In an effort to further reduce the foreclosure rate across the state, Massachusetts lawmakers recently passed a bill restricting home repossessions to certain properties types.
Under the legislation, spearheaded by Representative Michael Costello, financial institutions will only be able to foreclose on properties when the expected financial gain is more than what could be obtained through a loan modification, The Associated Press reports. Meanwhile, if it seems a foreclosure will net a higher profit, banks must provide a household with this specific data to legitimize the decision.
Additionally, to ensure no inaccurate information is provided, the lending regulation also implements a number of strict penalties for documentation and processing errors, should any occur during the process.
To create specific guidelines, a task force of 13 individuals, including legislators, law enforcement officials and industry experts, will be created to implement a feasible system that works in favor of both borrowers and lenders. Funding for the initiative is expected to come from the state's share of the recent multibillion-dollar settlement reached between the nation's largest mortgage lenders and state attorneys general.
Certain lawmakers applauded the efforts taking place, but claim more needs to be done to assist homeowners who have continued to make loan payments on time, but are still saddled with negative equity and face high mortgage rates.
"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," Representative Daniel Winslow said, according to the report.
Meanwhile, Massachusetts Attorney General Martha Coakley called the legislation a step in the right direction and said it was a critical measure to keep families in their homes while allowing banks to stay profitable. In addition, the initiative could also help further bolster the state's economy, which managed to escape relatively unscathed after the recent recession.
Previously, Coakley announced the start of a "HomeCorps" program, which ensured Massachusetts homeowners facing foreclosure were guaranteed council from a loan modification specialist to examine their options.
At the end of June, an estimated one in every 1,041 homes in Massachusetts were in some stage of the foreclosure process, representing one of the lowest rates in the country, according to RealtyTrac. Should this new legislation prove to be successful, it could drive home repossession activity even lower, and set an example for similar nationwide initiatives in the near future.