Deadlines for Enforcing a Mortgage

The Appeals Court issued a decision last week concerning the deadline for enforcing a mortgage in Massachusetts, under the obsolete mortgage statute. The full decision, Thornton v. Thornton, is included below.

Thornton isn’t the first appellate decision to look at this issue, and continues a trend of Massachusetts courts rejecting attempts by borrowers to eliminate mortgage requirements.

What Is a Mortgage?

A mortgage is an agreement that gives a lender security against a borrower when making a loan for real property. Under a standard mortgage, a lender is permitted to foreclose a property if the debt is not repaid. Without a mortgage, a lender would only have the right to sue the borrower for the owed money, and have no claim to the property itself.

A mortgage, importantly, is only a security agreement, and not the loan itself. While it is common for homeowners to state they are “paying their mortgage”, in reality, the homeowner is making payments towards the loan associated with the mortgage, known as the promissory note.

Mortgages and the Statute of Limitations

Massachusetts, like nearly every other state, has deadlines for bringing civil lawsuits, known as a statute of limitations. A common misconception is that the deadline for bringing a breach of contract claim applies to the enforcement of mortgages. The argument goes that, if the lender has not pursued a foreclosure for the owed loan within six years, no claim exists.

As explained in Thornton, this deadline applies only to enforcing the loan itself . . . not the mortgage. In other words, even if six years has passed since the loan default, the lender can still enforce the mortgage through a foreclosure.

Mortgages and the Obsolete Mortgage Statute

A bar, however, does exist for enforcing a mortgage through the obsolete mortgage statute. This law prevents the enforcement of mortgages in limited circumstances:

35 years from the recording of the mortgage or, in the case of a mortgage in which the term or maturity date of the mortgage is stated, 5 years from the expiration of the term or from the maturity date, unless an extension of the mortgage, or an acknowledgment or affidavit that the mortgage is not satisfied, is recorded before the expiration of such period. 

The borrower in Thornton argued that this deadline came from the promissory note. The Appeals Court rejected this argument, holding there was no basis for using the deadline from the note for this purpose.

In this case, because there was no maturity date stated in the mortgage, the thirty-five year deadline applied.

Practical Implications For Enforcing a Mortgage

Thorton underscores a critical point about the obsolete mortgage statute: courts, in my view, interpret this law strictly and will not allow a borrower to escape the enforcement of a mortgage unless all conditions of the statute are met. This statute is primarily intended for mortgages that are “up in the attic” and long forgotten by lenders, and courts are reluctant to extend this law much further than that.

This isn’t to say that a borrower has no options against a foreclosure. To the contrary, I’ve help many homeowners avoid foreclosure based on a wide array of defenses. None of these defenses, however, involve an elimination of the mortgage. For this reason, borrowers need to be realistic when dealing with such a matter.

Conclusion

If you need assistance with a mortgage matter, contact me for a consultation.

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Help With Foreclosure

Foreclosure

Help with foreclosure is available to struggling homeowners attempting to save their homes.  The foreclosure process can be intimidating, overwhelming, and a difficult process for many borrowers.  I often meet with potential clients who believe that they they will be removed from their homes in a matter of days and have no options available for avoiding this out outcome.  Fortunately, help with foreclosure is available.

A homeowner should always attempt to apply for a loan modification, repayment plan, or loan deferment as an option for avoiding foreclosure.  If a homeowner can obtain one of these loss mitigation options on their own, they can get the problem solved without the assistance of an attorney.  If, however, a homeowner is not having luck with one of these options, they should speak with an attorney.  An attorney can help with foreclosure through negotiating with the bank or loan servicer or filing a lawsuit to stop the foreclosure if there are grounds for challenging its validity.

Earlier in the process is always better for avoiding foreclosure: the sooner a homeowner begins fighting foreclosure, the better change they have of saving their home.  However, help with foreclosure is available at all stages of the process, from the start of foreclosure all the way until after the foreclosure has occured.

Homeowners can do their part in assisting a foreclosure defense attorney by keeping a paper trail of all efforts made to work with the lender to resolve the problem on their own.  These records can be a huge help in providing an overview of the situation and possible grounds for challenging the foreclosure.

If you find yourself in need of help with foreclosure, contact me for a consultation.

Foreclosure Moratorium in Massachusetts: FAQs

Earlier this week,  Governor Baker signed into law “An Act providing for a moratorium on evictions and foreclosures during the COVID-19 Emergency.” I previously wrote about how this law affects evictions. In this post, I’ll discuss the foreclosure moratorium.

What Foreclosures Are Covered Under the Moratorium?

The moratorium covers all residential foreclosures in Massachusetts. This law broadly prohibits all action related to a Massachusetts foreclosure, including the start of a Servicemembers Case and the publishing of a foreclosure sale notice.

An exception is allowed for “vacant or abandoned” property. The law does not cover foreclosures for commercial property.

What Relief is Available to Homeowners Under the Moratorium?

The law allows a homeowner to request a forbearance of their mortgage loan, which temporarily suspends payments on the loan. This is only allowed for those who have a “certain mortgage loan”, which is defined under a pre-foreclosure law, G.L. c. 244, § 35B. This forbearance, importantly, requires that the unpaid loan expenses be added to the end of the loan.

Forbearances are presently allowed for many homeowners under the federal CARES Act. However, to the best of my knowledge, a forbearance under the CARES Act does not require a lender to add the unpaid balance at the end of the loan, as the state moratorium does.

How Long Will the Moratorium Last?

120 days after the passage of the bill or 45 days after the COVID-19 emergency declaration has been lifted . . . whichever is sooner. The Governor also has the power to extend this moratorium.

What Impact will the Moratorium Have on Future Foreclosures?

A common misconception about foreclosure is that the process begins immediately after a homeowner misses a loan payment. In Massachusetts, nothing can be further from the truth. A myriad number of state and federal laws and mortgage requirements must be followed before a foreclosure sale can occur. It can easily be at least a year (and often longer) from the default of a loan up to a foreclosure sale.

As such, even without the moratorium, I wouldn’t have expected too many foreclosure sales to occur during the coronavirus pandemic. Some lenders may have started the process, but few homes would have actually been foreclosed. This moratorium will delay the inevitable foreclosures that will eventually arise from the pandemic.

What will happen next? It is possible that a wave of foreclosures may occur in the next several years, similar to what happen after the 2007/2008 financial meltdown. In my opinion, the most likely scenario is that loan servicers and other mortgage holders will be flooded with requests for mortgage relief in the next year. Many homeowners, unfortunately, will have difficulty getting the assistance they need.

Final Thoughts

If you need assistance with a foreclosure matter, contact me for a consultation.

Tips for Obtaining Mortgage Payment Assistance

Due to the ongoing coronavirus pandemic, many homeowners will likely need mortgage payment assistance in months ahead. Here are some tips for homeowners in need of such help.

Speak to Your Lender

For anyone seeking mortgage payment assistance, the first step is to speak with your lender. Most lenders have some form of mortgage assistance available, which can sometimes be granted through a simple phone call with the lender.

The most important piece of advice for obtaining mortgage payment assistance is (1) get it in writing and (2) keep a timeline of your communications with the lender. If a problem arises later, having this information can be critical in trying to avoid foreclosure.

Understand the Relief Available

Most lenders are offering mortgage forbearances as assistance during the coronavirus pandemic. A forbearance is a postponement of mortgage payments. It gives the homeowner a break from paying their mortgage.

A forbearance, importantly, does not forgive what is owed, or permanently modifies the loan. A homeowner who receives a forbearance needs to remember that their mortgage payments will resume in the future.

I have a feeling that the federal government (and many lenders on their own) will be pushing through more permanent mortgage assistance options in the future, so additional relief may be available soon.

Foreclosures Are Not Occurring Anytime Soon

While many homeowners, understandably, are concerned about losing their homes, foreclosures will not be occurring soon, due to federal and state regulations. Homeowners, however, do need to be proactive in addressing these matters, as foreclosures will resume at some point in the future.

Conclusion

If you need assistance with a foreclosure matter, contact me for a consultation.

Help for Homeowners During Coronavirus

According to Google search result trends, searches for foreclosure increased 47% in the past week. This is a staggering number, and proof that American homeowners are deeply concerned about the impact of coronavirus.

I’ve practiced foreclosure defense for the past seven years, and I’ve never seen a time where the threat of foreclosure has ever been so dire. Here, I want to discuss help for homeowners during coronavirus.

Speak to Your Lender Directly If You Are Behind on Your Mortgage Payments

The first step for anyone facing foreclosure is to speak with their mortgage lender, as soon as possible. Don’t wait until a foreclosure sale is scheduled; start as soon as you realize you may need assistance with your mortgage payments.

In Massachusetts (as well as most other states), there are few, if any, requirements for a mortgage lender to offer a homeowner foreclosure assistance, such as a loan modification. Fortunately, most lenders will consider such relief: if often makes more sense to get a homeowner into an affordable payment plan than foreclose.

Many lenders, thankfully, are offering foreclosure assistance in lite of the coronavirus pandemic. I wouldn’t be surprised if the federal government offers a loan modification program like the Home Affordable Modification Program offered years ago, during the financial meltdown.

Keep Good Records, Keep Good Records, Keep Good Records

What’s the most important advice for homeowners during the coronavirus? Keep good records. Lenders are going to be swamped with requests from homeowners facing foreclosure. Paperwork will get lost, and mistakes in reviewing these requests will be made.

Keeping good records is critical if your mortgage lender denies you foreclosure assistance, and legal action becomes necessary.

Understand the Foreclosure Process

While many homeowners, understandably, are concerned about the threat of foreclosure, it’s important to understand the foreclosure process. Massachusetts (like most states) has a lengthy process for foreclosure, which generally requires a right to cure period for the homeowner. Foreclosure takes months, and sometimes years, to occur.

While homeowners need to be proactive in addressing foreclosure, foreclosure doesn’t happen overnight, and homeowners do not need to be worried about being thrown out of their homes unexpectedly. This is especially true now, as many lenders are putting moratoriums on the foreclosure process.

Conclusion

Please stay safe during the coronavirus. If you need assistance with a foreclosure matter, contact me. I’m not doing in-person consultations, but I am available by phone.

What’s Required for a Foreclosure Default Notice? Massachusetts’s Highest Court Will Soon Clarify

foreclosure default notice

There is old saying for those living in New England: if you don’t like the weather, wait a few minutes. The same can be said about Massachusetts foreclosure law: if you don’t like a particular decision . . . wait a few minutes.

This is evident by a recent decision from the First Circuit Court of Appeals, that requests the Supreme Judicial Court to clarify the requirements for a foreclosure default notice, commonly known as “paragraph 22.” This comes from the Thompson decision, a ruling in favor of homeowners against a foreclosure sale that has been widely criticized by many in the real estate field. The full decision is below.

Background on Paragraph 22

The vast majority of homeowners in the United States have a mortgage agreement that uses a standard form. This standard form mortgage comes from Fannie Mae and Freddie Mac, and requires a lender to send a default notice prior to foreclosure. This requirement is generally found in paragraph 22 of this mortgage agreement.

This notice, among other things, requires specific disclosures to a homeowner prior to the start of foreclosure and provides the homeowner thirty days to pay the outstanding loan balance to avoid foreclosure.

In 2015, in a landmark court decision, the Supreme Judicial Court ruled in Pinti v. Emigrant Mortgage that lenders need to strictly comply with this foreclosure default notice requirement. Failure to include or correctly state one of the required disclosures in these notices can be grounds for setting aside a foreclosure.

The Thompson Decision

Earlier this year, the U.S. Court of Appeals for the First Circuit issued a decision applying the Pinti decision to an error in one of these paragraph 22 notices. In this decision, Thompson v. JPMorgan Chase Bank, the First Circuit ruled that the notice was defective because it mislead the borrower about when he could pay his outstanding loan balance to avoid foreclosure.

Importantly, the homeowner in Thompson never suffered any harm from this defect in his foreclosure default notice. The First Circuit suggested that any potential harm to a borrower in one of these notices was a violation of paragraph 22 and grounds for challenging a foreclosure’s validity.

Not surprisingly, many involved with Massachusetts real estate are concerned with the ramifications of this decision, and its impact on the foreclosure process. I, personally, have received many inquires about the ramifications of this decision; a sign that this area of Massachusetts foreclosure law remains in flux.

SJC to Review Requirements for a Foreclosure Default Notice

Thompson, importantly, was decided by a federal appeals court. The reason for this is that the case was brought into federal court from state court, which the law allows in certain circumstances.

The bank in Thompson asked for a reconsideration of this decision, which is rarely granted in appeals. The First Circuit declined to reconsider this decision, but instead, has asked the Supreme Judicial Court to clarify the law on foreclosure default notices and paragraph 22.

I, personally, have never heard of an appellate court doing this after issuing a decision. This is a good example of how Massachusetts foreclosure law continues to be an evolving area of law.

Conclusion

If you need assistance with a foreclosure matter, contact me for a consultation.

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Elderly Parents Facing Foreclosure

I often get consultation requests from adult children whose parents are facing foreclosure. As if foreclosure is not stressful enough already, the potential foreclosure for one’s parents is particularly difficult. Elderly parents facing foreclosure is a sensitive topic that requires appropriate action.

Overview of Foreclosure in Massachusetts

Massachusetts is a non-judicial foreclosure state. This means that a bank is permitted to foreclose a home without going to court, through the sending of legal notices to the homeowner and a public foreclosure auction.

For senior citizens, Massachusetts’s foreclosure process can present a real challenge. It is not uncommon for elderly homeowners to misunderstand these foreclosure notices and get overwhelmed by this situation. Adult children who are helping parents facing foreclosure often tell me that their parents had little recollection about the status of their mortgage loan and the start of the foreclosure process.

Options for Elderly Parents Facing Foreclosure

Elderly parents facing foreclosure need to carefully consider their options. For most homeowners, a loan modification is the best option for attempting to avoid foreclosure. This, however, is not always a viable option for senior citizens, who may be on limited income or not in a position to make loan payments for an extended period of time.

Most lenders, however, do consider a household member’s income when reviewing a borrower for a modification. Seniors who have adult children living with them and earning income may make a loan modification feasible.

Another option for elderly parents facing foreclosure is to simply sell the home. This is something to strongly consider if the home has significant equity in it. Rarely does a foreclosure give the borrower a good financial return from a home sale.

If these options are not feasible, it may also be possible to negotiate a deed in lieu of foreclosure, short sale, or other alternatives for avoiding foreclosure.

Conclusion

I’ve helped many Massachusetts homeowners avoid foreclosure, including elderly parents and senior citizens. If you or your parents need such assistance, contact me for a consultation.

Preventing Foreclosure in Massachusetts: 3 Success Stories

Challenging a Foreclosure

Whenever I meet with a potential client, I always ask a critical question: what is your goal for my legal representation? In other words, if I take your case, what do you want to get out it? This question is especially important for foreclosure defense.

As I tell all potential clients involved in foreclosure, no one gets a free home from fighting a foreclosure. While a successful legal challenge can prevent or undo a foreclosure that is not compliant with the law, nothing prevents a lender from simply starting the process again. With this in mind, the goal of foreclosure defense should always be a permanent resolution to the problem . . . not a temporary fix.

Here, I want to share three stories of how I have been able to help Massachusetts homeowners with preventing foreclosure. To protect privacy, I have changed each client’s name and location, but the underlining facts of each case are the same.

Preventing Foreclosure Through a Loan Modification

Meet Matt. Matt owned a two-family home in Saugus that was foreclosed in 2016. While he tried for years to work with his lender to avoid foreclosure, the loan servicer kept losing his loan modification applications and giving him excuses about why he didn’t qualify for foreclosure relief assistance. After foreclosure, the bank brought a post-foreclosure eviction case against him, at which time he retained me.

I challenged the bank’s case against him by arguing that it never served him with a proper notice to quit, and failed to provide him notice that he did qualify for a loan modification. The Court agreed that Matt never received the proper notice, which forced the bank to start the eviction case all over again.

In the end, we were able to negotiate a favorable loan modification for Matt, and a rescission (“undoing”) of the foreclosure sale!

Preventing Foreclosure Through Refinancing

Meet Tom. Tom inherited his parents’ home in Jamaica Plain several years ago, which had a past-due mortgage loan on it. Tom tried, repeatedly, to work with the lender to take over the loan and make these payments. Incredibly, the lender, at one point, outright refused to accept Tom’s payments towards the loan.

Tom retained me a month before the scheduled foreclosure sale, and I filed a lawsuit to stop the sale and for damages from the bank’s unfair and deceptive business practices. I succeeded in stopping the sale, and then began working with the bank to reach a settlement for this matter.

Tom was in a unique situation: he was fighting a foreclosure against a mortgage loan that wasn’t his. While he owned the home, the loan was from his deceased parents. I had Tom speak to several other mortgage lenders, and got him approved for financing. I then negotiated with the bank to accept a lower amount of the total owed debt, which the bank agreed to (at an amount far less than the home’s fair market value). Not only did Tom avoid foreclosure, this deal put instant equity into his home!

Preventing Foreclosure Through a Sale of the Home

Meet Jane. Jane owned a home in Beverly and was behind on her mortgage loan, due to lost employment. Jane was in the process of applying for a loan modification when her lender foreclosed, despite promising it would not do so.

Jane hired me to see what could be done. After we reviewed her options, we agreed that her best option wasn’t to keep the home, but rather, to sell it. The home was in a good neighborhood and would sell at a great price.

Since the foreclosure had already happened, I filed a lawsuit and requested an emergency court order to prevent the bank from selling the home again, which the Court granted. In the end, we reached a deal where the bank agreed to reverse the foreclosure and allow Jane to sell the home, which she did. Jane not only avoided foreclosure, but was able to recover significant equity from her home . . . money that would have been lost if the foreclosure had gone through.

Conclusion

If you need assistance with preventing foreclosure, contact me for a consultation.

Who Can Foreclose in Massachusetts?

The Appeals Court issued a decision this week concerning an important topic for Massachusetts foreclosure law: who can foreclose in Massachusetts? The decision, Mitchell v. U.S. Bank National Association, is included below.

Background

In this case, two homeowners challenged the validity of a foreclosure sale against their home. As is the case with many residential mortgages in the United States, these homeowners had a securitized mortgage loan.

Securitization is a process by which mortgage loans are put together into a trust, with shares of this trust (known as “certificates”) sold to investors. A trustee (often U.S. Bank National Association or Deutsche Bank) manages these trusts, with a loan servicer responsible for the day-to-day handling of the loan responsibilities, such as collecting loan payments and handling customer inquires.

Who Can Foreclose in Massachusetts?

The homeowners in Mitchell argued that U.S. Bank was not entitled to foreclose their home because this entity was not entitled to enforce their mortgage loan. Rather, they argued, the certificate holders were the only persons entitled to do so, and in turn, foreclose the home.

The Appeals Court rejected this argument. Because U.S. Bank was entitled to receive payments from the mortgage loan, it was therefore entitled to foreclose. The Appeals Court did not agree that, because these payments were for the benefit of the certificate holders, only these investors could foreclose.

Practical Implications

Mitchell reaffirms that attempts to challenge foreclosures on the basis of the loan securitization process is an uphill battle. Massachusetts courts have almost always rejected these arguments, with Mitchell being the most recent example.

That’s not to say that anyone can foreclose in Massachusetts. A valid foreclosure requires that the foreclosing entity hold the mortgage and promissory note, and comply with pre-foreclosure notice requirements. Mitchell, however, again declined to extend the scope of these foreclosure requirements to include the underlining loan securitization process.

Conclusion

If you need assistance with a foreclosure matter, contact me for a consultation.

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