Massachusetts Timeline

Enacted in 1967, the Consumer Protection & Business Regulation became the main consumer protection law in Massachusetts. The legislation provided protection to consumers against businesses by, among other things, preventing unfair and deceptive practices in any business including the mortgage market.

Initially known as SoftSecond, the ONE Mortgage Program introduced an affordable mortgage for low- and moderate-income first-time homebuyers. ONE+Boston combined City of Boston funds with the affordable features of ONE Mortgage to expand opportunities for low- to moderate-income first-time purchases of homes.

Through the program, more than 40 lenders in the state provided a 30-year fixed rate loan with a 3% down payment. The Program has provided over 22,000 low- and moderate-income households the ability to purchase their first home and expanded opportunities for sustainable homeownership in the state.

The program did not require Private Mortgage Insurance (PMI) and guaranteed extra assistance through subsidizing monthly payments. Lenders typically require PMI if a borrower cannot afford the down payment on a house (usually around 20%). With PMI, borrowers pay a monthly premium as part of the overall mortgage payment, ensuring lenders against defaults. 

HOEPA, a federal statute aimed at addressing predatory practices in the home loan industry by providing borrowers with protections against loans with excessive fees and interest rates; former Democratic Representative Joseph P. Kennedy of Massachusetts played a key role in authoring the statute. 

HOEPA amended the Truth in Lending Act (TILA) to establish new disclosure requirements and protections on certain closed-end mortgages that had rates or fees above a certain threshold. (Closed-end mortgages do not allow prepayment without penalty or re-negotiation; they can be a good fit for borrowers who are committed to living in their property for a long period of time, and often carry comparatively low interest rates.)  

Among the first regulations of its type in the country, the Massachusetts Division of Banks’  High Cost Home Loan Regulations addressed certain abuses in the high-cost mortgage lending industry. The regulations required lower interest rate and loan fee thresholds, extended high-cost home loan regulations to home secured open-end credit, and prohibited loan “flipping.”

The Division committed itself to review the regulations for their effectiveness within the first eighteen months of their operation.

After 13 months, the Division of Banks proposed amendments to the High Cost Home Loan Regulations, adding more protections for homeowners. These included even lower interest rate and loan fee thresholds, as well as a prohibition on balloon mortgages with a term of less than 7 years. 

On August 9, the Massachusetts Legislature approved the Predatory Home Loan Practices Act (PHLPA), which provided strong protections against predatory lending. A response to perceptions of abusive lending practices in Massachusetts, PHLPA provided extensive protections for borrowers. The protections in the PHLPA mirrored provisions in other comparable statutes such as the North Carolina Predatory Lending Law. 

Overview: 

Similar to the North Carolina Predatory Lending Law, PHLPA implemented a broad definition of “high-cost mortgage” – mortgage loans that either had annual interest rates in excess of 8% of the yield on comparable U.S. Treasury securities or had total points and fees in excess of the greater of 5% of the total loan amount or $400.

PHLPA provides the following protections for borrowers:

Borrowers who took on high-cost loans had to have a third-party housing counselor. This third-party counseling requirement imposed a waiting requirement because borrowers had to consider their proposed loan agreement over a longer period of time, and so served as a brake on high-pressure sales tactics. Through the third-party counseling requirement, borrowers discussed the benefits and costs of their desired loan with experts, who could clear up confusions and clarify deceptive terms.

Lenders could not make high-cost mortgage loans to borrowers unless they had a reasonable belief that borrowers “will be able to make the scheduled payments to repay the home loan.”

Lenders could not knowingly refinance a home loan that was “consummated within the prior 60 months . . . unless the refinancing is in the borrower’s interest.” In other words, loan flipping — when lenders refinance a mortgage loan simply to extract fees from borrowers became illegal.

Borrowers retained rights to bring a claim in court.

Lenders could not include mortgage provisions that compelled borrowers to bring disputes to “a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute than a judicial forum.

Lenders could not compel borrowers to pursue claims through arbitration if doing so would be “less convenient, more costly, or more dilatory,” even if the loan had a mandatory arbitration clause.

PHLPA also provided remedies for victims of lender violations. The statute provided strong assignee liability, so that borrowers could bring claims against the purchasers of their mortgage.  It also allowed class action lawsuits. 

Announced by Governor Deval Patrick and MassHousing’s Executive Director Tom Gleason, this $250 million program provided fixed-interest rate refinancing loans and counseling services to struggling subprime borrowers in Massachusetts. Acknowledged by housing finance professionals to be the most generous state-sponsored refinancing program created in response to the foreclosure crisis, this program was financed privately through a $190 million commitment from Fannie Mae and a $60 million contribution from MassHousing.

To qualify, individuals had to (1) be employed with verifiable income and be able to afford the new monthly mortgage payment; (2) have a minimum credit score of 560 for a single-family home or condominium, 580 for a 2- family home, or 620 for a 3- or 4-family home; and (3) meet income and loan limit restrictions. 

This plan aimed to keep people in their homes and stabilize neighborhoods across the Commonwealth. It provided $2 million in funding for foreclosure prevention activities, which included funding for counseling for first-time home buyers. 

It also: 

Established 11 Regional Foreclosure Education Centers, serving every region of the Commonwealth.

Launched Neighborhood Stabilization Pilot Programs in Lawrence, Boston, Brockton, New Bedford, Springfield and Worcester. 

Under the Five Point Plan, the Massachusetts Department of Housing and Community Development (DHCD) worked with lenders and nonprofits in order to reclaim foreclosed properties and make them available to qualified first-time homebuyers, with the goal of quickly restoring neighborhoods to fully occupied status. 

The plan further gave guidance to lenders about acclimating to higher interest rates, suggesting that they:

Contact borrowers at least three months prior to a mortgage reset,

Consider long-term loan modifications,

Review whether any subprime borrower qualified to refinance into a more affordable product after one year of satisfactory payments,

Require escrow of taxes and insurance for all new subprime borrowers, and

Allow pre-foreclosure sales or a forfeiture of deeds in lieu of foreclosures.

In January of 2008, the Patrick Administration made the following updates to the MassHousing Home Saver Foreclosure Prevention Program:

Expanding eligibility beyond victims of predatory lending to include any individuals looking for mortgage-related advice, so long as they could prove their financial ability to pay their current mortgage payment.

Expansion of eligible uses for any cash-outs with refinancing, including home improvements, medical payments, school payments and repayment of some household debt. 

Lenders could initiate the Home Saver application (rather than just the borrower).