Spilka: Statement on Foreclosure Prevention Bill
Last Thursday, my colleagues in the Massachusetts Legislature and I sent important legislation to Governor Patrick to combat one of the biggest remaining barriers to the state’s ongoing economic recovery: the foreclosure crisis.
In spite of our improving economy, the foreclosure crisis continues to have a ripple effect throughout the state hurting families and communities. The pain that comes from a foreclosed home doesn’t just hit the individual homeowner. It causes the property value for an entire neighborhood to drop, depresses the local economy, and causes instability in the Massachusetts housing market and overall economy.
I have worked to address this issue since foreclosure crisis began in Massachusetts and I am happy that my colleagues and I have now put in place some tools to help homeowners in trouble. Earlier this legislative session I filed a bill with Attorney General Martha Coakley and Representative Steven Walsh that addresses some of the most complex problems that face us as we try to prevent foreclosures. The legislation requires a bank to look closely at the mortgage and determine whether it will cost the bank more money to foreclose on the home than it would to modify the loan so that the borrower has lower mortgage payments and can stay in their home. These loan modifications may include a reduced interest rate or principal, or an extension of the loan repayment period. The new provisions apply to loans that are considered risky, such as interest-only loans and loans with short term introductory interest rates.
Other protections include the following:
- Borrowers who qualify for the program can get help from loan modification specialists in the Attorney General’s office to help in their negotiations with lenders;
- Lenders can no longer pass along the costs of improper foreclosures and cannot tack on fees for services not connected with the foreclosure;
- The Division of Banks will work with the Attorney General’s Office, to track the resolution of certain mortgage loans and report on them each year until 2018; and
- When creditors will need to prove they are the current legal holder of a mortgage and the mortgage note before they can foreclose.
These changes will make the system fairer – the loan modifications will keep people in their homes, lenders will avoid foreclosure costs and potential market losses, and neighborhoods will be protected from the negative effects of unnecessary foreclosures and abandoned property. I am proud that we produced a bill that takes a common sense approach to keep people in their homes by ensuring fair negotiations and avoiding unnecessary foreclosures. This approach is good for our residents, our communities, and is ultimately more profitable for the lenders.
I look forward to continuing our commitment to taking direct action and additional steps forward to protect homeowners, stabilize the housing market, and encourage continued economic recovery throughout Massachusetts.