The state’s Division of Banks has filed new regulations that prevent third-party loan servicers from foreclosing on a property if a loan modification is in process.
The regulations, which took effect last Friday, are part of a broader effort by Governor Deval Patrick’s administration to curb unnecessary bank foreclosures.
“These rules will provide clarity for lenders and servicers so that they can appropriately and fairly service the mortgage loans of Massachusetts borrowers,” David Cotney, the state’s commissioner of banks, said in a statement.
This past summer, the state adopted similar regulations for mortgage lenders.
These new regulations include provisions that were part of last year’s nationwide settlement between the attorneys general of 49 states, including Massachusetts, and the five largest mortgage servicers. The $25 billion settlement has helped 650,000 borrowers, short of the 1 million borrowers federal officials had initially anticipated would get relief, according to a recent report.
Still, the state’s new rules promote “reasonable loan modifications, keeping people in their homes and properties on the tax rolls, all without requiring banks to sacrifice the bottom line,” Attorney General Martha Coakley said in a statement.