Predatory lending, no-doc loans and subprime mortgages all contributed to high level of foreclosures in East Boston—a neighborhood not quite decimated by the problem but an example of how bad things got for a blue collar community when the economy tanked
With home foreclosures continuing to rise in the state in spite of the improving economy, the Senate and House sent final consumer protection legislation to the Governor this week that protects both homeowners and tenants from mortgage fraud and arbitrary evictions.
“The economic climate has made it difficult for many residents of the Commonwealth to keep their homes,” said Senator Anthony Petruccelli. “This bill will implement a number of measures to assist them in staving off foreclosure, while also protecting tenants from unreasonable evictions.”
The bill requires that tenants in foreclosed buildings can only be evicted for just cause. A lender cannot evict a tenant for failure to pay rent unless a written notice with proper contact information has been posted and delivered. It does not prohibit a lender from evicting tenants for valid reasons, such as using a unit for illegal purposes or not allowing 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 the 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.
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.
“As folks across the Commonwealth continue to struggle to make ends meet, this bill will institute measures to help keep our residents in their homes,” said House Speaker Bob DeLeo said. “In these uncertain fiscal times, this bill aims to provide a degree of stability to the families of Massachusetts.”
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.
In addition, 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 seven years after purchase.
“The neighborhood stabilization bill represents the latest step forward in our efforts to bring stability to our families and neighborhoods in this time of otherwise uncertainty,” said Mayor Thomas Menino. “Boston, like many other cities, has been hit hard by foreclosures over the past few years and our city’s homeowners, tenants, and neighborhoods have suffered the impacts. This important legislation would lend our Foreclosure Prevention and Reclamation Initiative the additional support needed to preserve homeownership, protect faultless tenants, and stabilize those neighborhoods that have been disproportionately affected.”
This bill now goes to the Governor for his signature.