Ch. 244 s. 35B “Certain Mortgages” and the Right to Request a Modified Mortgage Loan Bill Allen, Deputy Director
HomeCorps Loan Modification Initiative
Presenta(on Overview •  Overview of Chapter 244 s. 35B •  What is a “Certain Mortgage?” •  The Right to Request a Modified Mortgage Loan no(ce (the “35B No(ce) •  What protec(ons do Certain Mortgages get? –  Preserving the 150 day right to cure –  35B Applica(on Review Timeline •  Tips for working 35B cases © 2015 MassachuseRs Office of the ARorney General An Act Preven(ng Unlawful and Unnecessary Foreclosures Became law Aug. 3, 2012, with most homeowner protec(ons effec(ve Nov. 1, 2012. Amended M.G.L. c. 244 “Foreclosure & Redemp(on of Mortgages:” –  Added § 35B establishing significant protec(ons for homeowners with “certain mortgages.” –  Other changes included § 35C prohibi(ng specific conduct by creditors and § 14 regarding foreclosure no(ces and proof of chain of (tle. Division of Banks was given authority to create regula(ons. Regula(ons have been published at 209 CMR 56.00 et seq. © 2015 MassachuseRs Office of the ARorney General “Certain Mortgage” §35B(a) Owner occupied property where the loan has any one of these features: (1)  Introductory rate for ≤ 3 years that is 2% lower than fully indexed rate; (2)  Interest-­‐only payments for any period of (me; (3)  Payment op(on, where any op(on results in nega(ve amor(za(on; (4)  Loan did not require full documenta(on of income or assets; (5)  Prepayment penalty exceeds those allowed by MGL c. 183 § 56 or federal law (e.g. penalty in excess of 3 months’ interest, prepayment penalty extends beyond 36 months); (6)  At origina(on, LTV ra(o of 90% and DTI > 38%; (7)  At origina(on, one transac(on where CLTV ra(o exceeded 95%. a creditor is unable to determine whether the loan has one or more of these If factors the mortgage is a “certain mortgage.” © 2015 MassachuseRs Office of the ARorney General Not a “Certain Mortgage” §35B(a) •  Loans financed by the MassachuseRs Housing Finance Agency •  Loans originated though programs of MassachuseRs Housing Partnership Fund •  A loan on a property that is not “owner occupied” –  Vaca(on Homes –  Rental Proper(es •  A loan which is not “made primarily for personal, family or household purposes…” –  Business loans © 2015 MassachuseRs Office of the ARorney General Does 35B Apply? •  Did they get a No(ce of Right to Request a Modified Mortgage Loan (“35B no(ce”)? •  Make this a part of every client intake •  For clients early in the foreclosure process, the no(ce may s(ll be on the way, tell them: DON’T THROW IT OUT! The 35B NoEce contains a NoEce of ElecEon which must be completed and returned within 30 days of the creditor’s noEce being sent. © 2015 MassachuseRs Office of the ARorney General Date Sent compare to date actually received Due Date © 2015 MassachuseRs Office of the ARorney General ©2015 Office of MassachuseRs ARorney General Martha Coakley A Typical Foreclosure Timeline in MassachuseRs* Borrower Defaults SCRA No(ce & 30 Day Response Period 150 Day Right to Cure Period Publica(ons of Sale (minimum 3 weeks) Referral to Foreclosure 35B Elec(on Period only 30 days Sale Date No(ce to Quit & Evic(on Process *The events leading to a foreclosure may vary significantly. This is par(cularly true where a borrower has defaulted and reinstated the loan or where foreclosure has been resumed aqer a prior halt to the process. © 2015 MassachuseRs Office of the ARorney General Reasonable Steps & Good Faith §35B(b) Creditor required to take “reasonable steps” and make a “good faith effort to avoid foreclosure.” Defined as where creditor has considered: –  An assessment of borrower’s ability to make an affordable monthly payment –  NPV of receiving payments compared to net recovery following foreclosure –  Interests of creditor (including investors) considered Creditor is prohibited from publishing a noEce of foreclosure sale unEl these steps are taken © 2015 MassachuseRs Office of the ARorney General Presump(on of Good Faith & Compliance §35B(b)(2)(iv) A creditor is presumed to have acted in good faith and to have complied if: –  A loan modifica(on is offered “in all circumstances where the [NPV] of the modified mortgage loan exceeds the an(cipated net recovery at foreclosure” NPV is the key to 35B © 2015 MassachuseRs Office of the ARorney General 35B Loan Modifica(on Review Borrower Defaults SCRA No(ce & 30 Day Response Period 150 Day Right to Cure Period Publica(ons of Sale (minimum 3 weeks) Referral to Foreclosure 35B Elec(on Period only 30 days Sale Date No(ce to Quit & Evic(on Process *The events leading to a foreclosure may vary significantly. This is par(cularly true where a borrower has defaulted and reinstated the loan or where foreclosure has been resumed aqer a prior halt to the process. © 2015 MassachuseRs Office of the ARorney General Borrower 35B Loan Modifica(on Timeline §35B(c) Borrower must return the No(ce of Elec(on with all documents required by 209 CMR 56.06(2) within 30 calendar days from when the no(ce was sent Creditor 30 60 35B No(ce is sent Send a missing items leRer within 5 business days of receipt of the No(ce of elec(on 90 120 Issue an “assessment” within 30 calendar days from receipt of the No(ce of Elec(on, including: verified financials, NPV analysis, and either a modifica(on offer or a denial © 2015 MassachuseRs Office of the ARorney General 150 © 2015 MassachuseRs Office of the ARorney General Borrower must return the No(ce of Elec(on with all documents required by 209 CMR 56.06(2) within 30 calendar days from when the no(ce was sent Creditor 30 60 35B No(ce is sent Send a missing items leRer within 5 business days of receipt of the No(ce of elec(on If denied: Inves(gate any alleged errors in the creditor’s assessment If approved: Borrower may submit a counter-­‐offer within 30 calendar days 90 120 Issue an “assessment” within 30 calendar days from receipt of the No(ce of Elec(on, including: verified financials, NPV analysis, and either a modifica(on offer or a denial © 2015 MassachuseRs Office of the ARorney General 150 Process should be complete by day 150 Borrower 35B Loan Modifica(on Timeline §35B(c) Tips for working with the 35B (meline •  Don’t wait to submit the No(ce of Elec(on! •  An(cipate likely document request and start collec(ng them •  Return the no(ce of elec(on via cer(fied mail or with Fed Ex/UPS tracking •  Keep proof the loan servicer received the no(ce of elec(on on (me – “green card” for cer(fied mail or the Fed Ex/UPS tracking informa(on •  Request confirma(on that the homeowner’s 150 day right to cure has been preserved •  Make sure the point of contact you’re working with at the bank is aware of the special requirements of 35B modifica(on reviews. If they don’t know—
inform them! © 2015 MassachuseRs Office of the ARorney General Issues you may encounter •  What if an applica(on is already in process when the borrower receives the 35B no(ce? •  What if the 35B No(ce is dated many days prior to the homeowner receiving it? Doesn’t that cut into the borrower’s 30 day (me to complete the applica(on and return the No(ce of Elec(on? •  Under what circumstances should a borrower make a counter-­‐
offer? •  How does HAMP overlap with Ch. 244 s. 35B? Is a HAMP review sufficient to comply with sec(on 35B? Is it necessary? © 2015 MassachuseRs Office of the ARorney General Issues to Track If the no(ce was returned on (me, did the Creditor… 1.  Send a complete 5-­‐day Missing Items LeRer? 2.  Issue the “assessment” within 30 days of receiving the No(ce of Elec(on? 3.  Offer an NPV posi(ve modifica(on if one was available? 4.  Inves(gate any alleged errors in the Creditor’s assessment? 5.  Provide Access to the Creditor’s Representa(ve? 6.  Respond to a counter offer within 30 days? 7.  Complete the review process before publishing a no(ce of sale? © 2015 MassachuseRs Office of the ARorney General