Massachusetts Alliance Against Predatory Lending
www.maapl.info
FACT SHEET
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An Act Relative to a Temporary Moratorium on Foreclosures
Senate Bill 2663, Main Sponsor: Senator Dianne Wilkerson House Bill 4733, Main Sponsor: Representative William Lantigua What does this bill do? This new filed bill is a necessary follow-up to Chapter 206 of the Acts of 2007, “An Act Protecting and Preserving Home Ownership”. The bill provides a 6 month moratorium on foreclosures resulting from unfair lending practices. The 6 month stay will allow certain homeowners to avoid displacement and communities to avoid the disastrous consequences of abandoned properties. The bill gives homeowners some breathing room allowing them to reach some accord with foreclosing lenders and allowing time for state and federal government to devise additional comprehensive approaches to the foreclosure crisis. Bill is filed as part of a 3bill package, and includes the bills An Act to Require Judicial Foreclosure & An Act Requiring Just Cause for Eviction in Foreclosed Properties. Why consider this an emergency? The numbers say it all. In 2007, 29,607 foreclosure petitions were filed in the state, up 55% from 2006. 916 petitions were filed just during just the last week in April and we may see closer to 40,000 foreclosure petitions filed this year. That is roughly the number of homeowners in the City of Worcester. There were over 2,800 foreclosures during the first quarter of 2008, up about 140 percent over the same period last year. Didn’t the Legislature pass a law addressing the foreclosure crisis this past Fall? Absolutely. With the passage of Chapter 206 of the Acts of 2007 the Legislature took important steps to address the spiraling number of mortgage foreclosures, but more is needed to make that legislation effective. Indeed, some of these significant provisions of Chapter 206 may be thwarted without further action. Why do we need a temporary moratorium on foreclosures? A key feature of Chapter 206 was the provision of funds for work-out counselors to assist homeowners facing foreclosure. However, according to case managers, a single workout counselor can only handle between 100 and 130 cases per year while the number of foreclosure
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Members of MAAPL: Action for Boston Community Development (ABCD), Association for Community Organizing for Reform Now (ACORN), Action for Regional Equity, ARISE for Social Justice, Boston Tenants Coalition, Brazilian Women's Group, Charles Hamilton Houston Institute For Race & Justice, Chelsea Collaborative, Chinese Progressive Association, City Life/Vida Urbana, Community Economic Development Ctr of SEMA, Community Labor United, Dorchester People for Peace, ESAC, Fair Housing Center of Greater Boston, Greater Boston Legal Services, Greater Four Corners Action Coalition, Greater Boston Legal Services, Green Rainbow Party, Homeowners Options For MA Elders (HOME), Jewish Alliance for Law and Social Action, Lawrence Community Works, Mass Law Reform Institute, Massachusetts Community Action Network, Massachusetts Coalition for the Homeless, NAACP, Boston Branch, National Consumer Law Center, National Community Reinvestment Coalition, Survivors Inc., Tri-County Community Action Program, United Auto Workers Mass CAP, United For a Fair Economy , Union of Minority Neighborhoods, Volunteer Lawyers Project
petitions filed each week in our largest counties equals and in some cases surpasses that figure. We would need fifty work-out counselors in each of those counties to assist homeowners newly facing foreclosure each week. A temporary halt to certain foreclosures would allow counselors time to negotiate payment plans with lenders without the added pressure of new cases piling on at a rate never before seen. To refinance or even renegotiate to a better mortgage a good payment history is almost always a pre-requisite. Thus, it is critical that counselors reach people before they get behind in payments and while they still have a real chance to refinance or negotiate new payment plans. A moratorium of six months will allow Chapter 206 to succeed. Will the moratorium apply to all homeowners facing foreclosure? No. The moratorium applies only to unfair and predatory subprime loans with low introductory rates that increase dramatically, loans approved without documentation of ability to repay, loans that are 100% the value of the house and other characteristics described in Section 2. Has Massachusetts passed a moratorium before and are other states considering this step? Yes and yes. In 1991 the Legislature passed a four month moratorium for homeowners who were victims of home improvement loan scams and losing their homes in foreclosure. This round of foreclosures is much more extensive and merits even more attention. Maryland just passed a three month moratorium and New York , New Jersey and Minnesota are among other states considering similar laws. Even the Bank of America is now proposing a 60 day moratorium for its borrowers facing foreclosure. What will happen during the moratorium period? Mortgage holders are encouraged to work with counselors and borrowers to modify the terms of their mortgages, including, if necessary, reducing principal and lowering interest rates. A commission will be established to develop a plan for court review of foreclosures. Bill Summary: Section 1 institutes a 180 day foreclosure moratorium on mortgage loans with: (a) adjustable rate loan with an introductory period of three years or less; (b) debt-to income ratio in excess of 50% under the fully indexed rate; (c) loan approval on a “stated income” basis without regard to a borrowers ability to repay; (d) 100 % loan-to-value ratio; e) loan carries substantial or extended pre-payment penalties; (e) interest only loans; (f) high points, fees or interest. Section 2 prohibits accrual of interest or fees and initiation of evictions during the moratorium period except if the property is sold or for a cause originating prior to the foreclosure. Section 3 prohibits filing of foreclosure deed during the moratorium. . Section 4 establishes a commission to draft law for judicial review of foreclosures. Section 5 encourages mortgage holders to work with borrowers with loan terms described in the bill to modify the terms of the mortgages and allow homeowners to stay in their homes.
maaplinfo@yahoo.com www.MAAPL.info Legislative Contacts: Grace Ross, 617-291-5591 Debra Silva, MLRI, 617-357-0700 x 340