Foreclosure prevention law takes effect in Massachusetts

Last August, Massachusetts Governor Deval Patrick signed a bill that contains certain requirements to give more protection to struggling homeowners. For example, if a loan is considered risky, the lender must offer modifications to the borrower before foreclosure. Also, home mortgage lenders are banned from pursuing foreclosure if they do not have the correct documentation.

The major provision that will help many homeowners requires the lender to determine whether the net value of modifying the loan exceeds the anticipated amount that the lender will recover from a foreclosure. If it is, then the lender must offer a modification to the homeowner.

Law aims to prevent foreclosure

Foreclosures are a big problem in Massachusetts. The town of Springfield alone saw 305 foreclosure deeds from the beginning of the year to August. Hampden County saw 604 foreclosure deeds and Franklin County saw 73.

The law took effect in November, so the benefits are still to be seen. The state undersecretary of Consumer Protection and Business Regulation, Barbara T. Anthony, says that the law is good for both the banks and homeowners because it makes the banks offer a modification if it is the best deal for them, and then the homeowner gets to stay in his or her house. The process of foreclosure really is expensive for the banks, and the law recognizes this.

The new law is also good for the community because more people will be able to stay in their homes, and the neighbors and schools will be stable.

Some lenders have already been working with the borrowers to modify their loans instead of pursuing foreclosure right away. Some nonprofit groups in Massachusetts have also been purchasing homes via short sale - purchasing homes for less than what is owed on the mortgage and allowing the lender keeps all of the profits. These nonprofit then sells the home back to the homeowner with a 30-year fixed-rate mortgage.

Not all banks agree with new law

Some banks do not favor the new law and do not agree with Anthony that it is good for them, too. They believe that if homeowners can easily get their mortgages modified, they will not have an incentive to try to make their payments because they know they can get a modification instead of being foreclosed upon. Some banks just do not see this as a good business strategy.

Homeowners struggling to keep up with their payments should contact an attorney to help them determine what their options are and make sure that they are being treated fairly.