Amendment #253 to H4707
Consumer Protection in Security Agreements
Mr. Cahill of Lynn moves to amend the bill by adding at the end the following new section:-
SECTION X. Section 35C of chapter 244 of the General Laws, as so appearing in the 2022 Official Edition, is hereby amended by adding the following subsection:-
(i)For purposes of this subsection (i), the following words shall, unless the context clearly requires otherwise, have the following meanings:
“Entity”, an entity with a tax-exempt filing status under section 501(c)(3) of the Internal Revenue Code, or an entity controlled by an entity with such tax-exempt filing status; and
“Shared appreciation mortgage”, a mortgage or security instrument that is a second lien on the residential property for the percentage of shared appreciation required to be paid under the accompanying shared appreciation note and secured by such shared appreciation mortgage; and
“Shared appreciation”, has such meaning as is defined in the shared appreciation mortgage and/or shared appreciation note.
In all circumstances in which an entity obtains from a person acquiring or re-acquiring a residential property a shared appreciation mortgage encumbering such residential property that secures the contingent right of the entity to receive a percentage share of the appreciation in value of such residential property upon the sale, conveyance, assignment, or other transfer thereof, upon refinancing of the new first priority mortgage loan encumbering such residential property, or other payoff or satisfaction of such new first priority mortgage loan, or upon the occurrence of other events specified in such shared appreciation mortgage or such shared appreciation note, including reaching a defined maturity date, said entity and the maker, lender, grantor or holder of the new first priority mortgage loan shall not be liable for monetary relief, injunctive relief, or other equitable relief at common law or by statute, including chapter 93A, chapter 140D, chapter 183C, and/or section 49 of chapter 271, of the General Laws, for the use of or the terms of said shared appreciation mortgage or shared appreciation note, so long as such person receives full disclosure in writing as required below, in advance of the closing of such person’s acquisition or re-acquisition of such residential property, that such person will be required to give a shared appreciation mortgage and shared appreciation note, to such entity at the closing when such person also enters into a new first priority mortgage loan. A shared appreciation mortgage and note offered under this subsection shall be permitted only if a person has received notice or is otherwise shown to be 90 days or more delinquent on their prior mortgage loan. Under this subsection, if there is no reduction of the prior delinquent mortgage loan principal the person owes or owed when the person acquires or re-acquires such residential property and enters into a new first priority mortgage loan, then no shared appreciation mortgage can be offered.
Before any financial commitment or closing with a person to whom an entity is considering offering a shared appreciation mortgage and note, the entity shall provide the person with a written notice that discloses to the person substantially the following information. No other notice of the shared appreciation mortgage and note or the terms thereof is required by any other party.
Notice of Shared Appreciation Mortgage Agreement
In connection with your acquisition or re-acquisition of your property at _______________ you are being asked to agree to enter into a shared appreciation mortgage and shared appreciation note. Please be advised that under such shared appreciation mortgage and note:
You will not be required to make any payment on the shared appreciation mortgage and/or shared appreciation note during the mortgage term.
You will be required to pay the shared appreciation mortgage and note upon refinancing of your new first priority mortgage loan or sale of the home.
Your percentage of shared appreciation will be based on the amount that your prior mortgage debt has been reduced.
The written notice may also include the following information:
Since this shared appreciation mortgage agreement will have consequences for your future financial planning, you are encouraged to discuss this agreement with family, community service providers, housing counselors or others at any time during this mortgage process. If you fail or refuse to seek housing counseling, the entity may choose not to proceed. A list of housing counselors certified by the U.S. Department of Housing and Urban Development is enclosed with this notice or has otherwise been provided.
In order to proceed with this transaction, you must sign, date and return this notice to us promptly, but no sooner than 7 days after your receipt of this notice.
By signing this notice, you are not bound to proceed to enter into a shared appreciation mortgage and note. The entity has no obligation to proceed to assist you with acquiring or reacquiring a residential property or otherwise proceed to negotiate a shared appreciation mortgage and note. No shared appreciation mortgage and note shall be binding on you or the entity until a final shared appreciation mortgage and note are signed and dated by both you and the entity.
Your shared appreciation mortgage and note shall become due and payable upon the sale, conveyance, assignment, or other transfer of such residential property, upon refinancing of the new first priority mortgage loan encumbering such residential property, or other payoff or satisfaction of such new first priority mortgage loan, or upon the occurrence of other events specified in such shared appreciation mortgage or such shared appreciation note, including reaching a defined maturity date.
The Attorney General may promulgate rules and regulations interpreting this subsection.