requirements of this ordinance. A certificate of mediation completion pursuant to this article shall be issued immediately and without delay by the mediation program manager authorizing the mortgagee or its mortgage servicer to proceed with a foreclosure in accordance with the terms of the mortgage and the relevant statutes.

(j) The municipality may enact and from time to time revise by by-law or ordinance a reasonable and appropriate mediation registration fee to be charged to the mortgagee or its mortgage servicer for the services attendant to administering the mediation program established under this section. Any fees assessed pursuant to such by-law or ordinance shall not be charged to the mortgagor. The mediation fees shall be paid to the municipality who will then use these fees to pay for the mediation program directly. It is intended there will be no cost of this mediation program to be borne by a municipality adopting this section.

(k) After a foreclosure by sale of a residential property in the municipality, and either prior to or simultaneous with the recording requirements of section 15, a seller shall file the certificate of mediation completion with the registry of deeds in which the property is located. The municipality shall periodically request from the register of deeds information regarding attempts to record pursuant to said section 15 without complying with the recording requirements of this section.

(l) No foreclosure by entry in a municipality accepting this section shall be effectual unless and until the memorandum or certificate recorded as required by section 2 includes as an attachment or exhibit a copy of the certificate of mediation completion. The municipality shall periodically request from the register of deeds information regarding attempts to record pursuant said section 2 without complying with the recording requirements of this section.

(m) A mortgagee or its mortgage servicer’s failure to comply with this section shall result in a fine of $300 payable to the municipality, for each instance of a violation, to be charged to the mortgagee or its mortgage servicer in accordance with section 21 of chapter 40. Every calendar day of noncompliance with section shall constitute a separate violation subject to the penalties described under this subsection, up until the end of the right-to-cure period given under a lawful notice pursuant to subsections (g) and (h) of section 35A. The fine or fines under this subsection shall be recovered by indictment or complaint pursuant to said section 21 of said chapter 40. No fines pursuant to this subsection shall be charged to the mortgagor either directly or indirectly.