Massachusetts extends foreclosure relief

A new Massachusetts law passed this week extends the state’s foreclosure relief for homeowners, attempts to protect renters from eviction, and mandates negotiations between mortgage lenders and debtors.

The law extends the “right to cure” period from three months to almost five months if lenders do not attempt to negotiate a loan modification with the homeowner. This would effectively delay any foreclosure by an additional two months. The lender must have at least one meeting or conversation with a home owner about a loan modification, or suffer the additional delay as a penalty. It remains to be seen if these meetings will turn out to be genuine attempts to negotiate the terms of the loan, or perfunctory communications designed just to satisfy the legal requirement.

The law also prevents lenders from evicting tenants from homes that are in foreclosure, so long as the tenants are current on their rent. The tenants may be evicted, however, once the property is sold to a third-party buyer.

The law has the banking industry squirming, but it remains to be seen how effective it will be, and how it will influence bankruptcy filings. In certain circumstances, adding an additional two months to the foreclosure process may be enough time to help a Massachusetts debtor finance a Chapter 13 bankruptcy plan to try to save their home.

 

By Doug Beaton

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