Efforts to prevent foreclosure made progress last week.
The legislation, which was praised by housing advocates, would set up a network of counseling and education for borrowers to keep them out of trouble. It also calls for a database under the Division of Banks to track foreclosures and rate mortgage lenders on their lending practices and seeks regulations to curb deceptive loan advertising.
“The bill recognized the need for a comprehensive approach to foreclosure prevention both with dealing with families before they’re facing difficulties as well as those families that are currently facing foreclosure,” said Chris Norris, assistant director of the Citizens’ Housing and Planning Association.
The bill features components of legislation that Gov. Deval Patrick filed in June.
But the Senate bill also includes a section that directs the state Department of Housing and Community Development to establish a fund that provides a 50 percent state match to employers that help low- and moderate-income workers purchase or rent a home. Individual employers would be eligible to receive a maximum of $100,000 a year. The fund would provide a maximum of $5 million annually and would be subject to appropriations by the Legislature.
CHAPA, a housing advocacy group, has been pushing a statewide employer-assisted housing program for several years. Several Bay State employers, including Citizens Bank, Clark University in Worcester and UMass Memorial Health Care, already provide housing assistance to their employees. Earlier this summer, the DHCD announced that it was offering $250,000 to match funds that Cape Cod businesses are providing to homebuyers and renters.
CHAPA leaders are hoping that a statewide program would entice even more local companies to offer such benefits.
“We’re optimistic that there will be interest in participating in the program and it will encourage employers who are thinking about this but have yet to embrace this fully,” aid Norris.
‘A Very Comprehensive Shift’
As foreclosure activity has spiked, groups like CHAPA, the Massachusetts Affordable Housing Alliance and the Massachusetts Association of Community Development Corporations have been pressing for foreclosure prevention legislation. The groups helped draft legislation that was filed at the beginning of the year and since then the Patrick administration has joined the push to prevent future foreclosures.
The Senate bill includes a “right to cure” section that gives borrowers a 90-day time period to pay missed payments and fees in order to save their homes, and would prevent attorney’s fees from being imposed during that period. It also calls for lenders to provide accurate information to homeowners on what they owe and for in-person counseling for homebuyers who want to obtain adjustable interest-rate loans.
“This bill is very comprehensive shift in the way that the mortgage companies operate and it strikes a balance between the responsibilities of lenders and responsibilities of borrowers,” said Sen. Susan Tucker of Andover, who is co-chairman of the Joint Committee on Housing.
Mortgage industry professionals, however, believe some parts of the bill are too broad and would excessively restrict lending activity.
“Part of it is that everything was lumped into one bill and isn’t really the way we feel it should be handled,” said Denise Leonard, executive director of the Massachusetts Mortgage Association, which represents brokers and lenders. “Some of the provisions are just too far-reaching.”
The MMA is supportive of licensing loan originators and helped draft a bill on licensing. Language from the MMA bill is included in the Senate legislation. However, the MMA opposes the requirement for in-person counseling of subprime adjustable-rate loans.
“It stands to gravely limit the lending practices in Massachusetts in terms of what lenders will be willing to offer,” said Leonard.
Leonard said interagency guidance adopted last year that gives examiners, lenders and brokers direction on underwriting nontraditional loans, has changed what loan products are being offered by lenders. Adding more regulations and restrictions may convince some lenders that it’s too risky or difficult to offer certain types of loan products in Massachusetts.
“To regulate products even further is going to be detrimental Â… it will limit what products are available to consumers,” she said.
Leonard also has concerns about a section of the bill that seeks to punish originators that have violated any rules and regulations with jail time. According to the bill, “whoever violates Â… any rule or regulation made thereunder by the commissioner, shall be imprisoned in the house of correction for not more than 180 days and may be fined not more than $1,000, or by both such fine and imprisonment.”
Leonard said the language is problematic because it doesn’t stipulate that someone actually has to be found guilty of the crime in order to face jail time.
The proposed lender rating system is also drawing criticism. Those in the mortgage industry say it basically extends the Community Reinvestment Act requirements to mortgage companies. The CRA, which currently applies only to banks and credit unions, requires financial institutions accepting deposits from certain communities to reinvest in those communities and offer credit throughout their entire market area.
“Applying a CRA requirement to mortgage lenders regardless of what the Senate wants to call it Â… has been proven to be an impossibility in its application. And, any additional requirements to be placed upon the Division of Banks, including loan officer licensing and the development of a comprehensible foreclosure database, without the appropriate funding that would adequately support their current auditing and enforcement actions would be ridiculously moot,” Kevin M. Cuff, director of the Massachusetts Mortgage Bankers Association, wrote in an e-mail.
He added, “Tacking foreclosure prevention on the back of an employer-assisted housing bill and pushing it through the Senate within 24 hours of its announcement without asking for any input or opinion from the lending industry despite our best participation in the entire legislative and regulatory process over the course of the past year was extremely shortsighted by the Senate.”
Still, housing advocates threw their support behind the legislation.
“It touches on a number of different aspects of the lending problem out there,” said Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance.
Norris said the legislation is “consistent with what the governor has indicated he would support.”
“My hope is that the mortgage industry will see this as some common-sense requirements and a common-sense approach that balances their interests and the interests of the Â… homeowners,” he said.
The Senate bill needs approval from the House and must be signed by Patrick.
“We’re still looking at the details of that [bill],” said David Guarino, communications director for House Speaker Salvatore DiMasi.
