Alert January 22, 2013

Massachusetts Division of Banks Proposes Amendments to Regulations to Implement New Foreclosure Law

The Massachusetts Division of Banks proposed amendments to current regulations to implement the “Act to Prevent Unnecessary and Unreasonable Foreclosures,” which went into effect November 1, 2012 (see August 7, 2012 Alert). The Act requires creditors holding “certain mortgage loans,” which are defined by features of the loan (e.g., interest-only or adjustable rate mortgages), to “take reasonable steps and a good faith effort to avoid foreclosure.” The proposed amendments set forth form notices to be used by servicers as required by the Act (i.e., Right to Request Modified Mortgage Loan Notice and Right to Cure Notice).

The proposed amendments also establish a safe harbor for compliance. Under the proposed regulations, a creditor that does not provide the required Right to Request a Modified Mortgage Loan Notice and written assessment satisfies the requirements under the Act if the creditor can demonstrate one of the following: (1) that any time within the previous 3 years preceding the delivery of the Right to Cure Notice, the borrower accepted a permanent loan modification of a “certain mortgage loan” that provided for an affordable monthly payment; (2) that at any time within the previous 3 years preceding the delivery of the Right to Cure Notice, the creditor notified the borrower of his or her ineligibility for a modified mortgage; or (3) the creditor attempted a good faith effort to resolve the default with the borrower, but was unable to do so and is eligible to shorten the cure period from 150 to 90 days as permitted by Massachusetts law.

The Division of Banks has also scheduled a February 6, 2013 hearing for public comments on the proposed amendments to the regulations.