BOSTON (AP) — The Massachusetts House of Representatives has passed a compromise bill designed to prevent unnecessary home foreclosures in the state by requiring lenders to modify certain mortgage loans and banning foreclosures that do not have proper documentation.
State representatives voted unanimously in favor of the conference committee's compromise Wednesday. The Senate is expected to vote on the measure Thursday.
The legislation would require lenders to assess a borrower's circumstances and determine whether or not the net value in changing an existing loan is more than the anticipated recovery from foreclosure. If so, the lender is required to offer a loan modification to the borrower.
It also prohibits lenders from foreclosing on properties without proper documentation and includes provisions to create a task force to study mediation programs and their effectiveness, as well as ways to prevent unnecessary vacancies following foreclosures in the state. The bill is based on recommendations from Massachusetts Attorney General Martha Coakley.
Rep. Michael Costello, who headed the foreclosure conference committee, said the committee chose not to include the Senate proposal to make all loans subject to mediation because there wasn't enough data regarding the effectiveness. Instead, he said, the committee followed the House's proposal to go after "risky" loans and included a commission to study mediation and its effects.
"We didn't say mediation is a bad idea. We just chose a different path," said the Newburyport Democrat.
Costello said the foreclosure prevention bill would provide Massachusetts residents facing foreclosure with necessary relief.
Republican Rep. Daniel Winslow of Norton also commended the compromise, calling it a "solid beginning."
Winslow said the bill will help residents facing foreclosure, but more should be done to assist those who are paying their loans but barely getting by.
"We can't send a message to our citizens that the only way the government helps you is if you don't pay your bills," he said, adding that he hopes the legislature will work on this issue in the future.
Coakley has been pushing for the legislation, calling it "critical" to keeping people in their homes without having banks make sacrifices. She said the bill also will help the state's economy by creating standards to promote "reasonable loan modifications."
In April, Coakley announced a "HomeCorps" initiative to ensure that all Massachusetts borrowers facing foreclosure receive an evaluation and assistance from a loan modification specialist. The program is funded by the state's share of a nationwide settlement involving the five largest mortgage servicers and their connection with unlawful foreclosures and loan servicing.
Costello called the committee legislation, which the attorney general influenced, and the "Homecorps" program a "one-two punch" to help end the foreclosure crisis in Massachusetts.