Sciortino bill offers foreclosure relief

by Erin K. Gray

The state representative for Teele Square announced Oct. 25 that the House passed his new legislation to help stem the rising tide of mortgage foreclosures.

“This legislation will help families in Somerville that have been hit hard by the foreclosure crisis,” said State Rep. Carl M. Sciortino Jr., who in addition to Ward 7 represents the Precincts 1 and 2 of Ward 4.

In Somerville, there were 120 foreclosure notices issued in the year from July 2006 through June, compared with only 51 in the previous 12 months. The wave of foreclosures is not expected to crest until 2008, when many variable-rate mortgages readjust, he said.

The new legislation encourages banks to help borrowers, providing a new three-month window to cure defaults and mandating tough new licensing standards for mortgage loan originators, he said.

“Under this legislation, homeowners would be protected from foreclosure by the 90 day right-to-cure provision, which would require lenders to give homeowners 90 days to repay the interest and payment balance accumulated, before starting foreclosure proceedings,” said Sciortino.“If the borrower successfully completes this payment, their mortgage would be reinstated without penalty or foreclosure. This clause insures that consumers are not saddled with the weight of enormous legal fees associated with a foreclosure filing for simply falling behind on payments for a short period.”

This bill will also encourage mortgage lenders to work with borrowers to avoid foreclosures in the coming months and years. Sciortino said under this legislation mortgage lenders will be motivated to shift adjustable rate mortgages to fixed rates.

Borrowers can request to extend the length of their loan or increase their interest rate to achieve a fixed rate if they pay lenders a one percent fee on the cost of their mortgage. This one-time fee would enable mortgage holders to secure a fixed rate and encourage lenders to provide this security to homeowners, he said.
 
Hoping to guard against future problems, the bill would require licensure of 20,000 loan originators with an annual license fee of $750, allocating $3 million to employ regulators under the Division of Banking to more aggressively regulate mortgage lending practices across the Commonwealth.

“The problem of mortgage foreclosures is only going to worsen so acting now with bold measures is critically important,” said House Speaker Salvatore F. DiMasi, D, Boston.

“In passing this legislation, the House of Representatives voted to protect future home-buyers from predatory lending and bring meaningful help to those facing foreclosure,” he said.

Sciortino said unique to this bill is the creation of counseling requirements for first-time home buyers entering into sub-prime loans to insure they fully understand the financial commitment of their home loan.

The bill will also create a pilot program for impacted communities provides $2 million for foreclosure and mortgage counseling centers, he said.

In addition, the bill will protect tenants-at-will post foreclosure, and add reporting requirements for non-bank lenders of more than 50 loans, he said.

“We need to do everything we can to help protect the people who have been most directly affected by the foreclosure crisis,” said State Rep. Timothy J. Toomey, D, Somerville. “I am proud of the efforts of the legislature to address this crucial issue.”