Massachusetts Division of Banks Issues Guidance to Mortgage Lenders and Servicers About Assistance for Homeowners Affected by Coronavirus (COVID-19)
The Massachusetts Division of Banks has issued guidance to mortgage companies about what to do to help homeowners avoid foreclosure in the midst of the novel coronavirus (COVID-19) pandemic. This post explains the steps that are being suggested to help those homeowners save their homes.
The novel coronavirus (COVID-19) has hit the whole country to one degree or another. The Commonwealth of Massachusetts has been one of the hardest hit states. Governor Baker issued an order requiring people to self-quarantine. Only essential services are permitted to continue operating, which means that many Massachusetts homeowners are hunkered down at home. Because so many are out of work, this means that they are receiving no pay, or, if they’re lucky, some amount of unemployment. What should homeowners do about their mortgages if they can’t afford the payments?
Though some mortgage-related entities – namely, Fannie Mae, Freddie Mac, and the FHA – have put a 60-day hold on foreclosures, they only cover about half the outstanding mortgages in the country. Some of this was explained in a previous post titled “What Should You Do If Your Mortgage Payments Fall Behind During the Coronavirus Crisis?” More help is on the way, though.
In an effort to do more for homeowners hit by the coronavirus, on March 25, 2020, the Massachusetts Division of Banks (“DOB”) issued an industry guidance letter titled “Message to Financial Institutions, Mortgage Lenders, and Mortgage Loan Servicers Regarding Support for Mortgage Loan Borrowers Impacted by the Novel Coronavirus (COVID-19)” referred to hereafter as the Coronavirus Mortgage Opinion.
The Coronavirus Mortgage Opinion says that the state recognizes “increased risk of foreclosure for Massachusetts homeowners” due to the coronavirus, and that the state expects that “institutions will implement all reasonable and necessary change to provide relief to those adversely impacted borrowers.” It also provides specific action items for banks and mortgage servicers.
The types of relief that the Coronavirus Mortgage Opinion suggests are:
- Postponing foreclosures for 60 days;
- Forbearing mortgage payments for 60 or more days;
- Waiving late fees for 60 days;
- Not reporting late mortgage payments to credit bureaus for 60 days;
- Offering grace periods for loan modifications; and
- Proactively reaching out to homeowners about this assistance.
The downside to the Coronavirus Mortgage Opinion is that it may not be directly enforceable. It is not a direct order, so there is no direct penalty for a mortgage company’s non-compliance with it. That said, the DOB also said that mortgage companies who do not comply with the Coronavirus Mortgage Opinion may be subject to “examiner criticism,” industry jargon for action by bank regulators.
Can anything be done if a bank or mortgage servicer does not abide by the Coronavirus Mortgage Opinion? It’s definitely possible. Under the Massachusetts Consumer Protection Act, called Chapter 93A, businesses like banks and mortgage servicers are prohibited from engaging in any acts or practices that are “unfair or deceptive.”
In our opinion, there is a good argument that it is illegal, and unfair or deceptive under Chapter 93A, for mortgage companies to violate the Coronavirus Mortgage Opinion. One of the seminal cases involving Chapter 93A, PMP Associates v. Globe, 366 Mass. 593 (1975), holds that a business has broken the law if its conduct is (1) within an “established concept of unfairness, (2) oppressive or unscrupulous, and (3) causes injury to consumers. Thus, a mortgage company who goes ahead with foreclosing on a homeowner in the midst of this pandemic, in violation of the DOB’s Coronavirus Mortgage Opinion, seems to fall squarely within these prohibitions.
Be advised that the legal and regulatory framework for homeowners’ protections during the coronavirus pandemic is constantly changing. New rules are being issued all the time, new protections may come available, or some protections may change.
Our office has litigated numerous cases involving mortgages, foreclosures, loan modifications, and other claims related to the Consumer Protection Act. If you are having trouble with your mortgage for any reason, contact us today to see if we can help.