Preventing Foreclosure With A New Foreclosure Prevention Law

Signed recently by Massachusetts Governor Deval Patrick was Foreclosure Prevention Bill 4323. It will go into effect on November 1, 2012. The bill will hopefully make significant changes to existing foreclosure practices. Although the final details of the bill are still being worked out, programs for home ownership and for existing homeowners is what the bill is aiming for.

Some Provisions of the New Foreclosure Prevention Bill

Record mortgage assignments

Foreclosure Prevention Bill 4323 states that no foreclosure notice will be valid unless:

  • An assignment, or chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of deeds at the time such notice is mailed.
  • All recorded assignments is referenced in the notice of sale.
Foreclosure Prevention

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Offer loan modifications and mediation to qualified borrowers

Under this new law, mortgage lenders are required to attempt to offer loan modifications to creditors instead of foreclosing. It also means that creditors must first determine whether the ‘net present value’ of modifying a loan is more than the likely value of foreclosure. If such is the case, then the creditor must modify the loan. However, If the value of the loan is less than the value of the foreclosure, creditors need not have to modify the loan.

Also, the new law offers immunity to bona fide buyers of foreclosed properties from claims by disgruntled borrowers because creditors did not follow the rules of loan modification.

Clean up defective foreclosure titles

Section 35C of the new bill provides that creditors are prohibited from publishing a foreclosure notice if the creditor knows that the mortgagee is not the holder of the mortgage note or the authorized agent of the note holder. Additionally, it also requires that the creditor records an affidavit swearing its compliance with this new section.

Protection for third party buyers of foreclosed properties

The new law will protect third-party buyers from title claims, however, it will not shield creditors from potential liability to the borrowers. The new law further provides that creditors cannot pass the cost of any corrective documentation onto borrowers or third parties.

The new foreclosure prevention law, just like any new reform legislation aiming to get the system in place, has yet to experience a learning curve, both for lenders and foreclosure attorneys. It may not address all foreclosures problems in an instant but anything that gives hope to homeowners is a step in the right direction.

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