One of the most effective means of avoiding foreclosure is to simply sell a home before a foreclosure sale occurs. While this is not the desired option for homeowners who wish to keep their homes, selling a home before foreclosure is a good option in certain circumstances.
Selling a Home v. Defending Against a Foreclosure
The decision to sell a home, rather than defend against a foreclosure, is more often a financial decision than a legal one. The critical factor is generally whether the homeowner has the income to sustain a loan modification or other means of paying the mortgage debt. If the homeowner, even under the best circumstances, is no longer able to afford the home, selling the property is worth considering.
A critical factor in this decision is whether the homeowner has equity in the property. Equity is the owner’s value in the property: the market value of the home less all owed money, including mortgages, home equity loans, and any liens on the property. If a homeowner owes more than the home is worth (commonly known as being underwater), a sale of the home becomes more difficult.
How to Sell A Home Before Foreclosure
A homeowner can sell their home anytime prior to a foreclosure sale. Under most mortgage agreements, a lender is entitled to collect all legal fees and expenses that accrue in the foreclosure process, so a homeowner should keep this in mind, as a delay in selling can cut into the homeowner’s net payoff from the sale.
The ease of selling a home before foreclosure often depends upon whether a foreclosure sale is imminent. If no foreclosure sale is upcoming, a homeowner can simply list their home for sale, pay off the mortgage, and be done with the matter. A homeowner in such a case should strongly consider using a reputable real estate agent and closing attorney, and ensure they understand exactly what their payoff will be from the sale.
When to Speak with An Attorney
If a foreclosure sale is imminent, a homeowner needs to speak with an attorney. In some cases, an attorney may be able to delay a foreclosure sale and provide the homeowner with the time needed to complete the sale, either through negotiations with the lender or a court action.
The success of a lawyer in stopping a foreclosure sale often depends upon the likelihood of the homeowner selling the property. A court will be more inclined to delay a foreclosure sale if the homeowner has taken firm steps towards selling the home, such as hiring a real estate agent and listing the property for sale.
Selling a home to avoid foreclosure is a good option for some homeowners facing foreclosure. If you need assistance with such a matter, contact me for a consultation.
I’m proud to write that I’ve been named as a 2018 Massachusetts Rising Star by Super Lawyers. Rising Star candidates are limited to no more than 2.5% of lawyers in Massachusetts and go through a nomination, peer review, and independent research process.
As described by Super Lawyers on their website:
Super Lawyers selects attorneys using a patented multiphase selection process. Peer nominations and evaluations are combined with independent research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement. Selections are made on an annual, state-by-state basis. The objective is to create a credible, comprehensive and diverse listing of outstanding attorneys that can be used as a resource for attorneys and consumers searching for legal counsel. Since Super Lawyers is intended to be used as an aid in selecting a lawyer, we limit the lawyer ratings to those who can be hired and retained by the public.
I’m very proud and grateful for this recognition.
Coincidentally, this recognition occurred right around the time that I celebrated my fifth year in solo practice. What a ride it has been! While it is a real honor to be included with Super Lawyers, I’m even prouder of the many successes I’ve had in in my practice areas of real estate litigation.
If I can be of assistance to you with your legal problems, contact me.
A recent decision from the U.S. First Circuit Court of Appeals provides an important lesson on fighting foreclosure and the importance of properly preparing such a defense. The case, Klimowicz v. Deutsche Bank, is included below.
Massachusetts is a non-judicial foreclosure state. Unlike judicial foreclosure states, such as New York and Vermont, a lender does not need to bring a court case to foreclose. Rather, a lender can foreclose through a series of notices and publications.
In Klimowicz, the homeowner went through a non-judicial foreclosure and the lender, Deutsche Bank, became the record owner of the home following the foreclosure sale. Deutsche Bank then brought an eviction (“summary process”) case against the former homeowner for possession of the property.
Massachusetts permits defendants in a post-foreclosure eviction case to raise defenses against the validity of the foreclosure sale. If successful, a homeowner can defeat a bank’s right to possession of the property. In this case, the homeowner did just that, and attempted to argue that the foreclosure was void due to problems with the mortgage assignment.
The homeowner lost this eviction, and failed to appeal this case.
Federal Court Lawsuit
Following this unsuccessful eviction case, this homeowner continued fighting foreclosure through a federal court lawsuit.
By way of brief background, federal courts are permitted to hear state court matters under specific circumstances, including what is known as diversity jurisdiction: where the parties live in different states. Diversity jurisdiction is common in foreclosure defense cases, as the homeowner and bank tend to be in different states.
In this case, the homeowner attempted to pursue her foreclosure defense case in federal court, by essentially arguing the same claims raised in her eviction case. The federal court dismissed this lawsuit, and the appeals court agreed that the homeowner was not entitled to pursue this federal court action.
The main basis of this dismissal is a federal law concept known as the Rooker-Feldman Doctrine. In a nutshell, this doctrine prevents federal courts from hearing cases brought by parties who have lost in state court. In other words, as the homeowner had lost her case in the state eviction case, she was not able to pursue it again in federal court. If the homeowner had wished to continue fighting foreclosure, she needed to have appealed her eviction case, rather than starting a federal court lawsuit.
Although not discussed in Klimowicz, another basis for denying this federal court lawsuit was res judicata. This legal defense prevents a party from getting a “second bite at the apple” by bringing a claim that was decided (or could have been decided) in a prior claim involving the same parties.
Klimowicz has an important lesson for homeowners fighting foreclosure: it is incredibly difficult to have a second chance in defending against a foreclosure, if the homeowner is unsuccessful in their first court case. There are many, many similar cases like this where courts have denied homeowners their day in court because their foreclosure defense claims (no matter how strong or compelling) were, or could have been, raised before. There are few “second chances” to defend against a foreclosure.
If you need assistance with fighting foreclosure, contact me for a consultation.
The Massachusetts Appeals Court issued an important decision last week on what is needed for a declaratory judgment. The decision comes from a foreclosure law case, but just as easily applies to other areas of law. The decision, Wells Fargo v. Mulvey, is included below.
What is a Declaratory Judgment?
A declaratory judgment, simply put, is a court order that resolves a legal uncertainty. Pursuant to G.L. c 231A, § 1:
The supreme judicial court, the superior court, the land court and the probate courts, within their respective jurisdictions, may on appropriate proceedings make binding declarations of right, duty, status and other legal relations sought thereby, either before or after a breach or violation thereof has occurred in any case in which an actual controversy has arisen and is specifically set forth in the pleadings and whether any consequential judgment or relief is or could be claimed at law or in equity or not . . .
Declaratory judgments are often requested when the desired remedy for a case is more than simply money. For example, in the context of foreclosure defense, money alone will not help someone who wrongfully lost their home to foreclosure . . . that party wants the home back, not money. In such a case, the party can request a declaratory judgment stating that the foreclosure was wrongful, which has the full force of law.
For real estate cases, declaratory judgments are often recorded in the land records, which becomes part of the property’s title.
Overview of Case
In this case, Wells Fargo requested a declaratory judgment as to whether it could perform a non-judicial foreclosure against a homeowner. The bank was concerned that its mortgage did not include the necessary language permitting such a foreclosure.
Importantly, the home owner in this case never filed an answer or response to the bank’s motion. The bank sought a default judgment and requested what it asked for: a declaratory judgment allowing it to foreclose.
What is Needed for a Declaratory Judgment?
Not so fast, said the Court! Although the homeowner never responded to the lawsuit, the court, on its own, declined to give the bank a declaratory judgment. The reason for doing so answers this important question: what is needed for a declaratory judgment?
A declaratory judgment requires there to be an actual controversy for a court to resolve. Here, because the bank presented no evidence to conclude that its right to foreclose against the homeowner was in question, this was not a matter appropriate for a declaratory judgment.
As someone who often requests declaratory judgments in my cases, this decision is an important reminder of the need to properly prepare such lawsuits. Failure to do so can result in dismissal of the case. This decision is clear that a court can do this entirely on their own, even if the opposing party never raises this concern.
If you find yourself involved in a legal dispute concerning a declaratory judgment, contact me for a consultation.
Last week, I had a successful outcome in a FHA foreclosure defense case. My client was facing a post-foreclosure eviction and I raised a successful defense regarding the lender’s non-compliance with the foreclosure requirements for these types of loans.
A Federal Housing Administration (“FHA”) loan is a loan guaranteed by the federal government and designed to help home buyers who would not meet the traditional lending requirements for purchasing a home. Because the federal government insures these loans, lenders are more willing to offer loans to potential buyers who might otherwise be considered a high risk for lending.
FHA foreclosures require lenders to comply with many more requirements than those associated with a standard mortgage agreement. Lenders of FHA loans must review borrowers for loan modifications and other loss mitigation opportunities and, in most circumstances, have a “face-to-face” meeting with the borrower prior to foreclosure.
Strict Compliance Is Required for FHA Foreclosures
Massachusetts is a non-judicial foreclosure state, which allows lenders to foreclose without bringing a court case against the borrower. This is in contrast to states like New York and Vermont, where a lender needs to file a lawsuit against a borrower to foreclose. Here in Massachusetts, a lender must strictly comply with the applicable foreclosure requirements. Failure to do so will make the foreclosure void.
The Appeals Court has extended this strict compliance requirement to FHA foreclosures. A lender’s failure to comply with the “face-to-face” requirement will be fatal to a foreclosure’s validity.
While I am aware of no case on this, I believe that this type of foreclosure defense would equally extend to the other FHA foreclosure requirements, including reviewing a borrower for a loan modification.
For this reason, borrowers who are facing FHA foreclosures often have viable defenses in these cases.
Outcome of Case
In this case, the lender alleged to have performed the required “face-to-face” meeting, but only after it accelerated the mortgage loan (where the lender demands the entire loan balance prior to foreclosing). Because this meeting came after, and not before, the loan acceleration, the lender failed to comply with this foreclosure requirement, making the foreclosure void.
While it is sometimes obvious that the lender made an error with the foreclosure requirements, such mistakes are not always clear. Here, this foreclosure defense required a strong understanding of the non-judicial foreclosure process and these FHA requirements.
The benefits of having an experience foreclosure defense attorney is essential in dealing with one of these cases. If you need assistance in defending against an FHA foreclosure, contact me for a consultation.
Starting July 1st, my firm will be moving to Charlestown, Massachusetts (only several blocks away from my current office). My new office has plenty of parking and facilities that will help me continue to best serve my clients, and hopefully open up new opportunities for me in years to come.
It was a blast to have worked in Somerville for the past five years. Luckily, I won’t be far away, and look forward to staying active in this wonderful city.
Here’s hoping your summer is off to a great start!
This week, I received a client review from a homeowner I represented in a successful foreclosure defense case. The client wished to stay anonymous, but gave me permission to use this review here:
Adam Sherwin is exceptional! Patient, kind, thorough and competent. We had contacted our lender on several occasions to inform them of unfortunate and serious disabling health conditions that had caused my husband and me to fall behind on mortgage payments. We were assured that our modification was in process. We made consistent monthly payments as agreed. However, for some reason, we were informed that the agreed upon modification was not valid. We had carefully kept all notices from the mortgage lender. We worked closely with Adam for more than a year on every step of re-negotiation and reinstatement of our original agreement. Adam consistently informed us of progress, he listened carefully to our thoughts, concerns, and perspective. He was timely, persistent, clear, careful and detailed in every aspect required. We are deeply grateful. The modification was approved. We are in our home and we are thankful.
As discussed in this review, my client had difficulty obtaining a loan modification with her lender, which she qualified for and did everything asked of her to receive this assistance. Unfortunately, as with many loan modification applications, the lender made a mess of this process by denying her application for inaccurate reasons.
Through the filing of a lawsuit and negotiation with the lender, this turned out to be a successful foreclosure case: the client has kept her home through an affordable loan modification!
These are the kinds of cases I am especially proud of, where I’ve been able to help clients through difficult legal matters, and get them the help they need.