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Senator Spilka Votes to Pass a Number of Consumer Protection Bills, Including Foreclosure Protection

April 30, 2010

With home foreclosures continuing to rise in the Commonwealth in spite of the improving economy, Senator Karen Spilka (D-Ashland) voted on Thursday for legislation that protects residents from mortgage fraud, protects tenants in foreclosed properties from arbitrary evictions and helps people stay in their homes. The legislation, part of a series of consumer protection bills that passed the Senate, was approved unanimously.

“I am proud of this bill, on which I worked really closely with my colleagues to help bring about relief for struggling homeowners,” stated Senator Spilka. “This initiative will help individuals as they work to stay in their homes, as well as in assisting in stabilizing the overall economy.”

“Until we are able to get home foreclosures under control, our economic recovery is going to continue to be that much more difficult,” said Senate President Therese Murray. “This legislation protects residents and also puts forth a framework that will help to keep people in their homes. Updating these policies will keep a roof over residents’ heads at a time when many people are already struggling to make ends meet.”

“Today the Senate passed a comprehensive, multi-faceted approach to deal with the lingering foreclosure crisis in Massachusetts. Both homeowners and tenants will benefit from the bill’s consumer protections,” stated Senator Susan Tucker.

During this crisis, many renters have found themselves without a place to live with little or no reason or warning, after their building has been foreclosed on. Several initiatives are included in the bill to protect renters.

Tenants in foreclosed buildings can only be evicted for just cause, or if the building is purchased by a third party. Also, a lender cannot evict a tenant for failure to pay rent unless it has posted and delivered a written notice including critical information, including a contact number for the new owner. This does not prohibit a lender from evicting tenants for other valid reasons, such as interfering with the quiet enjoyment of other tenants, using a unit for illegal purposes, or refusing to allow the lender to enter the unit to make repairs.

For homeowners, the legislation temporarily extends the 90-day right to cure period, enacted by the legislature in 2007, to 150 days. The 2007 law gave homeowners 90 days to come up with past due payments on their mortgage, before the lender could require full payment of unpaid balance. This was intended as a cooling off period for the lender and homeowner to work out a new payment plan to avoid foreclosure.

In a provision championed by Senator Spilka, these new provisions require at least one meeting or telephone conversation between the homeowner and the lender to discuss a commercially reasonable alternative to foreclosure. The lender’s representative must have the authority to agree to the revised terms. The right to cure period can be reduced from 150 days to 90 days if the lender makes a good faith effort to negotiate a commercially reasonable alternative to foreclosure.

The bill also allows the 150-day right to cure to be granted once every 3 years; currently, the 90-day right to cure is only available once every 5 years.

On January 1, 2016, the 150 day right to cure period, along with the meeting requirement, will revert back to 90 days.

Additionally this new provision expands the content of the notice of right to cure that banks must send to homeowners, and includes an advisory for homeowners whose primary language is other than English that the notice is an important document, and that they should have it translated.

Further protecting homeowners, the legislation requires those who want to obtain a reverse mortgage on their home to meet with a counselor approved by the Executive Office of Elder Affairs.

In addition, in legislation advocated by the Attorney General, the bill would criminalize residential mortgage fraud.

The bill also establishes a new local option property tax exemption that permits a charitable organization that acquires a foreclosed property, and plans to create low and moderate income affordable housing there, to be exempt from property taxes until it rents or leases that property, but not for more than 7 years after purchase.

Lastly, the legislation establishes a 2-year pilot program within the Division of Banks that requires all property owners, including lenders, trustees, and service companies, to register and maintain vacant and/or foreclosing properties in the Commonwealth.

Senator Spilka also voted to pass a bill to update the Commonwealth’s homestead law to better protect homeowners from unsolicited loans. The legislation is part of a series of consumer protection bill that passed the Senate.

“The homestead law was created to help keep a roof over people’s heads. Given the economic decline in the past few years, this law has become even more significant for homeowners,” said Senator Spilka. “Having a homestead law that is clearer and up-to date is an important factor in protecting consumers.”

This legislation updates the homestead law to protect up to $500,000 of a home’s value. It also includes unsecured debts, such as credit card debt, that were incurred before the homestead was filed.

The Senate made other significant reforms to clarify ambiguities and modernize the law which include:
– Extending homestead protection to manufactured homes, and multifamily properties of up to 4 units.
– Requiring homeowners with more than one property to file a declaration, signed under the penalty of perjury, of which dwelling is their primary residence and therefore eligible for homestead protection to avoid fraud.
– Clarifying that the proceeds of fire/casualty insurance or sales/takings are protected from creditors. Fire/casualty proceeds are protected until re-occupancy; a homestead is declared on new home; or for 2 years after the date of the fire/casualty.
– Protecting the proceeds from sales or taking until a new homestead is declared or for 1 year, whichever occurs first.
– Allowing trustees of trusts to file homestead declarations on behalf of trust beneficiaries who reside in the property as their principal place of residence.
– Creates an automatic homestead of $125,000 for all homeowners.

A third consumer protection bill that Senator Spilka voted to advance on Thursday will protect consumers from unsolicited loans.

“Many people, particularly our seniors, have fallen victim to deceptive marketing of unsolicited loan products,” said Senator Spilka. “This legislation protects residents from those practices.”

“Unsolicited loans come with high interest rates, unfavorable terms, and have ruined the credit rating of many uninformed consumers”, said Senator Steven A. Baddour (D-Methuen). “This is an important consumer protection bill that will protect consumers from the unscrupulous practices of financial institutions on Wall Street.”

This legislation prohibits financial institutions and lenders from sending consumers unsolicited loans which are a negotiable check, money order, draft or other instrument that may be used to unknowingly activate a loan that was not solicited by the consumer.

Consumers will not be held liable for the unauthorized execution of these types of loans and will have a 10 day period to recede from a negotiated unsolicited loan.

A penalty of up to $5,000 per violation is established in the legislation for sending unsolicited loans to consumers. Also included are criminal penalties for the fraudulent execution of an unsolicited loan which include imprisonment in the house of corrections for up to 2 ½ years or imprisonment in state prison for up to 5 years or by a fine of up to $25,000 or by both a fine and imprisonment.

This legislation creates an exception to these restrictions for financial institutions with existing customer relationships with the consumer.

The three bills now move to the House of Representatives for further action.

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