Boston, MA – This afternoon, Senate Bill 2394, An Act to Stabilize Neighborhoods, was passed today in the state Senate. The legislation will protect thousands of families facing foreclosure at no additional cost to the Commonwealth.

“Today represents a critical step toward protecting residents and neighborhoods across Massachusetts” said Senator Sonia Chang-Díaz, who represents many of the Boston neighborhoods most affected by foreclosure. “As we’ve seen in news reports over the past few days, the foreclosure crisis is not over. Reform on this issue has been one of my top legislative priorities since taking office just over a year ago, so I’m thrilled at the passage of this bill.”

The legislation incorporates several measures championed by Chang-Díaz, a member of the legislature’s Joint Committee on Housing. A main provision in the bill will protect tenants from being unjustly evicted from their building when that building is foreclosed upon. Currently, tenants who are in perfectly good standing with payment of their rent, but who happen to live in a building that’s getting foreclosed upon, are often thrown out of their homes. This is a problem that particularly affects urban neighborhoods, where there are many multi-family buildings. S.2394 prohibits the lending institution that forecloses on a house from evicting a tenant unless that tenant has otherwise violated their lease.

Another provision strengthens the notification that lenders must send to homeowners when they intend to foreclose. Under the bill, lenders will be required to clearly identify who the foreclosing party is, and whom the homeowner may contact to dispute the foreclosure. They must also inform the homeowner of their rights during the foreclosure process. And the notice must include an advisory for non-English speakers to have the notice translated.

S.2394 also extends the current 90-day “right to cure period” to 150 days. The right to cure period will enable lenders and homeowners to develop alternative plans for homeowners to stay in their homes. Within those 150 days, according to the law the senate passed today, the lender must engage in a good faith effort to negotiate a commercially reasonable alternative. A good faith effort by the lender must include: (1) an assessment of the borrower’s current circumstances, such as income and debts, (2) consideration of the value of payments under a modified mortgage loan, compared to the anticipated recovery from a foreclosure sale, and (3) the interests of the creditor including.

Chang-Díaz successfully offered amendments to the bill that would do the following:

• Strengthen, clarify, and provide a mechanism for producing the translation advisory required for non-English speakers. The new language will require that the advisory appear in the five most commonly used languages in the state or region, according to Census data, or the whatever language the lender has already used regularly to communicate with the borrower.

• Require that lenders make important documents available to the creditor in advance of their meeting to negotiate a “good faith” alternative to the foreclosure.

• Prompt the Division of Banks to create a model form that lenders could use to comply with the notification requirements in the bill, in order to avoid duplication of work across many banks and lending institutions.

“This legislation comes at a needed time for the state,” said Chang-Díaz. “With over 52,000 foreclosure starts in Massachusetts during 2008 and 2009 alone, foreclosure and the renter evictions that often accompany them, remain a major economic scourge facing families across Massachusetts. At the same time, the neighborhoods surrounding those homes and empty apartments are scarred with vacant buildings, decreased property values, and increased crime. Foreclosure rates also remain as a major weight holding our economy and our neighborhoods back from economic recovery.”

Other provisions in the legislation include:

• Establishes a new local option property tax exemption. This exemption permits a charitable organization that acquires a foreclosed property, and plans to create low and moderate income affordable housing there, to be exempt from property taxes until it rents or leases that property, but not for more than 7 years after purchase.

• Homeowners who want to obtain a reverse mortgage on their home must meet with a counselor approved by the Executive Office of Elder Affairs. Applies to homeowners with less than 50% area median income, and with less than $120,000 in assets.

• Any lender who forecloses on a property with tenants receiving state or federal rental subsidies must assume both the lease and the rental subsidy agreement of those tenants.

• Amends the larceny statute to include fraudulent procurement of credit for a person other than oneself, and expands the prohibition to include credit procured from mortgage lenders.

• Establishes the crime of mortgage fraud.

• Establishes a 2-year pilot program within the Attorney General’s Office that requires all property owners, including lenders, trustees, and service companies, to register and maintain vacant and/or foreclosing properties in the commonwealth.

The legislation now heads to the House of Representative’s for their deliberation.