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Moore, Senate approve legislation to protect borrowers from deceptive mortgage practices

November 21, 2007... On the day before Thanksgiving, Sen. Richard T. Moore, D-Uxbridge, and his colleagues in the Senate enacted legislation to prevent mortgage foreclosures and crack down on deceptive lending practices. The bill, which now goes to the Governor for his signature, requires anyone arranging mortgage loans to be licensed. 

“The rate of mortgage foreclosures in Massachusetts continues to be a concern,” Senate President Therese Murray, D-Plymouth said. “This legislation will help prevent a future foreclosure crisis as it takes aim at predatory lenders and gives homeowners and borrowers a fighting chance.”

“This legislation is a step in the right direction to combat the growing rate of mortgage foreclosures in the Commonwealth,” said Moore. “While we certainly have to work to change the lending practices of predatory lenders, we must also continue to work with homeowners to educate them on their mortgage options. I am confident that if we continue to educate people, we can curb these foreclosure rates and allow families throughout Massachusetts to remain in their homes.”

The legislation includes an “in-person counseling” requirement for first-time homebuyers considering subprime adjustable rate loans. This provision is similar to the Governor’s original proposal. Its purpose is to help educate any eligible borrower who is considering a risky mortgage loan.

The following are additions to the bill regarding consumer protection and the prevention of unfair mortgage practices:

  • The bill ensures that a homeowner receives an itemized accounting of the disposition of proceeds from a foreclosure sale of their property after auction if there is a surplus.
  • It establishes responsible lending practices through added requirements of mortgage lenders and borrowers, including in-person counseling for first-time homebuyers considering a subprime adjustable or variable rate mortgage. 
  • The legislation also instructs the Division of Banks to maintain a foreclosure database to track developments and trends of mortgage foreclosure on residential property.
  • It establishes a borrower’s right to cure a loan default initiated by the mortgagee/servicer and thereby stop a foreclosure action from proceeding.
  • The legislation creates a system for the Division of Banks to rate mortgage lending companies on lending practices.
  • It requires mortgage originators to be licensed.
  • The legislation protects tenants by making renters tenants-at-will after foreclosure, providing tenants with additional time to find new homes.
  • It requires the Division of Banks to create a mortgage exam for mortgage originators as part of the licensing process.
  • The legislation enhances criminal penalties for mortgage brokers and lenders operating without a license.
  • It encourages lenders to change adjustable loans to fixed rate loans by increasing the current lender fee from ½ percent to 1 percent of outstanding loan balances.
  • The legislation appropriates $2 million for a pilot program to create foreclosure and mortgage counseling centers in communities with high rates of foreclosure. The pilot program will also help to create best practice standards for mortgage lending and borrowing.

For more information on Senator Moore’s housing and other legislative initiatives, please visit www.senatormoore.com.

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