Governor Patrick has signed into law Chapter 258 of the Acts of 2010, An Act Relative To Mortgage Foreclosures, which expands the rights of homeowners facing possible foreclosure. The law, which was approved on August 7, extends the 90-day right to cure a default under existing law protecting homeowners facing foreclosure to 150 days and also limits a lender’s ability to proceed directly to foreclosure after an earlier default that the borrower has cured. Under current law, a lender can proceed directly to foreclosure if, within any five-year period, a borrower defaults a second time after curing an earlier default within that period. The new law shortens that five-year period to three years, requiring a new 150-day right-to-cure notice following a default once a three-year period from the initial default expires. The right-to-cure provisions include an incentive for lenders to work with homeowners to modify loans in default by allowing the right-to-cure period to be reduced to 90 days if a lender’s representative confers with the borrower and makes a good-faith effort to negotiate a commercially reasonable alternative to foreclosure. The new law also places limitations on the ability of a mortgagee or subsequent owner to evict residential tenants in a foreclosed property. The new law requires “just cause” to evict such tenants, which includes failure to pay rent after receiving written notice, using the property for an illegal purpose, or certain lease violations. Finally, the new law establishes new disclosure and counseling requirements applicable to reverse mortgages. The right-to-cure provisions went into effect on August 7, 2010, and the other provisions will become effective at different times over the next several years.
Nutter Notes: The Massachusetts Division of Banks has published a series of answers to frequently asked questions about the changes to the timing and other provisions of the right-to-cure notice made by the new law. In the FAQs, the Division takes the position that the 150-day right-to-cure notice only applies to borrowers who are served a notice after August 7, 2010, and not to borrowers who have been served a 90-day right-to-cure notice before that date. The FAQs also note that 4 new disclosures must be contained in the right-to-cure notice, namely that the mortgagor may sell the property and use the proceeds to pay off the mortgage before the foreclosure sale, that the mortgagor may redeem the property by paying the total due before the foreclosure, that the mortgagor may be evicted after the foreclosure sale, and that the mortgagor may have certain additional rights depending on the terms of the residential mortgage. The FAQs state that the Division does not intend to issue emergency regulations relative to the changes to the right-to-cure notice made by the new law and that the filing requirements and procedures with the Division for the right-to-cure notice remain the same. The Division’s FAQs are available on its website and may be updated from time to time.