HOUSE DOCKET, NO. 3473        FILED ON: 2/19/2021

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1144

The Commonwealth of Massachusetts

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PRESENTED BY:

David Henry Argosky LeBoeuf

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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 facilitate alternatives to foreclosure.

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PETITION OF:

HOUSE DOCKET, NO. 3473        FILED ON: 2/19/2021

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1144

The Commonwealth of Massachusetts

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In the One Hundred and Ninety-Second General Court
(2021-2022)

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An Act to facilitate alternatives to foreclosure.

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 2018 Official Edition, 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:

“Mortgagor” or “Borrower”, an individual mortgagor, their assignee, successor, or a trust or trustee who owns and resides in residential real property located in the city, and for whom such residential real property is their principal residence.

“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.

“Creditor”, a person or entity that holds, owns or controls, partially, wholly, directly or indirectly, a mortgage loan secured by residential property, including, without limitation, a mortgagee, originator, holder, investor, assignee, successor, trust, trustee, or mortgage loan servicer, including but not limited to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or any other government sponsored entity. The term “creditor” shall also include any servant, employee, subcontractor or agent of a creditor.

“Creditor’s representative”, a person with documented prior authorization from the principal a person has the authority to negotiate and approve the terms of and modify a mortgage loan.

“Massachusetts Foreclosure Mediation Program” or “the program”, the program created pursuant to subsection (b).

“Mediation program manager”, a neutral not-for-profit organization or law firm selected by the attorney general whose personnel qualify as mediators under this Act

“Mediator”, An individual, employee of the Attorney General’s Office, certified housing counselor certified through the Department of Housing and Urban Development or certified housing counselor through the Citizens’ Housing and Planning Association or personnel of the Mediation program manager (1) trained in compliance 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; (2) knowledgeable of the mortgage foreclosure laws of the Commonwealth; (3) with a working knowledge of all federal, state and regional programs available to help homeowners retain their homes;

“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 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 or the division of banks; (iv) the Federal Housing Administration; or (v) a similar federal loan modification plan.

“Mortgage loan”, a loan, both mortgage note and mortgage on residential property, to a natural person, a nominee trust or any other entity commonly recognized under Massachusetts law as a lawful Mortgagor made primarily for personal, family or household purposes.

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

“Net present value”, the present net value of a residential mortgage loan 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 with similar affordability requirements and characteristics based on federally recognized present-day inputs and including principal reduction.

“Net recovery following foreclosure”, a calculation of mortgagee’s costs until projected sale or resale to third party purchaser, including but not limited to: (i) costs from projected delinquency; (ii) interest; (iii) fees by date of foreclosure based on current actual length of foreclosure process in Massachusetts; (iv) costs associated with all legally required actions to foreclose and percentage loss from foreclosure sale; (v) costs to meet all sanitary code requirements; (vi) property maintenance costs; (vii) costs associated with eviction, if part of standard operating procedure for creditor; and (viii) other ownership costs.

“Proof of ownership”, all documents evidencing an unbroken chain of ownership of the mortgage note including, all assignments of the mortgage whether recorded or unrecorded evidencing an unbroken chain of title, the wet ink mortgage note in its then-current condition evidencing the debt unless the parties agree in writing to accept a certified copy, fully executed founding document if the mortgagee is a non-governmental entity, and authority documents.

“Residential property”, real property located in the commonwealth, on which there is a dwelling house with accommodations for 4 or fewer separate households or a residential condominium unit or a residential co-op unit and occupied, or to be occupied, in whole or in part as her or his principal 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 a mediation program manager.

(c) A mortgagee shall concurrently send to the program a copy of the notice sent to the Mortgagor of residential property under section 35A. The program shall then send to the mortgagor the notice of right to mediation and a foreclosure mediation request form. If a notice of right to cure is not required, the mortgagee shall, at least 90 days before initiating foreclosure, send a notice of intent to foreclose to the program and the mortgagor. The program shall then send the mortgagor the notice of right to mediation. The program shall also telephone mortgagors to inform them of their right to participate in mediation. The notice shall be mailed in the 5 languages most commonly spoken in the commonwealth in addition to English.

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

(d) An individual mediation session shall be conducted by a neutral third-party mediator between the Mortgagor, the Mortgagor’s representative or housing counselor and the creditor’s representative, who shall provide proof of the authority to negotiate an alternative to foreclosure, including but not limited to: (i) reinstatement of the loan, (ii) a modified mortgage loan, (iii) a reduction in principal, (iv) a reduction in interest rate, (v) an increase in the amortization period of the mortgage loan or (vi) a short sale or deed in lieu; provided, however, in exceptional circumstances, as determined by the mediator, a meeting by phone, video-conference or equivalent may be mutually agreed upon by the mortgagor, the mortgagee and the mediator, provided that the mediator certifies the mortgagor has been made aware of his or her right to an in-person mediation conference.

As early as possible, but not later than 5 days before the scheduled mediation, the creditor shall provide to the Mortgagor and the program: (i) proof of ownership, (ii) a written net present value analysis including inputs and their basis, (iii) an accounting and history of the outstanding balance on the debt, (iv) documents evidencing any loss mitigation restrictions, and (v) the creditor’s anticipated net recovery following foreclosure. When required, the creditor shall bring additional documents supporting the net present value analysis to the mediation session.

Mortgagors shall be referred to and encouraged to work with a non-profit housing counseling agency. Mortgagors shall provide to creditor and the program current income, expenses, assets and debts and proof of income and releases standardly required by the affordable home ownership program or similar federal program.

If the initial mediation session does not result in an agreement, the parties may agree to additional mediation sessions that the mediator shall document.

If mediation results in an agreement, the Mortgagor shall have not fewer than 7 days to review and sign the mediation agreement and return it to the program and the creditor. Not later than 5 days after the mediation session is complete, the mediator shall write a report setting forth the specific compliance with mediation requirements and result of the mediation and send a copy of the report to the Mortgagor and the creditor.

The mediation period shall conclude not more than 120 days after the Mortgagor elects to participate in mediation.

(e) If the Mortgagor 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 Mortgagor elects to participate in the program, a creditor shall not accelerate the note or otherwise initiate foreclosure proceedings unless the mediator has certified that the creditor participated in the 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) If it is determined, after a good faith effort made by the creditor, homeowner or Mortgagor at the mediation conference, that the parties cannot agree to a commercially reasonable alternative to avoid foreclosure, such good faith effort on behalf of the creditor, homeowner or Mortgagor shall be deemed to satisfy the requirements of this section. A certificate verifying such good faith effort pursuant to this section shall be issued to the party that made a good faith effort within 5 days by the program to the certified creditor or certified homeowner or Mortgagor authorizing the party to proceed with its rights under this chapter.

(g) All mortgage modifications shall be recorded in the appropriate registry of deeds within 30 days. In the case the mediator does not issue a good faith certificate, the creditor or mortgagee shall be prohibited from continuing with the foreclosure process. No sale pursuant to this chapter shall be effective to foreclose on any mortgage under this section, unless all notices required by section 14 specifically reference that a good faith certificate has been issued to both parties verifying that the creditor or mortgagee, its assignee or any person identified in section 14 has successfully participated in a mediation program in accordance with this section. No entry by foreclosure shall be effectual unless the memorandum or certificate recorded as required by section 2 includes, as an attachment or exhibit, a copy of a good faith certificate verifying that the creditor or mortgagee has participated in mediation with the mortgagor or homeowner as required by this section.

(h) Any costs necessary to establish and operate the 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 Mortgagor’s portion of the mediation fee shall not exceed 15 per cent of the total cost of the mediation. A Mortgagor’s inability to pay for mediation shall not be a bar to participation in the program. Any fees assessed of the creditor or mortgagee pursuant to this section shall not be charged to the mortgagor or homeowner either directly or indirectly. The mediation program manager shall have the authority to set and collect fees for mediation sessions and the administration of the same

(i) The mediation program manager shall develop guidelines and standards for mediator training for the mediation process including training on foreclosure mediation and a working knowledge of all federal and state programs available to help homeowners retain their homes, subject to approval by the attorney general.

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

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

(l) The mediation program manager shall ensure the security and confidentiality of any and all information received consistent with applicable federal, state laws and regulations. Access to personal information shall be limited to those officers and employees of the organization who require the information to properly perform services under the program. The organization or individual or its officers and employees shall not access, modify, use or disseminate any personal information for purposes unrelated to the program. Statistical information may be gathered to assess the program. Documentation and outcome reports may be available for judicial proceedings.

(m) The program shall provide annually to the secretary of housing and economic development a report and data related to: (i) the number of mortgagors who are notified of mediation; (ii) the number of homeowners or borrowers who attend mediation and who receive counseling or assistance; (iii) the number of certificates of good faith issued under the program; (iv) the results of the mediation process, including the number of loans restructured, number and total value of principal write-downs, interest rate reductions and, to the extent such information is available, the number of mortgagors or homeowners who default on mortgages within a year after successful mediation conferences; and (v) any such other information as the Legislature may determine to be necessary and or helpful in assessing the value of the program and any adjustments that may need to be made thereto.”