Coakley pushes for law offering mortgage aid
Massachusetts Attorney General Martha Coakley said Monday a new federal study showing more troubled homeowners are staying in their homes after their mortgages are adjusted demonstrates that Massachusetts should require lenders to consider such workouts before seizing a residence.
The study, released by the Office of the Comptroller of the Currency, found 70 percent of US homeowners who received mortgage help from lenders in 2011 remain current on their new mortgages, compared with 37 percent in 2009. The study found that a major reason for the higher success rate is that lenders are now more willing to significantly reduce monthly mortgage payments of delinquent borrowers.
“When loan mods are done right and when they are done sensibly, they are actually a very good tool to make sure people stay in their homes, and it is good for the banks,’’ Coakley said.
The legislation sponsored by Coakley would force lenders to study certain loans before foreclosure and offer workouts if they find that offering a loan modification would be more profitable than a foreclosure. The requirement would apply to homeowners with risky loans, such as subprime mortgages, that are likely to fail.
“It will stop the flood of unnecessary foreclosures,’’ Coakley said. “If we can do that, it is one of the key steps to turning the economy around.’’
The bill is currently pending in the Joint Committee on Financial Services. The Massachusetts Bankers Association said the current version goes too far by requiring lenders to act, creating legal liability and financial punishments if they fail to produce a positive outcome.
“There’s a lot of issues we’ve expressed pretty strong reservations and objections to,’’ said Kevin Kiley, executive vice president of the Massachusetts Bankers Association.
The attorney general’s office also is preparing for an influx of money - about $45 million - from major US lenders as part of the multistate settlement between loan servicers and state attorneys general over allegations of fraud and sloppy paperwork.
Coakley’s office last week requested applications from nonprofit organizations to run statewide programs to help troubled borrowers who are fighting foreclosure or already have lost their homes. Each of the two programs includes a $3.5 million grant.
The programs are part of what Coakley is calling a “HomeCorps,’’ that would help communities prevent foreclosures and survive the aftermath of property seizures. Coakley said she will periodically update how the money is being spent. The settlement also includes $14.6 million in cash payments to certain borrowers who have already lost their homes and $257 million in mortgage relief.
“These grants are just one piece of a much larger program that we will implement to assist homeowners,’’ Coakley said. “We will unveil in stages what we are planning to do.’’
Jenifer B. McKim can be reached at firstname.lastname@example.org.