Sherwin Law Firm Succeeds in FHA Foreclosure Defense Case

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.

FHA Foreclosure

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.

Conclusion

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.

Firm News: Sherwin Law Firm Moves to Charlestown

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!

 

Firm News: Client Review from a Successful Foreclosure Defense Case

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.

If you find yourself in need of help with a foreclosure defense case or other legal matter that I handle, contact me for a consultation.

Do I Need A Foreclosure Attorney?

Homeowners facing foreclosure in Massachusetts often ask themselves: do I need a foreclosure attorney?  As an attorney who has helped hundreds of Massachusetts homeowners facing foreclosure, let me discuss some of the ways that a lawyer can assist with the foreclosure process.

Applying for a Loan Modification or Short Sale

A lawyer is not always needed for a loan modification or short sale application.  If a homeowner is comfortable completing the required paperwork and staying on top of the process, a homeowner can do this on their own.

However, many homeowners find these applications to be overwhelming, which often require extensive paperwork and communication with the loan servicer.  For many homeowners, a lawyer (or reputable loan modification professional) can be a huge help with this process.

Stopping a Foreclosure Sale

If a homeowner is facing a scheduled foreclosure sale, a foreclosure attorney is generally needed.  While a homeowner can attempt to represent themselves in court, the process for doing so is especially overwhelming and complicated for a non-lawyer.  I’ve rarely seen a self-represented litigant succeed in fighting a foreclosure.  Massachusetts foreclosure law is complicated, and a foreclosure attorney is generally necessary for developing an effective foreclosure defense strategy.

Facing a Post-Foreclosure Eviction 

After a foreclosure sale in Massachusetts, the bank (or the third-party buyer of the foreclosed property) is required to evict the occupants of the home.  Per Massachusetts law, a homeowner is allowed to challenge the foreclosure’s legality as an eviction defense.  If a homeowner wishes to pursue such a defense, having a foreclosure attorney is critical.  An experienced foreclosure attorney will know what defenses to raise, the information that is needed to pursue such a defense, and how best to present such a case before a judge or jury.

As I have written before,  even if the homeowner does not want to stay in the home, a foreclosure attorney can still be helpful.  A foreclosure attorney can help the homeowner obtain the time they need to leave the property and avoid any potential liability from the foreclosure sale.

Conclusion 

If you are facing foreclosure in Massachusetts, it is worthwhile to speak with an experienced foreclosure attorney.  If you are in need of such help, contact me for a consultation.

Advice for Choosing a Lawyer: Don’t Tell Me Just What I Want to Hear

Choosing a lawyer can be a difficult process.  Legal matters often require you to put trust into a person who you may only know through a website or referral.  For anyone choosing a lawyer, there are many things one should keep in mind when making this choice.  Here, I want to focus on what I consider to be an essential consideration in choosing a lawyer: finding someone who won’t tell you only what you want to hear.  This applies to all areas of law, but especially the practice areas that I cover.

Good Legal Advice Is Not Always the News You Want to Hear

When I meet with potential clients, it is not uncommon to have people ask me for a guarantee that they will win their case . . . regardless of the circumstances.  Sometimes, I suspect that the potential client simply wants an attorney to tell them what they want to hear.  Admittedly, this can be tempting, when the potential client is sympathetic and trying to do the right thing.

Of course, if the potential client has a strong case, I’m happy to tell them so and get to work.  But, if the case is not strong, it is important that the potential client knows this before making the decision to go forward.

In my practice, I follow a simple rule: good legal advice needs to be accurate and honest.  Nobody benefits from following a legal strategy that is doomed from the start and filled with unrealistic expectations.  When choosing a lawyer, look for someone who will tell you what you need to hear, and not only what you want to hear.

Be Wary of Taking Legal Advice From Non-Reputable Sources

 If it isn’t obvious, I am a big fan of using blogs and online resources for informational purposes.  I hear, on a regular basis, from many clients and lawyers who have benefited from my resources, which I’m proud of.  This information,  however, comes from years of experience and proven results.

The same isn’t true for other content floating around on the Internet.  Before believing something is true, take the time to learn where the content comes from.

Conclusion

Choosing a lawyer is an endeavor that should not be taken lightly.  Selecting a lawyer who simply tells you what you want to hear can have disastrous consequences down the road.  Picking an attorney with a reputable background and real understanding of the law is the best way for getting the legal help you need.

Sherwin Law Firm Files Brief for Lost Promissory Note Appeal

Last week, I filed a brief for a pending appeal in the First Circuit Court of Appeals concerning a lost promissory note.  This appeal concerns a critical issue of Massachusetts foreclosure law: the need for a lender to have a borrower’s promissory note to foreclose.

Overview of a Promissory Note 

A promissory note is a legal term for a written promise to pay a definite sum of money.  Often referred to as simply a “note”, this is a legal contract that a party signs, promising to repay a sum of money.  In the context of real estate, a promissory note is signed by a lender and a home buyer, where the home buyer agrees to repay the money borrowed to purchase the home.  While it is common for homeowner to refer to “paying my mortgage” when making payments on a home loan, a homeowner is actually making payments towards the promissory note (a mortgage, in contrast, is a security agreement, allowing a lender to foreclose if the debt is not repaid).

Most promissory notes for home loans are negotiable instruments, a legal document guaranteeing the payment of a specific amount of money at a set time.  The critical importance of this is negotiability: the right of a mortgage lender to sell the promissory note.  Mortgage lenders generally want to sell a mortgage loan as quickly as possible, for the purpose of maximizing their return on investment.

“Hold the Note” Requirement for Massachusetts Foreclosure Law 

Massachusetts law requires a foreclosing entity to “hold the note” at the time of foreclosure.  This comes from Eaton v. Federal National Mortgage Association, a landmark Massachusetts case that made this a requirement for the foreclosure process.  A foreclosing entity does not need to have physical possession of the note; it is permissible for an agent (such as the loan servicer) to hold it on the note owner’s behalf.

A home owner who wishes to see their promissory note can generally request it from their lender through a qualified written request.  Moreover, Massachusetts law requires a loan servicer to certify in writing to the borrower that they own the loan.  A foreclosing entity must also record an affidavit in the land records certifying that they own the note.  To the best of my knowledge, there is no requirement that a  foreclosing entity must show the actual, physical note to the borrower prior to foreclosure.

What Happens When a Promissory Note is Lost?

If a promissory note is lost, the lender has the option of doing a lost note affidavit.  The law for this, G.L. c. 106, § 3-309, only allows such an affidavit if the lender (among other things) previously had possession of the note and cannot obtain the note through a diligent search.

However, even with the the lost note affidavit law, a missing promissory note is a headache for a lender attempting to foreclose.  For example, a 2017 Land Court decision held that a lender could not foreclose on the basis of a lost note affidavit due to problems arising from the change of the servicer for the loan.

In my appeal, I challenged whether the foreclosing entity made an adequate showing for each requirement of the lost note affidavit law.  This is an area of law that continues to evolve and be relevant to matters of foreclosure defense.  Stay tuned . . .

Conclusion 

If you need help avoiding foreclosure, contact me for a consultation.  The benefits of having an experienced attorney on your side can make all the difference in getting you the outcome you need.

 

Can I Owe Money After a Foreclosure?

Challenging a Foreclosure

A common question for homeowners facing foreclosure is whether they will owe money after a foreclosure.  While it is possible to owe money after a foreclosure sale (commonly known as a deficiency judgment), there are requirements that a lender must follow to pursue such a claim, and other considerations that come into play on whether a lender will seek these damages against a borrower.

Requirements for Pursuing a Deficiency Judgment

Whether a borrower may own money after a foreclosure depends on the outcome of the foreclosure auction.   In such an auction, the home is put up for sale, with the lender attempting to recover the money that the homeowner owes on the home.  If the winning bid is greater than the amount owed by the borrower, the borrower gets the difference, after deducting the loan payoff and the lender’s costs and fees.

If the borrower owes more than the highest bid on the property, the borrower would owe the difference (known as a “deficiency judgment”).  However, to collect this judgment, the bank is required to comply with a notice and affidavit requirement.  A 2017 decision from the First Circuit Court of Appeals, Gavin v. U.S. Bank, N.A., held that a lender must strictly comply with this law.  In that case, the lender failed to send the required affidavit within thirty days after the foreclosure sale, which precluded the lender from attempting to recover this money from the homeowner.

Deadline for Pursuing a Deficiency Judgment 

Another consideration on whether a homeowner will owe money after a foreclosure sale is whether the lender has filed such a claim within the required deadline (known as the statute of limitations).  The statute of limitations for such a claim is two years from the foreclosure sale.  If such a claim is not brought within this deadline, the homeowner will not owe money after the foreclosure.

Practical Considerations on Owing Money After Foreclosure 

As discussed above, while it is possible to owe money after a foreclosure, it is not common.  The reason is that most lenders do not want to spend the time and money collecting a judgment that the homeowner will likely not be able to pay.  The old adage applies:  you can’t get blood from a stone.

Moreover, any owed money after a foreclosure sale can often be eliminated through a bankruptcy, either before or after the foreclosure.  If such a bankruptcy occurs, the lender will have few, if any, options for trying to collect this debt.

Conclusion 

Although it is rare to owe money after a foreclosure sale, it is possible.  Homeowners facing such a claim should speak with an experienced attorney to learn their options.

Sherwin Law Firm Wins Foreclosure Appeal

foreclosure appeal

I’m pleased to announce that I, along with appellate attorney Joseph Schneiderman, won a foreclosure appeal this week in the Massachusetts Appeals Court.  The case, Nationstar v. Culhane (included below) concerns an important topic for appealing an eviction (“summary process”) case in Massachusetts: the importance of timely filing a notice of appeal.

Overview of Case

It would take much, much more than a single blog post to give the background on this case, or even the procedural history of this matter.  Here’s a quick synopsis.  The homeowner went through a foreclosure sale and faced a post-foreclosure eviction case by the foreclosing lender.  In such a case, the homeowner has a right to defend against the eviction by alleging that the foreclosure was not lawful.  Here, my client had a strong defense based on the lender’s failure to comply with paragraph 22 of her mortgage.

Case History

My client won her case at the District Court, where the foreclosing lender filed this eviction case.  Following my client’s win, the foreclosing lender appealed this case to the District Court Appellate Division.  The Appellate Division is a part of the District Court and hears appeals of most civil cases from the District Court.

The Appellate Division reversed the District Court’s decision, and ruled that the foreclosing lender should have won the eviction case.  I then appealed the case to the Massachusetts Appeals Court, which hears appeals decided by the Appellate Division.

Outcome of Foreclosure Appeal

The Appeals Court ruled in my client’s favor based on a critical argument we raised for my client: the foreclosing lender’s failure to timely file this foreclosure appeal.

Massachusetts eviction law has a short deadline for pursuing an eviction appeal: ten days.  As we argued to the court, previous decisions on this law hold that a failure to meet this deadline, for seemingly any reason, are grounds for dismissing the appeal.  Here, the foreclosing lender filed its notice of appeal after the ten-day deadline, which the Appeals Court agreed was grounds for dismissing the appeal.

Conclusion

This case has some really important lessons not just for a foreclosure appeal, but any appeal of an eviction case.  The deadline for such an appeal must be timely filed.  Often, the failure to timely appeal a civil case is not always fatal to one’s case; appeal courts have discretion to allow a untimely appeal for good cause.  Not so with eviction cases.  This case, along with many prior cases on this matter (discussed in the court’s decision below) suggest that there are few grounds for filing an eviction appeal late.

For this reason, I always recommend that lawyers and parties representing themselves in an eviction appeal err on the side of caution when preserving a right to appeal.   File the notice of appeal as soon as possible and make sure you have proof that the court and opposing party receive this notice.  Take no chances on this.  I have been known to jump in my car on the last day of the deadline to appeal and make a special trip to court if I have any reason to believe the notice of appeal was not timely received by the court.

This case also demonstrates the importance of working with an experienced appellate attorney on one of these matters.  The arguments in this case were highly technical and required a deep understanding of Massachusetts eviction law and appellate procedure.  If you find yourself involved in a similar foreclosure appeal, contact me to see if I can help.

 

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Obtaining a Loan to Avoid Foreclosure

Happy New Year!  I hope 2018 has been off to a great start for you . . . besides the cold weather.  A recent foreclosure case that I successfully resolved is the basis for this blog post: obtaining a loan to avoid foreclosure.  This option, while not for everyone, can be an effective means of foreclosure defense.

Foreclosure 101

Foreclosure is the process by which a lender can force the sale of a property to recover the borrower’s owed debt for the property.  Massachusetts is a non-judicial foreclosure state:  a lender does not need to go to court to foreclose, and performs this process through a series of letters and notices.  The most common cause for foreclosure is a borrower’s failure to pay their mortgage loan.

Obtaining a Loan to Avoid Foreclosure 

Avoiding foreclosure requires a borrower to resolve the underlining money owed on a home.  Foreclosure defense is not about getting a free home and the only permanent solution to foreclosure is addressing the owed debt.  This can occur through a loan modification, where a lender agrees to restructure a loan to make the payments more affordable for the borrower.

Another option for some borrowers is obtaining a loan to avoid foreclosure.  If a borrower can obtain financing from another lender to pay the owed money on the home, this can be an option for saving one’s home.  This new financing, of course, would need to be more affordable for the borrower to make this option worthwhile.

This option is not for every borrower facing foreclosure: many borrowers in these predicaments lack the credit to obtain new financing.  This is a more realistic option for  those facing foreclosure who are not on the underlining loan.  This can occur if a homeowner has inherited a home with a delinquent mortgage loan, or have a partner or spouse whose name alone was on the mortgage debt.  In such a scenario, the non-borrower may qualify for a loan to avoid foreclosure, whose terms are more favorable than the delinquent debt.

Obtaining the Assistance of a Foreclosure Defense Attorney

If obtaining a loan to avoid foreclosure is an option for you, a foreclosure defense attorney can be helpful for your case.  If the underlining mortgage loan is really behind in payments, the owed debt may be much higher than the property value, making it difficult to find new financing.  A lawyer may be helpful in negotiating a more reasonable payoff for the homeowner.

I have had success in such cases, where the homeowner has excellent credit and is facing foreclosure through no fault of their own.  In the right circumstances, the lender might agree to accept less than what is owed on the property, with the borrower getting an affordable mortgage loan.

A word of caution on this blog post.  I have heard from some potential clients who have considered purposely defaulting on their loan, in hopes of getting a better payoff in the end.  This is bad, bad advice.  Defaulting on a mortgage loan has serious consequences, and there is never a guarantee that a permanent foreclosure defense can be reached for such a case.

Conclusion 

If you find yourself facing foreclosure, contact me for a consultation.  The advantages of having an experienced attorney on your side can make all of the difference in attempting to save your home.

Preserving a “Pinti” Defense – Paragraph 22 of the Standard Mortgage

The Massachusetts Appeals Court issued an important decision this week on preserving a “Pinti” defense under paragraph 22 of the standard mortgage.  In US Bank v. Milan, the Appeals Court ruled that a homeowner failed to preserve this foreclosure defense and was precluded from raising it in his foreclosure case (a full copy of this decision is below).

Overview of Paragraph 22 of the Standard Mortgage

Paragraph 22 of the standard mortgage (used for most residential home purchases) requires that a default notice be sent to a homeowner containing a number of required disclosures before a foreclosure sale can proceed.  In Pinti v. Emigrant Mortgage, the Supreme Judicial Court held that a lender must strictly comply with this mortgage requirement.  Failure to do so makes any subsequent foreclosure sale void.

Pinti, importantly, limited the homeowners who were entitled to this defense.  Initially, the decision only applied to those paragraph 22 notices sent after July 17, 2015 (the date of Pinti).  The Appeals Court subsequently extended the benefit of Pinti to those homeowners who had a pending appeal on the paragraph 22 issue, and later, to any homeowner who raised it as a defense in a pending trial court case.  In this present appeal, the Appeals Court needed to determine what counts to preserve this defense in a pending foreclosure case.

How Does a Homeowner Preserve a Paragraph 22 Defense? 

In this case, the homeowner was in a post-foreclosure eviction case, where the bank alleged to have foreclosed the home.  The homeowner was entitled to defend against the eviction by arguing that the foreclosure was void, precluding the bank from obtaining possession of the home.

Here, the homeowner appears to have answered the bank’s eviction lawsuit by using a printed answer form, which allows claimants to raise defenses and counterclaims by checking a box.  This homeowner made a general allegation that the foreclosure was void.  In response to the bank’s inquiry on the basis of this defense, the homeowner alleged that there was forgery in his case, and did not mention a failure to comply with paragraph 22 of his mortgage.  While this case was ongoing, the Supreme Judicial Court issued Pinti.  The trial judge ruled that Pinti applied because the homeowner preserved a Pinti defense in this case, and found the overall foreclosure to be void.

The Appeals Court disagreed, ruling that the homeowner listed forgery, and not a paragraph 22 defect, as the asserted grounds for the homeowner’s foreclosure defense.  In other words, the Court was not willing to let the homeowner “change horses midstream” and get the benefit of Pinti after stating a prior, separate basis for his foreclosure defense.

Conclusion 

Recent court cases have been favorable to foreclosed homeowners with a paragraph 22 defect.  Milan suggests that there are limits to who can get the benefit of Pinti  in their case, and that a failure to expressly raise this matter can be fatal to one’s defense.  This decision, however, really only applies to homeowners with a pending foreclosure case who received a defective paragraph 22 notice before July 17, 2015.  Homeowners who received a defective notice after this date will likely have much more leeway in raising a Pinti defense.

While the Court did not address this issue, Milan touches upon the problems of using forms in answering or bringing a lawsuit.  Such forms allowed a claimant to raise a defense or claim merely by “checking a box” and without providing any supporting facts or detail.  I have long believed that these forms are problematic and not proper under the requirements for raising a legal claimMilan suggests that Massachusetts appeal courts may be inclined to take a closer look at this issue in the future.  Regardless, this is a reason why the benefits of finding an experienced foreclosure defense attorney cannot be overstated.

US Bank v. Milan