Appeals Court Issues Decision on Legal Rights Following a Loan Modification

 

The Massachusetts Appeals Court issued an important decision last week concerning a homeowner’s legal rights following a loan modification.  In Barrasso v. New Century Mortgage Corporation, the Appeals Court held that a homeowner was unable to raise prior claims related to their mortgage loan after accepting a modification of that loan (a copy of the decision is below).

Background

In Barrasso, the homeowner entered into a loan modification with their lender, for the purpose of making the loan payments more affordable.  Years later, the homeowner brought a lawsuit against the lender, challenging several of the mortgage loan assignments and whether the present holder of the mortgage was the proper holder of the loan.

Legal Decision

Barrasso held that the homeowner was estopped from challenging the transfer of his mortgage due to the homeowner’s signing of this loan modification.  Estoppel is a legal defense that prevents a party from making an allegation or defense that contradicts a prior representation.  The loan modification in Barrasso, like most loan modification agreements, required the homeowner to agree to several factual representations about the mortgage loan, namely, who held the mortgage.  The Court reasoned that, because the homeowner benefited from this loan modification agreement, it could not then deny one of the prior statements in this agreement that it had agreed to: who the owner of the mortgage was.

Implications to Homeowners

Barrasso follows a line of reasoning that I have often taken with loan modifications: the signing of one of these agreements generally waives any prior legal claims associated with the loan.  A loan modification, in essence, is a new loan, with new terms and conditions.  If a homeowner had legal claims arising from the original loan (such as predatory lending), the homeowner probably won’t be able to raise them following a loan modification.  As explained by Barrasso, if a homeowner gets the benefits of a loan modification, it can’t then go back and raise matters that arose before the modification.

Some loan modification agreements, such as those coming from the federal Home Affordable Modification Program (“HAMP”), do not require a homeowner to waive any legal rights against a lender.  Barrasso makes clear, however, that  a loan modification has strong implications for one’s legal rights following one of these agreements.  Homeowners should keep this in mind when considering accepting a loan modification: homeowners generally won’t be able to raise claims arising out of the prior loan.

Barrasso should not scare homeowners away from accepting a loan modification.  Loan modifications are the best means of avoiding foreclosure, and a homeowner should absolutely accept a modification with an affordable loan payment.  The key is to make sure that such a modification is right for the homeowner.  If you find yourself in such a scenario, contact me for a consultation.

Barrasso v. New Century

Foreclosure Judgment

A common inquiry about foreclosures in Massachusetts is regarding a foreclosure judgment.  What does a bank get from a homeowner after it forecloses?

In judicial foreclosure states, where a bank needs to go to court to foreclose, a foreclosure judgement is a court order allowing the bank to do a foreclosure sale.  Massachusetts, in contrast, is a non-judicial foreclosure state, where a bank doesn’t need a court order.  A foreclosure judgment in Massachusetts, therefore, generally refers to what a bank can get after foreclosure: possession of the property and a deficiency judgment.

Even if a bank performs a lawful foreclosure, it must still bring an eviction (“summary process”) case to get possession of the property.  A foreclosure only changes title to the subject property; a eviction is required to get the former homeowners out of the home.  A post-foreclosure eviction case generally occurs several months after the foreclosure sale, and is usually brought in District or Housing Court.  If a bank is successful in one of these cases, it is entitled to an execution for possession, allowing the sheriff or constable to physically remove the occupants and their possessions from the property.  In one of these eviction cases, a bank can also obtain a judgment for use-and-occupancy against the former owners, which amounts to  rent for the time that the former owner resided in the home after the foreclosure sale.  While banks generally request use-and-occupancy in post-foreclosure eviction cases, it is rare for a bank to pursue this claim for money; the bank generally just wants possession of the home.

Another foreclosure judgment in Massachusetts is a claim for any deficiency judgment that exists following the foreclosure sale.  This is the difference between the amount that the homeowner owes on the mortgage loan and the amount obtained at the foreclosure sale.  For example, if the homeowner owes $400,000 on the mortgage loan, and the bank obtains $300,000 at the foreclosure sale, the homeowner is potentially liable for the difference: $100,000.  Claims for deficiency judgments are not frequently pursued.  Generally, most former homeowners do not have sufficient assets to make one of these claims worth pursuing.  Additionally, a bank has a two-year deadline (“statue of limitations”) from the foreclosure sale to bring one of these claims, which many banks fail to do.  A homeowner can also usually file a bankruptcy to get rid of this type of debt.

Each type of foreclosure judgment in Massachusetts is an important consideration for homeowners who are facing foreclosure or who have been foreclosed.  If you find yourself in either situation, contact me for a consultation.

What To Do About Unsafe Conditions In An Apartment

Unsafe conditions in an apartment is an unfortunate reality for many tenants and landlords owning rental property.  Buildings by nature get old and need repair, and despite the efforts of even the best landlords, unsafe conditions in an apartment can arise.  How should this be handled?

Step one: tell the landlord in writing.  Despite the “slumlord” stereotype of many landlords, most owners of rental property care deeply about their property and those who live in it.  Tenants with unsafe conditions in an apartment should promptly notify their landlord of the problem, and take pictures /video of the poor conditions.  Give the landlord adequate time to address the matter, and be as cooperative as possible in helping to get the problems fixed.

If the landlord refuses to address the problem, the next step is to file a complaint with your town or city’s inspectional services department (“ISD”) or department of health.  These agencies have trained staff who are responsible for inspecting apartments, documenting poor conditions in units, and filing a complaint with the landlord.  If the landlord continues to address the problem, the town or city can bring civil and criminal charges against the landlord.

The law allows a tenant with unsafe conditions in an apartment to withhold rent and seek damages against the landlord.  An important requirement of this, however, is that the landlord has notice of these  unsafe conditions.  This makes sense: a landlord can’t repair a problem that it doesn’t know about.  This is why it important to provide this notice in writing, and keep a copy for yourself.

Massachusetts law prohibits a landlord from retaliating against a tenant who complains about unsafe conditions in an apartment.  A landlord cannot raise rent, begin an eviction, or do anything to “punish” a tenant from making a complaint.  A landlord can be liable for monetary damages if they do such retaliation.

Landlords should always take complaints about an apartment seriously, and document all repairs made to the unit.  Landlords should also be careful about requesting a raise in rent or beginning an eviction after such a complaint is made, so as to avoid a claim of retaliation.

While tenants should absolutely report unsafe conditions in an apartment, this should be done in good faith.  Repeated, bad faith complaints done solely to annoy the landlord, or avoid paying rent, can possibly subject a tenant to problems done the line.  Moreover, this can become a “boy who cried wolf” scenario that will hurts tenants who actually need their apartments repaired.

If you find yourself in a case involving unsafe conditions in an apartment, contact me for a consultation.

 

SJC Rules that Failure to Send a Postforeclosure Notice Does Not Invalidate A Foreclosure

The Supreme Judicial Court issued a decision this week on postforeclosure notices, and whether the failure to send one invalidates a foreclosure sale.  In Turra v. Deutsche Bank, the Court ruled that the failure to send one of these notices does not void a foreclosure (disclosure: this was my appeal!).  A full copy of the decision is below.

The law in question, G.L. c. 244, § 15A, requires a mortgagee to notify the local municipalities of a foreclosure thirty days after the sale has occurred.  As the Court acknowledged in Turra,  prior court decisions suggested that strict compliance with this law was required to perform a lawful foreclosure.  The question in Turra was whether this was such a requirement, and whether a failure to comply with this step would invalidate a foreclosure.  Turra determined this statute isn’t grounds for challenging foreclosures.

I don’t read Turra to suggest that a failure to comply with a postforeclosure notice requirement can never be used to challenge a foreclosure.  If a homeowner or someone else is actually harmed from a bank’s failure to send such a notice, this violation may potentially be a consumer protection claim.  Turra is clear, however, that such a violation, on its own, is not enough to be a foreclosure defense.

While Turra wasn’t the outcome I wanted, I’m pleased that the Supreme Judicial Court acknowledged the basis for my argument, and conceded  that its prior caselaw suggested this was a plausible defense.  The decision mentions two other decisions where courts came out the oppositie way on this question of law (one of these decisions was one of my other cases using this defense).  You can’t win ’em all!

Turra has an important lesson of wisely choosing a foreclosure defense strategy.  The Internet is filled with foreclosure defense hoaxes and myths that do struggling homeowners more harm than good in trying to save their homes.  A review of unsuccessful foreclosure defense cases in state and federal court shows dozens of cases lost on the same arguments that courts routinely reject.  My strategy in defending homeowners is to make arguments that have a basis in law, and reject arguments that don’t work.  I reject the “kitchen sink” approach to foreclosure defense, where one raises every argument they can think of, irrespective of whether the claim has any hope of succeeding.  It is far better, in my opinion, to stick with arguments that work, and try new approaches.   While not successful in this case, my legal argument on these postforeclosure notices succeeded in several of my other cases, and helped keep a deserving family in their home.  If you find yourself facing foreclosure, don’t rely on an Internet myth to defend yourself: contact an experienced attorney for assistance.

Decision

What is Housing Court in Massachusetts?

Massachusetts has a unique forum for resolving matters involving residential housing: Housing Court.  Understanding what is housing court is essential for landlords, tenants, and former homeowners facing an eviction after foreclosure, as Housing Court is a popular forum for resolving these disputes.

Housing Court is a specialty court for matters involving residential housing.  Evictions makeup the bulk of the cases filed in these courts, but Housing Court can also hear civil lawsuits, criminal cases, and small claim matters (if they concern housing).  A party may file their case directly in Housing Court.  Alternatively,  a party may transfer their case into Housing Court so long as this is done the day before trial.  A transfer to housing court is a simple matter that only requires a party to file a notice of transfer in the court where the case was originally filed, and the appropriate Housing Court.  This is commonly done for eviction cases filed in District Court, where the tenant wishes the matter to be heard in the appropriate Housing Court.

Housing Court isn’t available everywhere in Massachusetts.  Massachusetts has five Housing Court divisions (Boston Housing Court, Northeast Housing Court, Worcester Housing Court, and Western Housing Court) which cover most of the state.  However, there is a large portion of Massachusetts that is not in a geographical jurisdiction of a Housing Court, including many cities in the Greater Boston region (including Somerville, Medford, Revere, and Chelsea).  With the exception of Boston Housing Court, Housing Court divisions sit in multiple locations within its geographical jurisdiction.  Northeast Housing Court, for example, hears cases in courtrooms in Salem, Lynn, Lowell, and Lawrence.  Visit the Housing Court’s website to find out if there is a Housing Court for your dispute.

Housing Court has some important features that make it a good option for resolving housing disputes.  Housing Court has trained mediators in each of their courts who can attempt to help resolve disputes in lieu of trial.  Mediation is particularly useful for evictions, as the majority of these cases are settled and do not go to trial.  District Courts (where evictions are also commonly brought) sometimes have similar mediation services, but these are not always as readily available as the services offered in Housing Court.

Another benefit of Housing Court is having experienced judges who know and understand housing law.  Housing law is complex, and it is not uncommon to find judges who aren’t familiar with many of the issues that come up in housing cases.  This doesn’t happen in Housing Court: the judges have hear the issues in these cases many times before.

Housing Courts are thought by some to be “tenant friendly”, with a preference towards tenants over landlords (and former homeowners over banks).  I personally believe this perception comes from the fact that Massachusetts’s housing laws are consumer orientated and lean in favor of tenants’ rights.  From my experience in every single one of the Housing Courts in Massachusetts, I believe a party can get a fair decision on their matter.  I do believe, however, that the decision on where to bring a case is an essential decision, and one that an experienced attorney should decide.  Although understanding what is Housing Court and the work it does is important for making the best decision for you, this is no replacement for having a trusted attorney by your side.  If you have a case in Housing Court, contact me for a consultation.

What is a Deed in Lieu of Foreclosure?

Understanding what is a deed in lieu of foreclosure is important for knowing all of a homeowner’s options available for foreclosure defense.

Foreclosure defense isn’t always about trying to keep a home.  For some homeowners, getting rid of their home and avoiding foreclosure is a better option than attempting to save a home that the homeowner is not able to afford.  Foreclosure defense is not about getting a free home; if a homeowner has no means to afford a modified mortgage loan payment, foreclosure is almost always inevitable.

With a deed in lieu of foreclosure, the homeowner voluntarily conveys the home to the bank or lender.  The homeowner no longer owns the home, and the bank or lender becomes the record title owner.  This is the same result that occurs in a foreclosure, with the exception that no foreclosure occurs: the homeowner has instead voluntarily given up the property.  A deed in lieu of foreclosure helps a homeowner avoid the stress, hassle, and stigma of foreclosure, and lets them get rid of the property on their own terms.  For a bank or lender, a deed in lieu of foreclosure saves the time and expense of having to do an often lengthy foreclosure proceeding.

Banks or lenders will generally only consider a deed in lieu of foreclosure if there are no encumbrances on the property, such as a lien or second mortgage.  A foreclosure, with few exceptions, provides a foreclosing entity with a “clean” title: all encumbrances second to the lender’s interest are wiped out in a foreclosure.  In contrast, if a lender accepts a property with a lien on it, this lien remains on the property, making it difficult to resell.

Homeowners interested in a deed in lieu of foreclosure can contact their loan servicers to see if this option is available to them.  Compared to a loan modification, a deed in lieu of foreclosure is generally a straightforward process.  Homeowners, however, should still speak with an attorney to review their paperwork and ensure the process is done to their advantage.  It is important, for example, that any potential deficiency judgment coming from the deed in lieu of foreclosure is waived by the lender, and the tax consequences of one of these deals is considered.

MA SJC Issues Important Decision on Consumer Protection Demand Letters

The Massachusetts Supreme Judicial Court issued an important decision on consumer protection demand letters last week, that is of particular importance to Massachusetts foreclosure defense.  The case, Moronta v. Nationstar Mortgage LLC,  is an interpretation of the consumer protection demand letters that are required for Massachusetts’s Consumer Protection Law (a full copy of the decision is below).

Overview of Massachusetts’s Consumer Protection Law

Massachusetts’s Consumer Protection Law (commonly known as “Chapter 93A”) prohibits “unfair and deceptive” practices by businesses.  The scope of this law is broad, and has been used successfully for a variety of consumer protection claims.  For foreclosure defense, Chapter 93A claims have been effective for loan modification denial claims; courts have increasingly allowed these lawsuits based on a loan servicer’s repeated refusal to properly review a loan modification application.

To bring a Chapter 93A claim against a business, a consumer is required to send the business a demand letter and provide them thirty days to make a settlement offer.  These consumer protection demand letters are an essential requirement of this law; courts have thrown out Chapter 93A claims for a claimant’s failure to send one of these letters (or to send a letter that makes a proper demand to the business).

Exceptions to the Demand Letter Requirement

A consumer does not need to send a demand letter if “if the prospective respondent does not maintain a place of business or does not keep assets within the commonwealth.”  The question in Moronta was whether one or both of these two exemptions are needed to avoid sending the demand letter.  As the Court explained: “if the defendant keeps assets in the Commonwealth, but does not maintain a place of business here, must the plaintiff serve a demand letter?”  The Court answered no: either one of these exceptions (no assets or no place of business in the Commonwealth) is an exception to the consumer protection demand letters under Chaper 93A.

How Does Moronta Affect Massachusetts Foreclosure Defense?

Moronta is of particular importance for Massachusetts foreclosure defense.  Because Massachusetts is a non-judicial foreclosure state (where a bank does not need to go to court to do a foreclosure), homeowners often need to go on “the offense” in avoiding foreclosure, through a civil action.  The demand letter requirement under Chapter 93A can be a burden for borrowers who have less than thirty days before a scheduled foreclosure to pursue a legal action.  Moronta will be a help for homeowners with cases against national banks and loan servicers, many of which do not have offices in Massachusetts, and would trigger the exception to the demand letter requirement.

Despite the benefit of Moronta for consumers, I caution consumers (especially homeowners with foreclosure defense claims) from pursuing Chapter 93A claims without the benefit of legal counsel.  Chapter 93A may be intended to help consumers, but consumer protection claims are often still too complicated for a non-lawyer to take on.  Consult an attorney if you believe you have a viable cause of action.

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Speak to a Lawyer for Legal Advice

Happy 2017!  I hope the new year is a good one for you.  In this post, I want to discuss why you should speak to a lawyer for legal advice; advice that will serve you well in this new year (and for years to come).

If I had to guess, I would say that more mistakes in law are made from people who receive “legal advice” from non-lawyers.  The biggest culprit, of course, is the Internet: today, it is easier than ever to create a official looking website that claims to be the authority on an area of law.  This occurs for all different types of legal matters, but especially for foreclosure defense: the Internet is filled with websites that attempt to explain foreclosure defense myths to vulnerable homeowners.

As the old adage goes, “saying something doesn’t make it so.”  Merely creating a website, or offering purported “legal advice”, does not make that information truthful.  Many times, such advice—while well intended—is flat out wrong.  The results can be devastating: I have seen claimants lose cases (and their homes) from relying upon advice with no basis in law.

Those offering such “legal advice” won’t tell you what I will write here: law is difficult.  TV lawyers may make our work seem easy, but the truth is that lawyering requires enormous time, effort, and yes, training.  Training is the key part of this: we require lawyers to attend law school and pass bar examination for a reason.  No, law school alone doesn’t fully prepare someone to practice law, but a legal education is essential for making tough legal decisions.  With this in mind, you should never, never, never trust anyone but a licensed lawyer for legal advice.  Speak to a lawyer for legal advice, and avoid the inevitable problems that come from taking poor advice from a non-lawyer.  The picture above is a coffee mug available for sale on Amazon; it is meant as a “gag gift”, but its slogan has an essential message: don’t replace the advice of a trained attorney with something found on a random website.

This post isn’t meant to discard the use of reputable websites and information sources that assist those with legal needs.  I am proud that this blog has helped many homeowners and other lawyers in making important decisions on legal matters.  This blog, however (like any similar legal resource) is merely an aid towards helping those with legal needs get the assistance they need (a reason why I encourage anyone with help in defending against a foreclosure to consult an attorney).

Fee for a Tenant Attorney

Courtroom

Many tenants in need of legal assistance, as well as landlords involved in legal cases with tenants, often ask about the fee for a tenant attorney.  Most people are familiar with the general model for hiring an attorney: the attorney takes an upfront amount of money and bills the client for their time.  The other common type of billing is a contingency fee, where the attorney takes a fixed percentage of the amount recovered from the case.  In Massachusetts, another type of payment for legal services is also available to tenants: fee shifting.

Fee shifting is a provision in a law that requires the losing party to pay the other side’s legal fees.  Generally, under the American Rule for legal fees, each side bears their own legals fees in a legal matter.  If you spend $10,000 in legal fees to recover a judgment of $5,000, you only get $5,000 in the end (and will have lost the remaining amount spent on the case).  A fee shifting requirement in a law allows the prevailing party to recover these attorney fees if their case is successful.  Many landlord/tenant laws contain such a provision, where the tenant is awarded reasonable legal fees if the claim is successful.  Importantly, many of these laws do not require the tenant to have accrued the legal fee.  In other words, there is no requirement that the tenant had actually spent money towards paying the attorney: the fee for a tenant attorney is still permitted if the underlining claim is successful.

Fee shifting provides a powerful incentive for tenants to pursue claims against landlords.  Without fee shifting, tenants and lawyers have little incentive to consider taking on claims against landlords.  The damages that could be recovered from one of these claims may be too small to make it worth the trouble.  With fee shifting, however, the fee for a tenant attorney becomes part of the case, and can be recovered through settlement or a judgment from the court.

With this in mind, both tenants and landlords should keep in mind the potential fee for a tenant attorney in evaluating a potential landlord/tenant claim.  The potential for damages in one of these cases is an important factor for both sides in attempting to resolve one of these matters.