SECTION 1. The General Court hereby declares and finds that because changes in financial industry practice as to predatory lending have significantly decapitalized the commonwealth, reduced the tax base of Massachusetts communities, detrimentally affected Massachusetts residents as consumers of predatory mortgage loan products, and made the chain of title of many mortgages of real property untraceable, it is in the interest of the commonwealth to establish a publicly owned and administered fund authorized to receive assets and monies, including residential mortgages and mortgage payments where the mortgagee and/or note-owner cannot be ascertained, and to discharge related functions to help rebuild our economy and municipal tax base, especially in the neighborhoods most affected by predatory lending and concomitant foreclosure.

SECTION 2. For the purposes of this Act, the following terms shall have the following meanings:

“all loan documents”, document files and electronic records including the loan collateral file, servicer file; onboarding or intake sheet(s) or screenshot(s); transaction and payment history; the original wet ink note with all allonges attached in their present condition, or a court determination that the note has been lost; all recorded and off-record assignments or certified copies thereof; the fully executed founding documents of any securitized trust, limited liability corporation or other entity in the chain of title; and any documents associated with the loan from its document custodian or claimed holder of the mortgage or associated claimed note-owner.”

“Mortgagee” or “mortgage holder”, a person who has invested funds or other consideration for the grant of a mortgage, and who is named as such in the mortgage or any assignment thereof.

“Mortgagee of Record”, a “mortgagee” or “mortgage holder” so identified in an instrument that was subsequently recorded. 

“Mortgage Note”, a promissory note, bearing the original signature(s) of the mortgagor(s), promising to pay the lender, or any successor who is entitled to enforce the mortgage note, and specifying the requirements for the repayment of the debt including the principal amount, interest and charges.

“Note Owner”, the lender or a transferee of the mortgage note, who is entitled to receive payments under and to enforce the note.

SECTION 3. Chapter 40H of the General Laws, as appearing in the 2014 Official Edition, is hereby amended by inserting after section 4 the following section:

Section 4A. (a) CEDAC shall establish a Resolution Trust Fund, hereinafter “the Fund”, which is hereby authorized to receive transfers of mortgage loans as to which the current mortgagee and/or note-owner cannot be identified; monies including those appropriated from the general fund or paid into the Fund by bequest or otherwise; targeted funding streams through the Massachusetts state government; and monies that a court or an agency in receipt of settlement funds designates for payment into the Fund. The Fund will be established in accordance with the requirements defined in subsection (a) of section 2A.

(b) The Fund may accept any mortgage loan that through legal procedure, including administrative action such as a qualified written request, documents produced in a legally required mediation or negotiation, or otherwise as evidenced as not being owned by the mortgagee of record in the appropriate registry of deeds or as to which the claimed note-owner has not produced required original source documents demonstrating present legal note owner status

(c) The fund will receive any mortgage loan transferred to the Commonwealth by operation of law or in accordance with provisions of this act.

(d) A court or other entity transferring such a mortgage to the Fund shall, if it has jurisdiction to do so, modify the mortgage to the extent necessary to obtain compliance with traditional prime lending characteristics including, but not limited to, an original principal of not more than 80 percent of the value of the home on date of origination, prime lending rates, fixed payment schedules, standard underwriting criteria, no prepayment penalties, and no balloon payments.

(e) If any payments transferred to the Fund are for a mortgage which is or might be predatory and has not been modified accordingly before transfer, the Fund shall immediately request a determination of traditional prime lending characteristics for that mortgage from the division of banks or another appropriate state agency, and modify mortgage characteristics according to subsection (d).

(f) To the extent possible, any mortgage transferred pursuant to this Act shall be accompanied by all loan documents.

(g) When a mortgage loan is transferred to the Fund, within twenty (20) days the Fund shall record in the appropriate registry of deeds, at its own cost, a certified copy of all document(s) evidencing the transfer.

(h) Within thirty (30) days of the transfer of a mortgage, the Fund shall notify each mortgagor of the periodic payment to be made to the Fund, with any modified mortgage loan characteristics, including present principal, interest rate, monthly payment, amortization schedule, escrowing of taxes and insurance, payment requirements and authorized payee contact information.

(i)  The Fund shall establish an escrow account and pay applicable real estate taxes and other costs out of mortgage payments transferred to it and shall otherwise service the loan.

(j)  The Fund may retain up to fifteen (15) percent of all mortgage payments transferred to it and expend such amounts to defray administrative overhead.  Any excess over the amounts required to administer the Fund for a given fiscal year shall be invested prudently, with the income thereof being paid into the Fund.

(k) In case of the dissolution of the Fund, any balance of such administrative overhead remaining shall inure to the General Fund.

(l) If a homeowner whose mortgage has been transferred to the Fund becomes delinquent, the Fund shall make every effort, including pre-foreclosure mediation if applicable, to assist the family to stay in its home. If the homeowner nonetheless defaults, and cure is not feasible, the Fund may accelerate the maturity of the remaining principal balance and foreclose by court action in the name of the commonwealth pursuant to section 1 of chapter 244 of the General Laws. 

(m)  Any sale of a property after such a foreclosure’ shall convey title in fee simple from the commonwealth to the purchaser. The proceeds of any such sale shall, after subtracting any legally required distribution of proceeds and costs, including costs of recordation in the appropriate registry of deeds, be credited to the Fund.

(n) When a mortgagor completes payments on a mortgage transferred to the Fund, the Fund   shall provide a discharge of the mortgage, and record this at its expense within thirty (30) days of payoff in the appropriate registry of deeds.

(o) CEDAC shall appoint a director to administer the Fund through CEDAC and under criteria that it shall establish promptly by regulation pursuant to this Act

(p) CEDAC shall ensure that the Fund is invested prudently.

(q) At the close of each fiscal year, the Fund shall determine the number of “Eaton” or section 35C of chapter 244 affidavits filed with each registry of deeds in the previous five calendar years.

(r) Monies “… shall be allocated to the general fund for the 3 years after the end of the Governor’s Covid-19 emergency declaration(s).  Monies, beyond administrative expenses, that the Fund receives by appropriation or otherwise that are not attributable to a given county or former county (herein, “county”), and interest on any monies invested on the Fund’s behalf, shall be allocated (herein, “allocated monies”) among the counties at the close of each fiscal year according to the proportion of Eaton affidavits filed with the appropriate registry of deeds in the previous five calendar years.

(s) When payments to the Fund from a given county plus any allocated monies equal at least $300,000, the CEDAC, in consultation with community agencies in the county, shall hold a hearing within that county for public input into the distribution within that county of the funds and the purposes, including affordable housing, for which CEDAC will expend them. Preference shall be given to areas or neighborhoods with the highest proportions of Eaton affidavits filed in the appropriate registry of deeds during the previous five years. CEDAC shall publicize each such hearing widely through community agencies and relevant members of the general court as well as by means of the media in the county in which the hearing is to be held.

(t) CEDAC shall by regulation establish a point system for potential projects, based upon public input; announce a request for proposals; review and rank such proposals; award contracts accordingly; and require an annual accounting of the funds distributed for each such project with a specification of the results obtained.

(u) Once the revenue to the Fund from a city or a cluster of up to 5 towns has reached an income threshold of $100,000 in a year, a local hearing will be held upon request and funds distributed similarly to subsection (c) and (d). The Fund will be established in accordance with the requirements defined in subsection (a) of section 2A.

(v) The director of the Fund shall file an annual report on December 15 with the speaker of the house of representatives, the president of the senate, and the chairs of the house and senate joint committees on ways and means, housing, community development and small business, and insurance and financial services, providing an accounting of the Fund’s monies expended, including their regional distribution, the usage of those monies, a description of the respective projects’ funding, and their impact on affordable housing and community development.