Fennell, Walsh want 90-day grace period on foreclosures

LYNN – Homeowners facing foreclosure would get a three-month window to cure defaults and mortgage loan originators would face tough new licensing standards under legislation supported by local legislators.”Hopefully, with the combination of additional state scrutiny toward mortgage lenders and greater public awareness, we will see foreclosure rates decline in the ensuing years,” said state Rep. Robert Fennell.In Massachusetts, the foreclosure rate is up 76 percent in the past year, with 1,000 foreclosures in Boston in the past six months. The wave of foreclosures is not expected to crest until 2008, when many variable-rate mortgages readjust.The legislation establishes counseling requirements for first-time homebuyers entering into sub prime loans to insure they fully understand the financial commitment of their home loan.”Each day we hear about foreclosures that could have been avoided if consumers had greater knowledge about their mortgage lender,” Fennell said.Fennell and state Rep. Steven Walsh support legislation aimed at reversing the foreclosure trend and helping property owners entangled in it.The legislation requires lenders to give homeowners 90 days to repay the interest and payment balance accumulated, before starting foreclosure proceedings.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 legislation is critical to the prosperity of so many communities in Massachusetts and to the economy of our state,” said Walsh.The bill also encourages mortgage lenders to work with borrowers to avoid foreclosures in the coming months and years. 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 1 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.The bill also requires licensing of 20,000 loan originators with a $750 license fee. The state Division of Banking would also be required to hire more regulators to monitor mortgage-lending practices.The bill also mandates that the Division of Banks keep a record of the mortgage practices of each loan originator in Massachusetts. The DOB will evaluate this information and rate lenders performance in the market.The Legislature is acting on the foreclosure bill in the wake of Attorney General Martha Coakley’s August proposal to change state consumer laws. She wants mortgage brokers to disclose how interest rates or other charges will increase and bar them from making a loan if they don’t have a reasonable belief the borrower is able to repay it.Coakley’s proposals would also prohibit mortgage brokers from processing loans that are not in the borrower’s interest and outlaw the practice of lenders or brokers steering borrowers to more costly loan products.