On May 1, a key provision of the new Mass. state law passed back in November 2007, that is designed to provide financially distressed homeowners with foreclosure relief, will go into effect.  Under the new law, Massachusetts homeowners facing foreclosure will now be entitled to a 90 day “right to cure” period.  Now, a foreclosing lender must provide a notice of delinquency to the borrower and then provide 90 days to cure the delinquency.  Previously, homeowners were only entitled to 30 days notice, and the lender did not have to give the homeowner an opportunity to pay the arrearage, cure the default, and avoid foreclosure. The new law applies to foreclosures initiated on or after May 1, 2008.

Governor Patrick and Attorney General Coakley both point to the new 90 day “cooling off” period as a crucial opportunity for mortgage lenders and loan servicers to avoid unnecessary foreclosures—those situations where a restructured loan results in a continued income stream for lenders, preserves home ownership for borrowers, and avoids the destabilizing effects foreclosures have on entire communities and neighborhoods. 

The Attorney General’s Office and the Patrick Administration’s Division of Banks have met with several law firms that handle foreclosures in order to ensure that the law will be faithfully implemented by those firms that actually process most foreclosures.  Together, the agencies have sought to ensure that the newly required notice of delinquency—which requires the lender to identify the delinquency and provide a contact person at the lender to discuss alternatives to foreclosure—is a meaningful starting point for discussions between borrowers and lenders.  The next step, in addition to monitoring compliance with the law, is to ensure that the 90 day period serves the purpose of achieving alternatives to foreclosure.

 In addition to requiring the new notice of delinquency and 90 day right to cure, the new law contains several other provisions designed to address the foreclosure crisis and the mortgage lending abuses that often were the root of eventual foreclosures.  Other provisions include:

·          A new requirement that foreclosure notices be filed with the Division of Banks, which will enable the Division to better track foreclosures and the lenders and brokers whose loans tend to lead to foreclosure (effective May 1, 2008).  The Division will also retain contact information for those responsible for maintaining vacant foreclosed properties.

·          Licensing of all mortgage loan originators, not just the companies that employ loan originators (effective July 1, 2008). 

·          Mandatory counseling for first-time homebuyers who obtain subprime adjustable rate mortgage loans (effective January 31, 2008).

·          Extending $2 million in grants to establish 11 foreclosure education centers around the Commonwealth and promote first-time homebuyer and foreclosure counseling.

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