Section 35B: Requirement of reasonable steps and good faith effort to avoid foreclosure; criteria; notice of right to pursue modified mortgage; recording of affidavit of compliance
Section 35B. (a) As used in this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:—
''Affordable monthly payment'', monthly payments on a mortgage loan, which, taking into account the borrower's current circumstances, including verifiable income, debts, assets and obligations enable a borrower to make the payments.
''Borrower'', a mortgagor of a mortgage loan.
''Certain mortgage loan'', a loan to a natural person made primarily for personal, family or household purposes secured wholly or partially by a mortgage on an owner-occupied residential property with 1 or more of the following loan features: (i) an introductory interest rate granted for a period of 3 years or less and such introductory rate is at least 2 per cent lower than the fully indexed rate; (ii) interest-only payments for any period of time, except in the case where the mortgage loan is an open-end home equity line of credit or is a construction loan; (iii) a payment option feature, where any 1 of the payment options is less than principal and interest fully amortized over the life of the loan; (iv) the loan did not require full documentation of income or assets; (v) prepayment penalties that exceed section 56 of chapter 183 or applicable federal law; (vi) the loan was underwritten with a loan-to-value ratio at or above 90 per cent and the ratio of the borrower's debt, including all housing-related and recurring monthly debt, to the borrower's income exceeded 38 per cent; or (vii) the loan was underwritten as a component of a loan transaction, in which the combined loan-to-value ratio exceeded 95 per cent; provided, however, that a loan shall be a certain mortgage loan if, after the performance of reasonable due diligence, a creditor is unable to determine whether the loan has 1 or more of the loan features in clauses (i) to (vii), inclusive; and provided, further, that loans financed by the Massachusetts Housing Finance Agency, established in chapter 708 of the acts of 1966 and loans originated through programs administered by the Massachusetts Housing Partnership Fund board established in section 35 of chapter 405 of the acts of 1985 shall not be certain mortgage loans.
''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; and provided, further, that the bodies politic and corporate and public instrumentalities of the commonwealth established in chapter 708 of the acts of 1966 and in section 35 of chapter 405 of the acts of 1985 shall not be a creditor.
''Creditor's representative'', a person who has the authority to negotiate and approve the terms of and modify a mortgage loan, or a person who, under a servicing agreement, has the authority to negotiate and approve the terms of and modify a mortgage loan.
''Modified mortgage loan'', a mortgage loan 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; and provided, further, that residential property shall not include a property subject to condemnation or receivership.
(b) A creditor shall not cause publication of notice of a foreclosure sale, as required by section 14, upon certain mortgage loans unless it has first taken reasonable steps and made a good faith effort to avoid foreclosure. A creditor shall have taken reasonable steps and made a good faith effort to avoid foreclosure if the creditor has considered: (i) an assessment of the borrower's ability to make an affordable monthly payment; (ii) the net present value of receiving payments under a modified mortgage loan as compared to the anticipated net recovery following foreclosure; and (iii) the interests of the creditor, including, but not limited to, investors.
(1) Except as otherwise specified in a contract, a servicer of pooled residential mortgages may determine whether the net present value of the payments on the modified mortgage loan is likely to be greater than the anticipated net recovery that would result from foreclosure to all investors and holders of beneficial interests in such investment, but not to any individual or groups of investors or beneficial interest holders. The servicer shall act in the best interests of all such investors or holders of beneficial interests if the servicer agrees to or implements a modified mortgage loan or takes reasonable loss mitigation actions that comply with this section. Any modified mortgage loan offered to the borrower shall comply with current federal and state law, including, but not limited to, all rules and regulations pertaining to mortgage loans and the borrower shall be able to reasonably afford to repay the modified mortgage loan according to its scheduled payments. Notwithstanding section 63A of chapter 183, any modified mortgage loan may be made without the consent of the holders of junior encumbrances and without loss of priority for the full amount of the loan thereby modified and shall not be construed so as to grant to any such holder of a junior encumbrance rights which, except for said revision, the holder would not otherwise have.
(2) A creditor shall be presumed to have acted in good faith and to have complied with this subsection, if, prior to causing publication of notice of a foreclosure sale, as required by section 14, the creditor:
(i) determines a borrower's current ability to make an affordable monthly payment;
(ii) identifies a modified mortgage loan that achieves the borrower's affordable monthly payment, which may include 1 or more of the following: reduction in principal, reduction in interest rate or an increase in amortization period; provided, however, that the amortization period shall not be more than a 15–year increase; provided, further, that no modified mortgage loan shall have an amortization period that exceeds 45 years;
(iii) conducts a compliant analysis comparing the net present value of the modified mortgage loan and the creditor's anticipated net recovery that would result from foreclosure; provided, that the analysis shall be compliant if the analysis is in accordance with the formula presented in at least 1 of the following: (A) the Home Affordable Modification Program; (B) the Federal Deposit Insurance Corporation's Loan Modification Program; (C) 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; (D) the Federal Housing Administration; or (E) a similar federal loan modification plan; and
(iv) either (A) in all circumstances where the net present value of the modified mortgage loan exceeds the anticipated net recovery at foreclosure, agrees to modify the loan in a manner that provides for the affordable monthly payment; or (B) in circumstances where the net present value of the modified mortgage loan is less than the anticipated net recovery of the foreclosure, or does not meet the borrower's affordable monthly payment, notifies the borrower that no modified mortgage loan will be offered and provides a written summary of the creditor's net present value analysis and the borrower's current ability to make monthly payments, after which the creditor may proceed with the foreclosure process in conformity with this chapter.
(c) Under this section, for certain mortgage loans, the creditor shall send notice, concurrently with the notice required by subsection (g) of section 35A, of the borrower's rights to pursue a modified mortgage loan. Said notice shall be considered delivered to the borrower when sent by first class mail and certified mail or similar service by a private carrier to the borrower at the borrower's address last known to the mortgagee or anyone holding thereunder. A copy of said notice shall be filed with the attorney general. The process for determining whether a modified mortgage loan is offered shall take no longer than 150 days. Not more than 30 days following delivery of the notice as provided for in this subsection, a borrower who holds a certain mortgage loan shall notify a creditor of: (i) the borrower's intent to pursue a modified mortgage loan which shall include a statement of the borrower's income and a complete list of total debts and obligations, as requested by the creditor, at the time of receipt of the notice; (ii) the borrower's intent to pursue an alternative to foreclosure, including a short sale or deed-in-lieu of foreclosure; (iii) the borrower's intent not to pursue a modified mortgage loan and pursue the right to cure period described in section 35A; or (iv) the borrower's intent to waive the right to cure period and proceed to foreclosure. A borrower who holds a certain mortgage loan and fails to respond to the creditor within 30 days of delivery of the notice provided for in this subsection shall be considered to have forfeited the right to cure period and shall be subject to a right to cure period of 90 days. A borrower shall be presumed to have notified the creditor if the borrower provides proof of delivery through the United States Postal Service or similar carrier. Not more than 30 days following receipt of the borrower's notification that the borrower intends to pursue a modified mortgage loan, a creditor shall provide the borrower with its assessment, in writing, under subsection (b). The assessment shall include, but not be limited to: (i) a written statement of the borrower's income, debts and obligations as determined by the creditor; (ii) the creditor's net present value analysis of the mortgage loan; (iii) the creditor's anticipated net recovery at foreclosure; (iv) a statement of the interests of the creditor; and (v) a modified mortgage loan offer under the requirements of this section or notice that no modified mortgage loan will be offered. If a creditor offers a modified mortgage loan, the offer shall include the first and last names and contact phone numbers of the creditor's representative; provided, that the creditor shall not assign more than 2 creditor's representatives responsible for negotiating and approving the terms of and modifying the mortgage loan. The assessment shall be provided by first class and certified mail. A creditor shall be presumed to have provided the assessment to the borrower if the creditor provides proof of delivery through the United States Postal Service or similar carrier. A borrower who receives a modified mortgage loan offer from a creditor shall respond within 30 days of receipt of the assessment and offer of a modified mortgage loan. The borrower may: (i) accept the offer of a loan modification as provided by the creditor; (ii) make a reasonable counteroffer; or (iii) state that the borrower wishes to waive the borrower's rights as provided by this section and proceed to foreclosure. The borrower's response shall be in writing and, if a counteroffer is proposed, shall include substantiating documentation in support of the counteroffer. The response shall be provided by first class and certified mail. A borrower shall be presumed to have responded if the borrower provides proof of delivery through the United States Postal Service or similar carrier. A borrower who fails to respond to the creditor within 30 days of receipt of a modified mortgage loan offer shall be considered to have forfeited the 150 day right to cure period and shall be subject to a right to cure period of 90 days. Where a counteroffer is proposed, the creditor shall accept, reject or propose a counteroffer to the borrower within 30 days of receipt. Under this section, additional offers by both parties shall be considered during the right to cure period; provided, however, that a borrower may at any time state, in writing, that the borrower wishes to waive the borrower's rights as provided by this section and proceed to foreclosure. Nothing in this section shall be construed as preventing a creditor and a borrower from negotiating the terms of a modified mortgage loan by telephone or in person following the initial offer of a modified mortgage loan by a creditor; provided, however, that all offers, whether by a creditor or a borrower, shall be in writing and signed by the offeror. The right to a modified mortgage loan, as described in this section, shall be granted once during any 3–year period, regardless of the mortgage holder.
(d) The notice required in subsection (c) shall, at a minimum, include the appropriate contact information for modification assistance within the office of the attorney general; provided, that, the notice shall be similar in substance and form to the notice promulgated by the division of banks under section 35A.
(e) Nothing in this section shall prevent a creditor from offering or accepting an alternative to foreclosure, such as a short sale or deed-in-lieu of foreclosure, if the borrower requests such alternative, rejects a modified mortgage loan offer or does not qualify for a modified mortgage loan under this section.
(f) Prior to publishing a notice of a foreclosure sale, as required by section 14, the creditor, or if the creditor is not a natural person, an officer or duly authorized agent of the creditor, shall certify compliance with this section in an affidavit based upon a review of the creditor's business records. The creditor, or an officer or duly authorized agent of the creditor, shall record this affidavit with the registry of deeds for the county or district where the land lies.
The affidavit certifying compliance with this section shall be conclusive evidence in favor of an arm's-length third party purchaser for value, at or subsequent to the resulting foreclosure sale, that the creditor has fully complied with this section and the mortgagee is entitled to proceed with foreclosure of the subject mortgage under the power of sale contained in the mortgage and any 1 or more of the foreclosure procedures authorized in this chapter; provided, that the arm's-length third party purchaser for value relying on such affidavit shall not be liable for any failure of the foreclosing party to comply and title to the real property thereby acquired shall not be set aside on account of such failure. The filing of such affidavit shall not relieve the affiant, or other person on whose behalf the affidavit is executed, from liability for failure to comply with this section, including by reason of any statement in the affidavit. For purposes of this subsection, the term ''arm's-length, third party purchaser for value'' shall include such purchaser's heirs, successors and assigns.
(g) On a bi-annual basis, a creditor shall report the final outcome of each loan modification on all mortgage loans for which the creditor sent to a borrower a notice of the right to pursue a modified mortgage loan to the division of banks.
(h) The division of banks shall adopt, amend or repeal regulations to aid in the administration and enforcement of this section, including the minimum requirements which constitute a good faith effort by the borrower to respond to the notice required under subsection (c); provided, that, such regulations may include requirements for reasonable steps and good faith efforts of the creditor to avoid foreclosure and safe harbors for compliance in addition to those under this section. The division of banks shall make any available net present value models accessible to all creditors.