New Mass. law toughens foreclosure safeguards
Massachusetts homeowners facing foreclosure and tenants in foreclosed apartment buildings will get extra protections under a bill signed into law Saturday by Gov. Deval Patrick.
Patrick signed the law at a single family home in Brockton that was foreclosed on but then rehabilitated by a local affordable housing agency and placed on the market.
“Even as Massachusetts continues its economic recovery, thousands of families are still dealing with the effects of foreclosure and they need immediate assistance,” Patrick said in a press release. “Combined with the 2007 comprehensive foreclosure law, we are redoubling our efforts to address the foreclosure crisis.”
The new law bars bankers and lenders from issuing wholesale eviction notices to tenants in foreclosed buildings. Under the law, tenants can only be evicted for just cause, like not paying their rent on time or other violations of their lease.
For homeowners, the new law temporarily extends an existing 90-day cooling off period designed to give property owners and their lenders time to negotiate new terms to a mortgage to help avoid a foreclosure. The new law extends the period to 150 days.
The cooling off period can be reduced back to 90 days if the lender makes a good-faith effort to work out a reasonable alternative to foreclosure.
In an effort to protect older homeowners, the new law requires those who want to obtain a reverse mortgage on their home to meet with a counselor approved by the Executive Office of Elder Affairs. It also criminalizes residential mortgage fraud.
Housing advocates have long pushed for the added safeguards, especially for tenants, who often find themselves caught between a landlord facing foreclosure and a bank that wants to empty a building of existing tenants to make it easier to resell.
Without the new law, tenants could be evicted by a bank even if they had a lease and had been paying their rent on time, according to Lew Finfer of the Massachusetts Communities Action Network, a group of community improvement organizations.
“A lot of tenants immediately get a notice saying we want you out,” he said. “It’s a huge hardship to have to move and pay a new rent and a security deposit.”
Bankers and real estate agents say the bill is much improved, compared to an earlier version which they said would have stripped away too many of their rights.
Gregory Vasil, the CEO of the Greater Boston Real Estate Board said once a building is foreclosed on, the goal is to get it back on the market and into productive use as soon as possible.
“Nobody wants them to sit vacant,” he said.
He said the final version of the bill would still allow a building owner who is facing foreclosure, but is able to negotiate a purchase and sale agreement with a new buyer, to evict tenants. But once the lender or bank takes control of the property, tenants could not be evicted.
Local banks have been closely monitoring the new law’s requirements, including a provision that gives property owners up to 150 days to negotiate new terms of a mortgage, according to Jon Skarin, director of federal policy for Mass Bankers Association.
“Because many of the provisions (of the law) kick in immediately, it is going to cause some confusion in the market,” said Skarin. “Our members have been scrambling to try to comply with the law.”
Lawmakers said the legislation was designed not just to help individual homeowners and tenants, but to fend off blight that can come from too many foreclosed properties in a single area.
“When a property lays vacant and abandoned it is an invitation to drug addicts and vandals, and can be a general eyesore to a whole neighborhood,” said House Committee on Ways and Means Chairman Charles Murphy, D-Burlington.
The bill also creates a new property tax exemption that lets a charitable organization that acquires a foreclosed property — and plans to create low and moderate income affordable housing there — to be exempt from property taxes until it rents or leases the property.
The exemption would expire seven years after purchase.
The new law comes as the state continues to struggle with high numbers of foreclosures.
There were 1,313 foreclosure deeds recorded in Massachusetts last month, compared with 628 in June 2009, according to The Warren Group, an independent publisher of real estate data.