The state’s newly passed foreclosure law, which will extend the right-to-cure period for homeowners up to 150 days, is raising concerns among bankers who say the statute lacks clarity and could drag out the foreclosure process beyond a year.

Lenders say the statute imposes obligations on them but lacks clarity as to how to fulfill those obligations, and they’re urging the governor’s staff to clear up the areas of confusion within the bill before it is signed into law.

Current law provides a right-to-cure period, or time set aside for a borrower to try and work out their finances before foreclosure, of 90 days. The new bill, dubbed "An Act To Stabilize Neighborhoods," would extend that period a further two months – but only if the borrower has made an effort to work with the lender. If the borrower fails to respond to a lender’s attempts at contact, or if the two parties meet and cannot come to an agreement, the right-to-cure reverts to 90 days.

But lenders complain that the way the law is written leaves them in a Catch-22 – if a borrower doesn’t respond to their communications, they have the right to proceed under the shorter, 90-day timeline. But in order to proceed under the shorter timeline, the law requires that they file an affidavit affirming they have made good-faith efforts to come to terms with the borrower, including offering loan modifications or allowing a short sale or deed-in-lieu transaction. Without financial information provided by the borrower, such a modification cannot be constructed.

"Effectively, the consumer doesn’t have to do anything, and gets a 150-day right to cure," said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. "We want the consumer to come to the table, so we can ascertain, what’s the financial situation, does he have a job, can we perform some kind of loan modification before they get 150 days?"

Kevin Kiley, executive vice president and chief operating officer of the Massachusetts Banker’s Association, told Banker & Tradesman last night that the group was working with the governor’s staff to clear up the areas of confusion before the bill is signed into law.

"There’s a variety of different ways some clarification might be achieved on these issues and that’s what we’re trying to do as we speak," he said, citing concerns around the effective date of foreclosure, the number of days required to issue a good faith notice and the affidavit concerns.

The governor has up to 10 days to consider the bill, though housing advocates said he could sign the bill as early as today. A spokeswoman for the governor declined to say when the governor would sign the bill, saying only that he looks forward to reviewing the legislation.

Cuff said the bill’s passage will drag out the foreclosure process beyond a year.

"In order for you to get your house foreclosed, it takes a half a year. Now it’s going to take another half a year before we can begin the process," said Cuff. "The consumer will very likely be able to not write a check on anything and live in the property for almost a year before it can be foreclosed."

Ultimately, according to Cuff, such provisions will force lenders to tighten lending standards still further.