Senator Brian A. Joyce is pleased to announce the unanimous Senate passage of legislation that will prevent mortgage foreclosures and crack down on deceptive lending practices. The bill would make mortgage fraud a felony and incorporates legislation filed by Senator Joyce mandating that anyone arranging mortgage loans be licensed. The bill also includes a section establishing a program for employees seeking housing. 

“With soaring foreclosure rates in Massachusetts, we needed to comprehensively address the issue with legislation that takes on predatory lenders while educating current and future homeowners,” said Senator Joyce. “This is an important consumer protection bill.” 

“It is ridiculous that until now we have required manicurists and hairdressers to be licensed, but NOT mortgage loan originators,” said Senator Joyce. “Mortgage loan originators work directly with individuals, in what most likely is their single biggest financial investment.  It is essential that these mortgage loan originators have the necessary training and level of competence to perform the required responsibilities in a professional manner.” 

Additionally, the bill includes a Joyce amendment requiring tighter regulations on reverse mortgages and includes an “in-person counseling” requirement for sub-prime loan sales that was proposed by the governor. Its purpose is to help educate any borrower who is considering these variable or adjustable rate mortgages.  

The new “responsible lending” language relevant to mortgage foreclosures was added to an existing Senate bill meant to establish an employer assisted housing program, allowing businesses to provide funds and incentives to help their employees obtain housing. 

The Department of Housing and Community Development would provide matching grants to businesses that establish such a program, contributing $1 for every $2 expended by the business. The maximum matching contribution each business could receive would be $100,000. 

Under that section of the bill, businesses would provide grants or loans to employees whose incomes do not exceed 120 percent of the area median income, with at least one-half of the funds going to employees whose incomes do not exceed 80 percent of the area median income. The funds could be used for down payments, closing costs, security deposits and first-month’s rent.

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 at auction.
• It establishes responsible lending practices through added requirements of mortgage lenders and borrowers, including in-person counseling. 
• The bill provides guidelines and procedures to avoid deceptive mortgage loan advertising practices. 
• The bill 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 bill creates a system for the Division of Banks to rate mortgage lending companies on lending practices.
• It requires mortgage originators to be licensed.
• The bill would also make mortgage fraud a felony, punishable by incarceration in state prison for not more than 5 years, or the house of correction for not more than 2 1/2 years, or by a fine of not more than $10,000. 

The bill is now in the House of Representatives.