Homeowners in Massachusetts have gained new protections against unfairly losing their homes, including a regulation that prevents national and state lenders from foreclosing if an application for a loan modification is in process.
Also referred to as “dual tracking,” the practice has drawn the ire of state authorities and consumer advocates and is a prohibited under the National Mortgage Settlement with five of the biggest lenders.
But a few states have or are considering their own regulations to ensure that dual-tracking is put to rest by all home lenders.
The new Massachusetts regulations were established as a result of a law signed by Governor Deval Patrick
in August 2012.
Under the new rules, mortgage servicers will be required to explore more options to help borrowers avoid foreclosure. Third-party mortgage servicers will be prohibited from initiating a foreclosure when an application for a loan modification is in process.
The state regulations were filed by the Patrick Administration’s Division of Banks.
“This is another step in the right direction to further strengthen protections provided to Massachusetts borrowers and homeowners,” said Consumer Affairs and Business Regulation Undersecretary Barbara Anthony.
“These new rules complement the recently adopted foreclosure prevention regulations that require lenders and servicers to modify certain mortgage loans if the cost of modification is less than the cost of foreclosure.”
Third-party loan servicers will also have to provide a “single point of contact” for the borrower, follow detailed loan modification procedures, and communicate with borrowers in a timely manner to comply with the new regulations.
These new regulations include many provisions under the National Mortgage Settlement with the five largest national mortgage servicers. The Division also considered the recently published Consumer Financial Protection Bureau (CFPB) rules which go into effect in January 2014.
“These regulations ensure that state regulatory requirements are consistent with the requirements of the Bureau’s mortgage servicing rules,” said Commissioner of Banks David Cotney. “These rules will provide clarity for lenders and servicers so that they can appropriately and fairly service the mortgage loans of Massachusetts borrowers.”
On Jan. 1 of this year, Californians facing foreclosure got new state protections against lender abuses, including curbs on dual tracking.