Breaking a Loan Modification

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For homeowners trying to avoid foreclosure, getting a loan modification (where the lender agrees to adjust the monthly payments to an affordable amount for the borrower) would seem to be the solution for beating foreclosure.   Believe it or not, however, some lenders don’t follow through with these plans: the breaking a loan modification by a loan servicer is an unfortunate reality for many homeowners.

I’ve seen this occur in different ways.  In the first scenario, the homeowner receives a trial payment plan (“TPP”), where the homeowner is approved for a modification and is required to make three payments under the new modified loan amount.  The homeowner signs the required paperwork, makes the three payments, and expects to get the permanent modification.  The loan servicer, however, refuses to give them the permanent modification, despite the homeowner doing everything that was required of them.

In the second scenario, the servicer “forgets” about the loan modification months, and sometimes even years, after the modification has begun.  Believe it or not, some servicers simply refuse to outright honor a modification, despite the homeowner having been approved for this loss mitigation assistance.

Fortunately, the law is often on the side of homeowners in these matters.  Many courts have held that breaking a loan modification is a breach of contract: a violation of a legally binding agreement that entitles the homeowner to relief in court.  Homeowners in these cases can sue for damages, and ask for both monetary damages and the remedy of specific performance, which asks the court to reinstate the parties’ loan modification agreement.  In one of my successful cases on such a matter, I was able to negotiate a reinstatement of a loan modification where the loan was brought current to the date of the settlement, as if the homeowner had been making payments all along.

Homeowners who are in one of these situations should contact a foreclosure defense attorney as soon as possible.

Who Pays for Legal Fees in an Eviction Case?

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A central question that anyone in a landlord/tenant case needs to consider is, who pays legal fees in an eviction case?  The answer to this question makes a huge difference in determining whether to pursue a potential claim against a landlord or tenant.

Massachusetts, like most of the country, follows the American Rule in awarding attorney fees in a lawsuit.  Unless there is a law explicitly allowing attorney fees, a prevailing party doesn’t get attorney fees in a lawsuit . . . even if the court determines they were on the “right” side of the law.

The American Rule most directly impacts landlords in eviction cases against tenants.  Landlords generally cannot recover attorney fees in an eviction case against a tenant.  A landlord who prevails in an eviction case is entitled to the “costs” of the case, but this is generally limited to the filing fee of the lawsuit, and not any attorney fees incurred in one of these cases.  Some leases provide for attorney fees if a landlord brings an eviction case in court, but this alone does not guarantee that a landlord will obtain these fees from the tenant: a landlord (like any party in a lawsuit) can only obtain a judgment from a party with assets.   If the tenant does not a steady income, property, or anything else of value, the landlord will have a judgment that they cannot recover.

The same isn’t true for tenants bringing claims against landlords.  Massachusetts has some of the most tenant friendly laws in the country, allowing for legal fees in an eviction case.  Violation of one of Massachusetts’s many landlord/tenant laws, such as the security deposit law, will not only subject a landlord to monetary damages, but require them to pay a “reasonable” attorney fee if the tenant prevails.  For a lengthy eviction case, these attorney fees can be huge.

With this in mind, both landlords and tenants should keep in mind who pays attorney fees in eviction cases when evaluating their options.  For landlords attempting to evict a tenant, strong consideration should be given to working out settlement agreements in lieu of litigating these cases.  The potential risks of fighting one of these cases can be costly (as unfair as this can  be).  For tenants who are dealing with an unfair landlord, Massachusetts’s landlord/attorney laws, which provide for attorney fees for a prevailing tenant, are a strong reason why tenants should speak with an experienced landlord/tenant attorney if they are dealing with a bad landlord.

If you find yourself in either scenario, contact me for a consultation.

Deadline For HAMP

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The final deadline for HAMP (“Home Affordable Modification Program”)  is rapidly approaching: applications for this federal program are due December 30, 2016.

HAMP is a federal program aimed at helping struggling homeowners avoid foreclosure.  Eligible homeowners can obtain a loan modification through a combination of an interest rate reduction, term extension, and principle forbearance.  Applying for HAMP requires proof of income, a variety of tax and financial documents, and a hardship affidavit (showing a reason why the homeowner cannot make their normal loan payments).

HAMP, to say the least, has been a nightmare: servicers routinely lose paperwork, delay reviewing modifications, and deny applications for false and ambiguous reasons.  Despite its shortfalls, HAMP remains one of the best options for homeowners trying to avoid foreclosure.  With this in mind, homeowners in need of loss mitigation assistance should make a note of the deadline for HAMP and submit an application as quickly as possible.

The deadline for HAMP has been extended in the past and I wouldn’t be surprised if that happens again.  However, homeowners should assume that it won’t be extended, and get prepared to submit an application well before the December 30, 2016 deadline.  Don’t procrastinate!  A HAMP application requires an enormous amount of time and collection of documents.  You do not want a loan servicer to deny your application on the grounds that your application was not submitted in time (a reason for denial that, unfortunately, I see occurring for many homeowners who will apply at the end of the year).

When applying for HAMP (or any other loan modification program), be sure to keep a paper trail of your application process.  If you find yourself not getting the results you need, contact a foreclosure defense attorney for assistance.

Can Airbnb Help Avoid Foreclosure?

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I recently saw a  Airbnb TV commercial that attempts to promote the many benefits of this room sharing service for local communities.  Airbnb claims that its service has helped many homeowners avoid foreclosure, a topic that I want to discuss here.  Can Airbnb help avoid foreclosure?  As with all legal questions: it depends. 

Airbnb is a peer sharing service for renting rooms, apartments, and even entire houses.  An interested renter enters their desired location and travel dates and gets a list of available options, with rates and information of the rental property.  Airbnb follows the trend of similar “sharing economy” services like Uber and Lyft, allowing individuals to conduct business on their own terms.  Not surprisingly, these services are under attack by state and local governments: here in Massachusetts, there is talk of regulating Airbnb, over concern that this service takes business away from local hotels and other short term rental options.

I, personally, am a huge fan of the “shared economy.”  I see no reason why a homeowner or car owner should not be permitted to use their personal property for profit (while providing an important service for the general public).  Inevitably, however, there is push back from the commercial businesses who normally provide these services.  As local and state businesses continue to determine how to deal with Airbnb, the question on whether Airbnb can help avoid foreclosure is an important topic to consider.

For homeowners facing a temporary loss of income (ex. layoff from job or reduced working hours), Airbnb can be an option for avoiding foreclosure.  Short-term rental income can help provide the resources necessary to pay a mortgage loan and avoid default.  This is a much, much better option than letting a loan go unpaid.

I am a little more skeptical of using Airbnb as a means of producing income for purposes of obtaining a loan modification.  On paper, income from Airbnb should be adequate for getting a modification.  However, the unpredictability of this income can make it difficult to verify for a loan modification.  When applying for a modification, a lender wants to see definite, documented income.  I can see many lenders being reluctant to accept this income, out of concern that this income may not be consistent.

So, can Airbnb help avoid foreclosure?  If the homeowner can use Airbnb to stay current on a loan (or get caught up in missed payments), then I think it is an effective foreclosure defense strategy.  Airbnb is also a fantastic option for generating extra income for homeowners with a tight budget, thereby providing savings in the event that other income becomes scarce.

For homeowners with a significant loan default, who are in need of a loan modification, I wouldn’t rely 100% on Airbnb to produce the income necessary to qualify for this loss mitigation assistance.  Go ahead and use Airbnb, but also try to establish income that is more certain and definitive.  If you have space in your home to rent, consider finding a permanent tenant or roommate, which may be more effective in showing your lender that you have the income necessary for a modification.

If you find yourself facing foreclosure and need help, contact me for a consultation.

Advice for Landlords

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In this blog post, I am going to give you the single, most important piece of advice for landlords in Massachusetts.  This advice might sound obvious, but believe me when I tell you that it is often ignored.  Ready for it?  Here it is: speak to a landlord/tenant attorney before becoming a Massachusetts landlord.  

I have met countless landlords who start renting homes and apartments without any knowledge of Massachusetts landlord/tenant laws.  Often, these landlords end up being okay in the beginning, when things go well with their tenants.  When things go bad, however, they can get really bad: not following Massachusetts’s extensive landlord/tenant laws can have dire consequences for landlords down the line.

Nearly all of these problems can be avoided by following the law correctly in the first place.  A Massachusetts landlord/tenant lawyer can help you draft a lease, decide on the proper terms of your tenancy, and avoid many of the pitfalls that inexperienced landlords in Massachusetts often make.  Few, if any of us, would start a business without learning the applicable law.  Why should being a landlord be any different?

This advice for landlords stresses an important point: you don’t need to hire a lawyer only when things go wrong.  A landlord/tenant attorney can be a great help to you in becoming a landlord, and help you avoid major problems from not following the law.

Appealing a Foreclosure Case

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A recent Massachusetts Supreme Judicial Court decision illustrates the importance of properly appealing a foreclosure case.  The Court’s decision reaffirms that a homeowner has one–and only one–opportunity to appeal an unfavorable court decision.

In Eresian v. Merill Lynch Credit Corporation, the Supreme Judicial Court upheld the denial of a homeowner’s attempt to overturn a decision in a foreclosure case from the 1990s (a copy of the full decision is below). The homeowner attempted to file an appeal of this decision in 2015, years after the 1993 foreclosure case.  The Appeals Court rejected this appeal, and stated that the case was closed.  The homeowner then attempted to petition the Supreme Judicial Court for a subsequent order to review her prior decision.  Here, the Supreme Judicial Court rejected this requested relief, noting that the homeowner had already obtained an appeal of her decision, and there was no reason for the Court to allow her the opportunity for another review of the case.

The Court’s decision in this case reaffirms an important lesson for homeowners fighting foreclosure: there are few, if any, “do overs” in matters of law.  If a homeowner loses their foreclosure case and wishes to appeal, they get one–and only one–chance at appeal. Rarely will a homeowner ever be able to come back later for a second shot.

With this in mind, homeowners should strongly consider consulting an experienced foreclosure defense attorney in appealing a foreclosure case.  The risks of not doing the job right the first time just aren’t worth it.

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Bring E-Filing to Massachusetts!

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My blog post today isn’t directly on point with the legal topics I generally blog about, but I think it’s a post that has important relevance to the work I do and clients I serve.   Let me tell you about why we need to bring e-filing to Massachusetts.

Permit me a story, that I will call “a tale of two cases.”  Both cases were complex matters, requiring extensive research, writing, and preparation.  In the end, though, one was far easier to get filed with the court than the other, saving my client money (and freeing my time for other important matters).   What was the difference?  One case was in federal court, which permits e-filing, and the other was in Massachusetts state court, which does not.

“E-filing” lets an attorney file papers with a court online.  The attorney merely needs to turn his papers into a PDF (which almost all word programs allow a user to do today), upload them on the federal court website, and submit.  No need to send the other side a copy of what you filed; the other attorneys and court get an automatic notification when something is filed.  Same when the court issues an order or decision.

Massachusetts state courts, in contrast, still require paper filing.  A lawyer needs to print a copy of what they want to file and mail or hand deliver it to the court and other side.  For large lawsuits and motions, the process requires enormous amounts of paper and clerical work to get done.

E-filing is of equal benefit to all attorneys, but is especially needed for solo and small firms like myself.  I don’t rely on clerical staff for my administrative needs and the extra time I spend filing papers with the court takes away valuable time from my clients.  It makes legal services more expensive than they need to be.  Moreover, as a proud alumnus of the nation’s top environmental law school, paper filing consumes enormous amounts of paper.  The picture above is from a recent appeal I did.  The required filing of seven copies of my brief and transcript amounted to several hundred printed pages and hundreds of dollars in printing costs.

E-filing has other advantages as well: it provides attorneys the convenience of working remotely and the ability to view the filings in a case without a trip to the courthouse.  Research is also easier: a lawyer interested in learning about a case can do so from their computer, and not in a busy clerk’s office.

E-filing has worked wonders in federal court, and its time to bring e-filing to Massachusetts.  There are several pilot projects  underway on this important endeavor and here’s hoping that e-filing becomes a permanent part of the Massachusetts state court system.

 

What Is An Unlawful Eviction?

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Being a landlord in Massachusetts is tough.  There are many traps for the unwary; a reason why landlords should always consult a landlord/tenant attorney on Massachusetts’s numerous housing laws.  A good attorney can help landlords navigate these tricky waters and find the best way to resolve these complex matters.

There is one “sin” that is above everything else in matters of Massachusetts landlord/tenant law: an unlawful eviction.  What’s an unlawful eviction?  A unlawful eviction, sometimes known as a “self help eviction”, is an eviction done without a court process, such as changing the locks of an apartment or cutting off the utilities.  These are attempts to evict a tenant without a court hearing and execution for possession.  An unlawful eviction is just that: unlawful and illegal.  Not only will an unlawful eviction subject a landlord to numerous civil penalties, it may even put them in jail.

A landlord who needs to evict a tenant must do so through a formal eviction (“summary process”)  case.  It doesn’t matter how much money a tenant owes, or how much damage a tenant has done: the failure to properly evict a tenant has enormous repercussions and should never, never be done.

If you are a landlord and need to evict a tenant, do the process properly by hiring a landlord/tenant attorney and bringing a lawful eviction against a tenant.  The risks of an unlawful eviction just aren’t worth it.

Tips on Applying for a Loan Modification

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Applying for a loan modification can be an incredibly frustrating experience.  Anyone who hasn’t tried to submit one of these applications to a loan servicer has little idea of how much time and work can go into this process.  I certainty didn’t before I began working in this area of law.  Here are some tips on applying for a loan modification, which I hope are helpful in completing one of these applications.

  • Read the Application Instructions Carefully:  Bank and loan servicers will not hesitate to reject an loan modification application if a page is missing or a line item is not correctly filled out.  One particular trouble spot is with bank account statements: loan modification applications often require every page of these statements, even if several of these pages are blank.  Are some of these requirements overkill?  Absolutely.  But, failing to follow them will result in denied applications and lost time.
  • Show Proof of Income:  To show that you can sustain a loan modification, you need to prove that you have income.  If you work for someone else or receive benefits (such as Social Security), this can easily be done through your paystubs or bank statements.  If you work for yourself, or receive rental income, this gets trickier: the loan sevicer will want to see deposits of this income into a bank account.  If you can’t show this, you can’t prove you have this income.  Be sure that you can show sufficient proof of your income.
  • Show Proof that the Loan Servicer Received Your Application:  Loan modification applications and supplemental information for your application should always be sent through some form of certified mail, to show that the recipient got the information.  If you are submitting the application by fax, get a confirmation that the fax was sent.  Moreover, be sure to follow-up with the loan servicer several days after sending in these documents.
  • Be Prepared to Apply More Than Once:  The unfortunate reality of applying for a loan modification is that the process can take a while, even if you have been applying for it correctly.  Be prepared to apply more than once.
  • Create a Log of Your Applications:  The single most important one of my tips for applying for a loan modification is to create a paper trail of your applications and communications with the loan servicer.  This record will be a tremendous help if you need to take further action later on against the servicer.

If, after several attempts, you have not been successful in getting a review of your loan modification applications, obtain a consultation with a foreclosure defense attorney, who can help you determine the best way to proceed.

Is My Home In Foreclosure?

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Struggling homeowners in Massachusetts often start a consultation with me with a simple question: is my home in foreclosure?  Those not familiar with Massachusetts law might laugh at this question, believing that the service of a foreclosure lawsuit easily answers this question.  In states like New York and Florida, which are known as judicial foreclosure states, that is correct: lenders in those areas must take a borrower to court to foreclose.  Massachusetts, however, is a non-judicial foreclosure state, where a lender does not need a court’s permission to foreclose (anyone interested in a good discussion between these different types of foreclosure should read two great articles on this topic from the Boston Bar Journal).

Because a lender does not need a court’s permission to foreclose, determining whether a home is in foreclosure is not always obvious.  The official start of the foreclosure process comes with the publishing of advertisements in the local newspaper and notices sent to the borrower.  Determining where the homeowner is before that step, however, can be tricky to figure out.

One of the quickest ways to determine a borrower’s foreclosure status is checking whether a servicemembers’ case has been brought against them.  When a client asks me, “Is my home in foreclosure?”, my first step is to check whether one of these cases has started.  A servicemembers’ case is a judicial proceeding to determine if a borrower is in the armed services, which sometimes allows a delay in foreclosure for military members.  To check on whether a  servicemembers’ case has been brought against a borrower, I look at the court records on Masscourts.org.  Servicemembers’ cases are typically brought in the Land Court, so I usually search for cases in that court.  Another way of checking to see if such a case has been filed is through the registry of deeds.  Generally, a lender files a notice of one these cases in the land records for the subject property, which will have the case number and court where the case is filed.

Determining the status of the servicemembers’ case is a good way to determine how far along the borower is in the foreclosure process.  If the servicemembers’ case has been completed, a foreclosure sale will likely begin soon.  If no such case has been filed, the foreclosure sale will likely take longer (I estimate the typical servicemembers’ case to take around four months to complete).

It is important to note that there are always exceptions to this general timeframe, a homeowner should never, never delay in seeking help against foreclosure.