Massachusetts 2023-2024 Regular Session

Massachusetts House Bill H2036 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	1 of 1
2	2	HOUSE DOCKET, NO. 3248 FILED ON: 1/20/2023
3	3	HOUSE . . . . . . . . . . . . . . . No. 2036
4	4	The Commonwealth of Massachusetts
5	5	_________________
6	6	PRESENTED BY:
7	7	Peter Capano
8	8	_________________
9	9	To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
10	10	Court assembled:
11	11	The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
12	12	An Act enabling municipal pre-foreclosure mediation.
13	13	_______________
14	14	PETITION OF:
15	15	NAME:DISTRICT/ADDRESS :DATE ADDED:Peter Capano11th Essex1/20/2023 1 of 14
16	16	HOUSE DOCKET, NO. 3248 FILED ON: 1/20/2023
17	17	HOUSE . . . . . . . . . . . . . . . No. 2036
18	18	By Representative Capano of Lynn, a petition (accompanied by bill, House, No. 2036) of Peter
19	19	Capano for legislation to authorize municipalities to establish foreclosure mediation programs.
20	20	Municipalities and Regional Government.
21	21	[SIMILAR MATTER FILED IN PREVIOUS SESSION
22	22	SEE HOUSE, NO. 2143 OF 2021-2022.]
23	23	The Commonwealth of Massachusetts
24	24	_______________
25	25	In the One Hundred and Ninety-Third General Court
26	26	(2023-2024)
27	27	_______________
28	28	An Act enabling municipal pre-foreclosure mediation.
29	29	Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
30	30	of the same, as follows:
31	31	1 Chapter 244 of the General Laws, as appearing in the 2016 Official Edition, is hereby
32	32	2amended by inserting after section 35C the following section:-
33	33	3 Section 35D. (a) As used in this section the following terms shall, unless the context
34	34	4clearly requires otherwise, have the following meanings:-
35	35	5 “Certificate of mediation completion”, a certificate issued by the mediation program
36	36	6manager upon good faith effort in mediation if a mutually-agreeable commercially reasonable
37	37	7alternative to foreclosure cannot be reached.
38	38	8 “Commercially reasonable alternative”, an alternative based on a comparison of the net
39	39	9present value of receiving payments pursuant to a modified mortgage loan, or the likely financial 2 of 14
40	40	10recovery from other foreclosure alternatives, to the anticipated net recovery following
41	41	11foreclosure incorporating an assessment of the borrower’s current circumstances, including,
42	42	12without limitation, the borrower’s current income, debts, and obligations.
43	43	13 “Entity”, a natural person, business organization, or any other kind of organization,
44	44	14including without limitation, a corporation, partnership, trust, limited liability corporation,
45	45	15limited liability partnership, joint venture, sole proprietorship, or any other category of
46	46	16organization, and any employee, agent, servant or other authorized representative of such entity.
47	47	17 “Eviction”, any action, without limitation, by a foreclosure sale purchaser of residential
48	48	18property, which is intended to compel an occupant to vacate or to be constructively evicted from
49	49	19such residential property.
50	50	20 “Fair market rent”, an amount equal to that established by the United States Department
51	51	21of Housing and Urban Development pursuant to 42 U.S.C. § 1437f(c)(1), as it exists or which
52	52	22may be amended, for a unit of comparable size in the area in which the residential housing is
53	53	23located.
54	54	24 “Foreclosed property”, a property on which a foreclosure deed has been recorded until
55	55	25such property has been purchased from a foreclosing entity by a party who is not the foreclosing
56	56	26entity, itself.
57	57	27 “Foreclosing owner:, an entity that either: held or owned a mortgage loan secured by the
58	58	28property at any point prior to the foreclosure of the property or is the subsidiary, parent, or agent
59	59	29of, or otherwise is related to any entity which held or owned the mortgage in the property at any
60	60	30time prior to the foreclosure of the property; and holds title to this property that it acquired at a
61	61	31foreclosure sale or by any other method of foreclosure and holds a security interest in 3 or more 3 of 14
62	62	32mortgage loans. For purpose of this definition, the phrase ‘hold title’ shall include an entity
63	63	33which holds title in any capacity, directly or indirectly, without limitation, whether in its own
64	64	34name, as trustee or as beneficiary.
65	65	35 “Foreclosing property”, a property on which the mortgagee or its agent has filed a
66	66	36complaint with the land court or superior court pursuant to the Massachusetts Soldiers’ and
67	67	37Sailors’ Civil Relief Act (St. 1943, c. 57 (1943), as amended through St. 1988, c. 142) until such
68	68	38time as a foreclosure deed has been recorded in the registry of deeds in which the property is
69	69	39located.
70	70	40 “Foreclosure”, termination of a mortgagor's equity of redemption in property, by action,
71	71	41bill in equity, entry or power of sale.
72	72	42 “Foreclosure sale”, the foreclosure of a mortgage of a residential property pursuant to a
73	73	43power of sale in a mortgage and as described in this chapter.
74	74	44 “Foreclosure sale purchaser”, a foreclosing owner or a person or entity who purchases
75	75	45residential property from a foreclosing owner and not intending to reside or have a family
76	76	46member reside in such residential property as the primary residence.
77	77	47 “Good faith effort”, each party to the mediation is present, has decision-making authority
78	78	48to negotiate and agree upon a commercially reasonable alternative to foreclosure, provides
79	79	49required documentation, and actively participates in the mediation process.
80	80	50 “Mediation conference”, the formal discussion and negotiation undertaken by the parties
81	81	51in a good faith effort to negotiate and agree upon a commercially reasonable alternative to
82	82	52foreclosure, and held in the municipality or at a location mutually convenient to the parties. Both 4 of 14
83	83	53the mortgagor and mortgagee or its mortgage servicer must be physically present for the
84	84	54mediation conference unless telephone participation is mutually agreed upon and the mediation
85	85	55program manager certifies that the mortgagor has been made aware of the mortgagor’s right to
86	86	56an in-person mediation conference. The mortgagor shall be allowed to have a lawyer, an
87	87	57interpreter, and up to 3 additional persons of the mortgagor’s choosing present at the mediation
88	88	58conference. The mortgagor shall be notified of this right at the time the mediation conference is
89	89	59scheduled by the mediation program manager.
90	90	60 “Mediation program”, “Massachusetts Foreclosure Mediation Program” or “the
91	91	61program”, the program created pursuant to subsection (b). the foreclosure mediation program
92	92	62established by a municipality pursuant to this section.
93	93	63 “Mediation program manager”, a neutral not-for-profit organization, attorney, or
94	94	64qualified third party experienced in the mediation of the foreclosure process, familiar with all
95	95	65programs available to help homeowners avoid foreclosure, knowledgeable of the mortgage
96	96	66foreclosure laws of the commonwealth, and having no ownership interest or management interest
97	97	67in residential housing in the municipality other than their primary residence. The mediation
98	98	68program manager shall sign a user agreement with the municipality authorizing the receipt and
99	99	69use of personal and financial information for the purposes of the mediation program only. the
100	100	70mediation program manager shall ensure the security and confidentiality of any and all
101	101	71information received or exchanged under the program consistent with applicable federal, state,
102	102	72and municipal laws. Access to such program information shall be limited to those officers and
103	103	73employees of the organization who require the information to properly perform services under
104	104	74the mediation program, and that the organization and its officers and employees may not access,
105	105	75modify, use or disseminate such information for inconsistent or unauthorized purposes. 5 of 14
106	106	76 “Mediator”, an individual, (i) trained in compliance with the qualification standards for
107	107	77neutrals specified in the guidelines for training mediators adopted by the Supreme Judicial Court
108	108	78of Massachusetts pursuant to Rule 8 of the Uniform Rules for Dispute Resolution; (ii) trained in
109	109	79mediation and the Massachusetts foreclosure process; and knowledgeable of the mortgage
110	110	80foreclosure laws of the commonwealth (iii) with a working knowledge of all federal, state, and
111	111	81municipal programs available to help homeowners retain their home;’
112	112	82 “Mortgage documents”, shall include the entire wet ink mortgage note with all allonges
113	113	83attached; mortgage; loan agreement; assignments (recorded and unrecorded) and any other
114	114	84documentary evidence of transfer of the note and interest in the note or mortgage; ledgers or
115	115	85accounting of all payments and disbursement of these payments since the commencement of the
116	116	86loan; any powers of attorney granted by the mortgagee or homeowner in relation to the mortgage
117	117	87loan.
118	118	88 “Mortgage loan”, a loan, both mortgage note and mortgage on residential property, to 1
119	119	89or more natural persons, or to a nominee trust or any other entity commonly recognized under
120	120	90Massachusetts law as a lawful borrower, made primarily for personal, family or household
121	121	91purposes on residential property in the municipality, which is the principal residence of 1 or
122	122	92more borrowers of the loan or their family members, or in the case of a nominee trust, 1 or more
123	123	93of the beneficiaries of the trust.
124	124	94 “Mortgage servicer”, or “servicer”, the person legally authorized by the mortgagee to
125	125	95service the mortgage loan.an entity that administers or services or at any point administered or
126	126	96serviced the Mortgage Loan; provided, however, that such administration or servicing shall
127	127	97include, but not be limited to, calculating principal and interest due on the mortgage loan, 6 of 14
128	128	98assessing fees and costs onto a mortgagor’s loan account, collecting regular payments from the
129	129	99mortgagor, acting as escrow agent for the owner of the mortgage loan or foreclosing on a
130	130	100mortgage loan in the event of a default.
131	131	101 “Mortgagee”, or “mortgage holder” a person who has invested funds or other
132	132	102consideration and who is named as such in the mortgage or any assignment thereof.
133	133	103 “Mortgagor” or “Homeowner”, grantor of a mortgage.
134	134	104 “Net recovery following foreclosure”, a calculation of mortgagee’s costs until projected
135	135	105sale or resale to third party purchaser, including but not limited to: (i) costs from projected
136	136	106delinquency; (ii) interest; (iii) fees by date of foreclosure based on current actual length of
137	137	107foreclosure process in Massachusetts; (iv) costs associated with all legally required actions to
138	138	108foreclose and percentage loss from foreclosure sale; (v) costs to meet all sanitary code
139	139	109requirements; (vi) property maintenance costs; (vii) costs associated with eviction, if part of
140	140	110standard operating procedure for creditor; and (viii) other ownership costs.
141	141	111 "Occupant", any person or group of persons, including the mortgagor, who occupied
142	142	112residential property prior to a foreclosure sale.
143	143	113 “Parties”, the mortgagor and the mortgagee or its mortgage servicer.
144	144	114 “Person”, any individual, corporation, partnership, limited liability partnership, limited
145	145	115liability company, trust or other entity.
146	146	116 “Property”, any real property, residential or commercial, or portion thereof, located in the
147	147	117municipality, including building or structures situated on the property. 7 of 14
148	148	118 “Residential real property", a 1 to 6 family structure or a residential condominium unit or
149	149	119a residential co-op unit.
150	150	120 “Responsible party”, (i) every person, entity, servicer, property manager, or real estate
151	151	121broker, who or which, alone or severally with others: (ii) has care, charge or control of Property,
152	152	122including but not limited to any dwelling, dwelling unit, mobile dwelling unit or parcel of land,
153	153	123vacant or otherwise, including a mobile home park, or any administrator, executor, trustee or
154	154	124guardian of the estate of the holder of legal title; (iii) is a mortgagee of any such property who
155	155	125has filed a complaint with the Land Court or Superior Court pursuant to the Massachusetts
156	156	126Servicemembers Civil Relief Act (St. 1943, c. 57 (1943), as amended through St. 1988, c. 142),
157	157	127including its successors or assigns; (iv) is an agent, trustee or other person appointed by the
158	158	128courts and vested with possession or control of any such property; (v) is a mortgagee who has
159	159	129made entry on any such property, pursuant to the terms of the mortgage, in order to make repairs
160	160	130upon mortgagor's failure to do so.
161	161	131 "Vacant property", a structure or building not legally occupied.
162	162	132 "Unit" or "residential unit", the room or group of rooms within a property, located in a
163	163	133municipality, which is used or intended for use as a residence by 1 household.
164	164	134 (b) A mortgagee who has sent the notice of the right to cure pursuant to section 35A
165	165	135pertaining to residential property in a city or town accepting the provisions of this section
166	166	136pursuant to section 4 of chapter 4, shall engage in a mediation program as set out in this section.
167	167	137 (c) A municipality may establish a foreclosure mediation program by ordinance or by-law
168	168	138and enter into any agreements necessary to implement the 8 of 14
169	169	139 (d) The foreclosure mediation program shall provide mediation prior to all foreclosures of
170	170	140residential property in which the mortgagor or mortgagor’s family resides. The program shall
171	171	141address all issues reasonably related to foreclosures on residential property, including but not
172	172	142limited to all commercially reasonable alternatives to foreclosure. The parties shall make a good
173	173	143faith effort in mediation. Mediations conducted pursuant to the program shall use the
174	174	144calculations, assumptions and forms that are established by or are made available through:
175	175	145 (i) the Federal Deposit Insurance Corporation and published in the Federal Deposit
176	176	146Insurance Corporations Loan Modification Program Guide available on the Federal Deposit
177	177	147Insurance Corporation's publicly accessible website;
178	178	148 (ii) the Home Affordable Modification Program;
179	179	149 (iii) any modification program that a mortgagee may use which is based on accepted
180	180	150principles and the safety and soundness of the institution and recognized by the National Credit
181	181	151Union Administration, the division of banks;
182	182	152 (iv) the Federal Housing Authority; or
183	183	153 (v) similar federal loan modification programs.
184	184	154 (e) A municipality shall provide for a means of evaluating and selecting qualified
185	185	155mediation program managers. The municipality shall also provide for a means of assessing and
186	186	156evaluating annually the municipality’s mediation program, including reports and data related to:
187	187	157 (i) the number of mortgagors who are notified of mediation;
188	188	158 (ii) the number of mortgagors who attend mediation and who receive counseling or
189	189	159assistance; 9 of 14
190	190	160 (iii) the number of certificates of mediation completion issued under the program; and
191	191	161 (iv) the results of the mediation program, including the number of loans restructured,
192	192	162number of principal write-downs, total value of principal write-downs, number of interest rate
193	193	163reductions and, to the extent such information is available, the number of mortgagors who
194	194	164default on mortgages within a year after restructuring, and the number of short sales and any
195	195	165other alternatives to foreclosure.
196	196	166 (f) The municipality may terminate a mediation program manager's participation in the
197	197	167mediation program for good cause. In such case, the mediation program manager shall deliver to
198	198	168the municipality all records and information in its possession for appropriate preservation and
199	199	169storage.
200	200	170 (g) Except for financial information otherwise permitted by law to be disclosed, any
201	201	171financial statements or information provided to the municipality or its approved independent
202	202	172counseling agencies or provided to the mortgagee or its mortgage servicer or mortgagor during
203	203	173the course of mediation in accordance with this article is confidential and shall not be available
204	204	174for public inspection. Any financial statement or information required to reasonably facilitate the
205	205	175mediation shall be made available as necessary to the mediator and to the attorneys or
206	206	176representatives, if any, of the parties to the mediation. Any financial statement or information
207	207	177designated as confidential under this section shall be kept separate and apart from other papers
208	208	178and matters not the subject of the mediation. No mortgagee or its mortgage servicer shall be
209	209	179required to disclose information in violation of chapter 93H, and 201 CMR 17. No information
210	210	180provided by the mortgagor in the course of the mediation may be used by the mortgagee or its
211	211	181mortgage servicer or its agents in a subsequent legal proceeding. 10 of 14
212	212	182 (h) For the purpose of the mediation program established by the municipality, a
213	213	183mortgagee shall send a copy of all notices given to a mortgagor pursuant to subsections (g) and
214	214	184(h) of section 35A, which relate to residential property in the municipality, to the clerk of such
215	215	185municipality, within 10 days of giving such notices to a mortgagor. The receipt by the
216	216	186municipality of said notice, or of a request for mediation from the mortgagor made within 15
217	217	187days of receipt of a mortgagor's notice pursuant to subsections (g) and (h) of section 35A, shall
218	218	188constitute the beginning of the mediation process as set forth in this section. At that time the
219	219	189municipality shall notify a mortgagee and a mortgagor of their rights and responsibilities under
220	220	190this section regarding mediation. Mediation shall commence within 45 days of the mortgagor
221	221	191receiving notice of the mortgagor’s right to cure as provided in subsections (g) and (h) of section
222	222	19235A. The municipality shall refer the matter for mediation to an approved mediation program
223	223	193manager, which shall have the responsibility of assigning a mediator and scheduling the parties
224	224	194to immediately commence mediation pursuant to this section. The mediation shall proceed with
225	225	195the parties' good faith effort to negotiate and agree upon a commercially reasonable alternative to
226	226	196foreclosure. The mediation shall continue without delay until completion, but shall in no way
227	227	197constitute an extension of the foreclosure process, nor an extension of the right to cure period.
228	228	198Notwithstanding the limitation in the previous sentence, the mediation may be extended by
229	229	199mutual agreement.
230	230	200 (i) The municipality’s mediation program established by this section shall include, but is
231	231	201not limited to, the following steps:
232	232	202 (1) The parties shall participate in a mandatory mediation conference at a location
233	233	203mutually convenient to the parties. All parties or their respective representatives present at the 11 of 14
234	234	204mediation conference must have authority to enter into any agreements renegotiating the
235	235	205mortgage that is the subject of the foreclosure, or to otherwise resolve the pending foreclosure.
236	236	206 (2) The mediation conference shall be scheduled at a time and place to be determined by
237	237	207the mediation program manager, but not later than 45 days following the mortgagor's receipt of
238	238	208the mortgagor’s notice of right to cure under subsections (g) and (h) of section 35A. The parties
239	239	209shall be sent notice under the mediation program by certified and first class mail at the parties’
240	240	210last known address(es), if any, or if none, then to the address to which the tax collector last sent
241	241	211the tax bill for the property. The notice shall contain the following declaration on the first page in
242	242	212English, Spanish, Cambodian, Russian, Greek, Vietnamese, French, Haitian Creole, and in any
243	243	213other language which the mortgagee or its mortgage servicer knows is the mortgagor’s primary
244	244	214language, and any other language deemed appropriate by the mediation program manager:
245	245	215“(insert city or town name) has a mediation program that may help you negotiate more
246	246	216affordable mortgage payments and avoid foreclosure. However, there is no express or implied
247	247	217guarantee foreclosure will be avoided. Have this notice translated at once and contact us for
248	248	218help.”
249	249	219 (3) If a mortgagor does not respond to the initial notice, the mediation program manager
250	250	220shall, to the extent possible, utilize additional outreach methods to supplement mailed notices.
251	251	221 (4) Prior to the scheduled mediation conference, the mortgagor shall be assigned a
252	252	222municipally approved loan counselor. If the mortgagor is already working with a municipally
253	253	223approved loan counselor, no assignment is necessary. However, such loan counselor must agree
254	254	224to work with the mortgagor during the mediation process in accordance with this section or any
255	255	225by-law or ordinance established under this section. 12 of 14
256	256	226 (5) The mortgagor shall be encouraged to attend a group orientation, if available, prior to
257	257	227the mediation conference. Such orientations shall be scheduled as necessary at times convenient
258	258	228to mortgagors. Interpretation shall be offered to mortgagors ahead of time, and provided at the
259	259	229orientation if deemed necessary by the mortgagor. The following shall be invited to participate in
260	260	230the design and implementation of the orientation: mediation program manager; 1 or more local
261	261	231legal services organizations; and 1 or more community organizations operating in the
262	262	232municipality that provide advocacy and peer-to- peer support for distressed homeowners.
263	263	233 (6) The orientation shall familiarize mortgagors with the full range of options that are
264	264	234available as commercially reasonable alternatives to foreclosure, with the foreclosure process,
265	265	235and with obligations of mortgagee or its mortgage servicers under the mediation program.
266	266	236 (7) The mortgagor and mortgagee or its mortgage servicer shall cooperate in all respects
267	267	237with the mediation program manager. The mortgagor shall complete any and all loan resolution
268	268	238proposals and applications as appropriate and provide evidence of all current income. The
269	269	239mortgagee or its mortgage servicer’s representative shall bring and make available the mortgage
270	270	240documents, as well as a detailed accounting of the outstanding balance, costs and fees.
271	271	241 (8) If, after 2 attempts by the mediation program manager to contact the mortgagor by
272	272	242mail, the mortgagor fails to respond to the mediation program manager's request to appear for the
273	273	243mediation conference, the requirements of this section shall be deemed to be satisfied upon
274	274	244verification by the municipally-approved mediation program manager that the required notice
275	275	245was sent. If these conditions are met, a certificate of mediation completion shall be issued
276	276	246immediately by the mediation program manager certifying that the mortgagee or its mortgage
277	277	247servicer has satisfied the mediation requirements of this section. 13 of 14
278	278	248 (9) If it is determined, after a good faith effort, that the parties cannot come to a mutually
279	279	249agreeable, commercially reasonable alternative to foreclosure, such good faith effort on behalf of
280	280	250the mortgagee or its mortgage servicer shall be deemed to satisfy the requirements of this
281	281	251ordinance. A certificate of mediation completion pursuant to this article shall be issued
282	282	252immediately and without delay by the mediation program manager authorizing the mortgagee or
283	283	253its mortgage servicer to proceed with a foreclosure in accordance with the terms of the mortgage
284	284	254and the relevant statutes.
285	285	255 (j) The municipality may enact and from time to time revise by by-law or ordinance a
286	286	256reasonable and appropriate mediation registration fee to be charged to the mortgagee or its
287	287	257mortgage servicer for the services attendant to administering the mediation program established
288	288	258under this section. Any fees assessed pursuant to such by-law or ordinance shall not be charged
289	289	259to the mortgagor. The mediation fees shall be paid to the municipality who will then use these
290	290	260fees to pay for the mediation program directly. It is intended there will be no cost of this
291	291	261mediation program to be borne by a municipality adopting this section.
292	292	262 (k) After a foreclosure by sale of a residential property in the municipality, and either
293	293	263prior to or simultaneous with the recording requirements of section 15, a seller shall file the
294	294	264certificate of mediation completion with the registry of deeds in the county or district in which
295	295	265the property is located. The municipality shall periodically request from the register of deeds
296	296	266information regarding attempts to record pursuant to said section 15 without complying with the
297	297	267recording requirements of this section.
298	298	268 (l) Until it is abolished, foreclosure by entry in a municipality accepting this section shall
299	299	269be effectual unless and until the memorandum or certificate recorded as required by section 2 14 of 14
300	300	270includes as an attachment a copy of the certificate of mediation completion. The municipality
301	301	271shall periodically request from the register of deeds information regarding attempts to record
302	302	272pursuant said section 2 without complying with the recording requirements of this section.
303	303	273 (m) A mortgagee or its mortgage servicer’s failure to comply with this section shall result
304	304	274in a fine of $300 payable to the municipality, for each instance of a violation, to be charged to
305	305	275the mortgagee or its mortgage servicer in accordance with section 21 of chapter 40. Every
306	306	276calendar day of noncompliance with section shall constitute a separate violation subject to the
307	307	277penalties described under this subsection, up until the end of the right-to-cure period given under
308	308	278a lawful notice pursuant to subsections (g) and (h) of section 35A. The fine or fines under this
309	309	279subsection shall be recovered by indictment or complaint pursuant to said section 21 of said
310	310	280chapter 40. No fines pursuant to this subsection shall be charged to the mortgagor either directly
311	311	281or indirectly.