At a press conference from her office, Massachusetts Attorney General Martha Coakley announced newly imposed regulations barring foreclosure “rescue” schemes. The new rules – which are effective today – bank for-profit lenders from taking ownership to help struggling homeowners avoid foreclosure.

The new rules do not apply to nonprofit housing agencies, or from family members taking ownership. The new rules also will not prevent lenders from offering assistance, such as by relaxing repayment terms.

From the Boston Herald:

Coakley, whose office has been battling companies that offer complex transactions claiming to lessen the financial pressure of mortgages, said the regulations are effective today and valid for 90 days.

The regulations could become permanent after public hearings are held.

Coakley’s office vowed to review and possibly implement other reforms to deal with the foreclosure “crisis” gripping the state.

“These ‘rescuers’ take a bad situation - foreclosure - and make it worse by liquidating any remaining equity in the homes,” Coakley said in a statement.

From Boston.com:

Coakley's action comes at a time when the state Legislature is still weighing whether to pass a law to deal with the subprime lending and the state's foreclosure crisis. Subprime mortgages are targeted to homeowners with poor credit, but the low initial payments that make them attractive increase two years into the loan when the interest rate increases.

Coakley said she would seek comments from the public over the next 28 days for proposals to make it illegal for lenders to inflate a borrower's income on their mortgage application, to make mortgages that borrowers clearly cannot pay; and to provide credit when it is not in the interest of the homebuyer or an existing homeowner who is refinancing a property.