Right to Cure seen stemming Mass. foreclosures

A Massachusetts regulation designed to stem foreclosures caused by the housing-bubble collapse of 2008 appears to be working, according to Gov. Deval L. Patrick’s administration. Recent data suggests that the number of foreclosure petitions, paperwork that starts the process, have significantly decreased. As a result, actual foreclosures have decreased as well.
Commonly known as the Right to Cure regulation, the Mass. Division of Banks on Jan. 31 temporarily withdrew amendments to the regulation in order to address some minor corrections that would not impact its purpose. The planned amendments are designed to provide a standard form to be sent to borrowers before commencing foreclosure proceedings. Incidental corrections to the form necessitated the delay.
“There were some technical glitches with the form that needed correcting and they have been fixed,” said Jason Lefferts, spokesman for the Division of Banks. The amended regulation, which does not need legislative review, should become effective March 2, according to Lefferts. The new form was due to become mandatory April 23, but the state has yet to announce if the April date will change due to the delay.
The earliest version of the law was established in May 2008, and required lenders to provide a 90-day right to cure, or fix, the loan problem – to borrowers prior to commencing foreclosure. The law was amended in 2010 in order to extend the period to 150 days. No official forms were provided with the regulation, leaving mortgagees and their loan servicers to define proper and adequate notice. This year’s changes will unify the information the notice is to provide.
Despite the lack of an official form to date, the measure appears to be working. According to information released by The Warren Group, foreclosures in Massachusetts lessened in 2011, even though an increase was observed in the month of December. More significantly, foreclosure petitions were down 47 percent, from 23,931 in 2010 to 12,634 last year. In addition, completed foreclosures dropped more than 30 percent, from 12,238 in 2010 to 8,528 in 2011. The Warren Group has reported real estate news in New England for 135 years and is the publisher of Banker & Tradesman. According to RealtyTrac, a national foreclosure Web site, one out of every 906 housing units was in foreclosure in Massachusetts last December. The ratio in Rhode Island was one in 1,009, a better rate than the one in 954 reported in November. Currently, the national average is one in 634.
According to Timothy M. Warren Jr., chief executive of The Warren Group, the numbers are also indicative of a stronger economy in 2011 than in past years. “It’s promising to see a drop in foreclosures for the year. However, it’s no secret that the low numbers are indicative of lenders slowing foreclosure processes throughout much of the year,” he said in a news release. “I’m expecting that we’ll see a true picture of the market as the process gets back on track in the coming year.”
In addition, last November, Massachusetts issued its foreclosure statistics for 2010. The data showed a notable decrease in pre-foreclosure notices, particularly in the latter half of the year. The extension of the 90-day period to 150 days took effect Aug. 7.
Of the 22,198 foreclosure petitions filed in 2010, 54 percent were related to notices mailed to homeowners in 2009; only 29 percent were associated with notices filed in 2010. Figures reported by The Warren Group and the state are not identical due to slightly different reporting periods.
The Patrick administration credited the regulation for contributing to lessening the deluge of filings. “The right-to-cure process is vital to the homeowner, who has time and opportunity to find a solution to their foreclosure problem,” said Commissioner of Banks David Cotney. “We encourage homeowners facing foreclosure to immediately begin a conversation with their lender and a local, HUD-approved housing counselor to find potential options.”
The figures also showed 28 percent of the notices sent were for mortgage delinquencies between 61-120 days, while 35 percent were for loans that were late by more than 120 days, an indication that lenders were allowing more time before pursuing legal alternatives.
In order to begin the process under the Massachusetts’ regulation, the mortgagee must be able to demonstrate it has negotiated to reach an alternative to foreclosure in good faith with the borrower, and at least one meeting between the two parties has taken place. The mortgagee must verify that loss-mitigation information was provided to the borrower before the meeting, and that afterwards, they were not able to reach a resolution other than foreclosure. A 90-day notice is acceptable only if the mortgagee can show that the borrower failed to respond within 30 days to the offer to negotiate.
The new notice includes a warning to consumers translated into Spanish, Portuguese, French and Chinese. It must provide the loan balance and a cure amount, with those items broken down and itemized. Information for payment contact, Home Preservation Foundation and the Division of Banks’ foreclosure-prevention program must be provided. The right-to-cure’s expiration date must be provided as well as a statement that failure to pay could result in foreclosure and eviction, and contact information for the mortgagee’s representative, who can discuss the borrower’s dispute of the right-to-cure amount. •

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