The new Neighborhood Stabilization Act, which was enacted with an Emergency Preamble, became effective, in part, upon signing by Governor Duval Patrick on Thursday, July 29, 2010. The new law gives meaningful additional protections to Homeowners facing foreclosure, and tenants living in houses that have gone to foreclosure sale. We will deal with the Ownership issues in this post and the Tenant issue in the next.)
In order to foreclose on a property in the Commonwealth of Massachusetts a mortgagee/creditor MUST give the homeowner/mortgagor a 150 day Notice To Cure the default giving rise to the foreclosure threat. This "Cure Period" is subject to the following rules:
1. If the lender/servicer certifies that is has "engaged in a good faith effort to negotiate a commercially reasonable alternative to foreclosure..." (defined below) and
2. If this effort "has involved at least one meeting either in person or by telephone, between a creditor's representative and the borrower or borrower's attorney or the borrower's representative..." and
3. "After such meeting the creditor and the borrower were not successful in resolving their dispute, then the creditor may begin foreclosure proceedings after a right to cure period lasting 90 days..."
4. If the borrower does not respond to mail offering to negotiate within 30 days (does not state when the 30 days starts) then the borrower must live with the 90 day period allowed the creditor instead of the 150 days
KEY DEFINITION
"Creditor has made a good faith effort to negotiate and agree upon a commercially reasonable alternative to foreclosure shall mean that the creditor has considered"
a. "an assessment of borrower's current circumstances including without limitation (they can consider more, not less) income, debts, and obligations"
b. "the net present value ("NPV") of receiving payments pursuant to a modified mortgage loan as compared to the net recovery following foreclosure" -(this is a calculation taking into account the following factors to arrive at a value to compare to the value of the modified loan)
1. the current market value
2. the costs of foreclosure
3. foreclosure stigma discount to re-sell the house
4. the total unpaid balance
5. number of months expected before sale
6. taxes and insurance costs
7. the appreciation/depreciation forecast.
The creditor must use the Mass Housing Finance Agency formula, FDIC formula, or Treasury formula.
c. "...The creditor shall provide by first class mail and certified mail or private carrier to the borrower documentation of the good faith effort 10 days prior to meeting, telephone conversation specified..." (in paragraph 2. above)
The importance of this law cannot be overstated. While it grants an extra 60 days to the borrower, sixty days which did not exist until the Commonwealth passed an earlier law in 2009, it REQUIRES the creditor to assess the situation OR wait 150 days to BEGIN a foreclosure process. It is as far as the Commonwealth can go to try to force a creditor / mortgagee to negotiate a modification.
The notice that has to be given to the borrower/mortgagor before the creditor can start the foreclosure process, whether it is a 90 day notice or a notice after the 150 days, MUST contain the following information
1. Nature of the default and the amount of money needed to cure/fix the default
2. The date by which the default must be cured (stating "150 days after the date of this letter" or "90 days after the date of this letter" is not good enough. The creditor must give an actual DATE)
3. That is the borrower/mortgagor does not cure the default (pay the back amount owed) the creditor can take steps to foreclose on the house
4. The name and address of the creditor and the telephone number of a representative whom the borrower/mortgagor can contact if the borrower/mortgagor disagrees with the statements in the notice
5. Name of current and former mortgage broker or mortgage loan originator for the mortgage
6. Statement that the mortgagor/borrower may be eligible for help with the names and telephone number of the agencies
7. That the creditor may sell the property to pay off the mortgage
8. That the borrower/mortgagor may redeem the property anytime PRIOR to the sale by paying all amounts due
9. That the borrower/mortgagor may be evicted after the sale (this does not mean 5 minutes after the sale but after proper eviction proceedings in the Court)
NO PROPER NOTICE, NO FORECLOSURE
The Act gets technical - do not try to navigate it yourself. If you are behind and you receive a Notice to Cure, and you cannot PAY ALL ARREARS, contact a lawyer or Housing Agency immediately
Author's Copyright by Richard I. Isacoff, Esq, August 2010
Author's Copyright by Richard I. Isacoff, Esq, August 2010
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