Massachusetts’s Supreme Judicial Court issued its long-awaited decision in the Thompson case, concerning foreclosure notices in Massachusetts. This is a decision that lenders, title examiners, and other real estate professionals have been closely following since the original federal court decision. The full decision is below.
Thompson was a federal court case brought by a borrower challenging a foreclosure sale against his home. In 2019, the First Circuit of Appeals ruled that the foreclosure in this case was void due to an error in the right to cure notice, which both state law and the terms of most mortgages required to be sent prior to foreclosure.
This decision surprised many (including yours truly) because it seemed to “stretch the limits” on what is required for one of these notices, per established law.
For this reason, Thompson generated a great deal of concern and criticism, leading the Supreme Judicial Court to take this decision for the purpose of resolving this matter.
Foreclosure Notices in Massachusetts: Basic Requirements
To be clear, there are several required foreclosure notices in Massachusetts, including those notifying the property owner about the scheduled foreclosure sale. Here, I am focusing on the required default notice that must provide the mortgagor with an opportunity to cure their loan default, prior to foreclosure. Both state law, as well as the terms of most standard mortgages, require such notice.
Under the SJC’s decision in Pinti v. Emigrant Mortgage, a lender must strictly comply with the mortgage requirements for such notices. Even a minor error in one of these notices could seemingly invalidate a foreclosure.
In Thompson, the question for the court was whether an alleged error in one of these notices was fatal to a foreclosure’s validity.
Here, the First Circuit had held that a paragraph 22 notice sent to a borrower made the foreclosure sale void because it misrepresented the borrower’s rights. The notice told the borrower that he could reinstate his loan after acceleration , anytime before the foreclosure was to occur. The problem with this was that the borrower’s mortgage required this reinstatement to occur five days before a foreclosure sale.
The SJC ruled that, because state law gave the borrower a longer time to reinstate than the mortgage itself, the default notice was not deceptive.
Implications of Thompson
Due to a series of SJC decisions in the wake of the 2008/2009 financial crisis (including Pinti), the validity of many Massachusetts foreclosures have been often called into question, with many areas of foreclosure law remaining unclear. Thompson is a step away from this trend, and avoided a circumstance where many foreclosures across Massachusetts could have been voided.
The SJC, however, avoided answering an underlining question in this decision: how strict is strict compliance? In other words, how much of a mistake needs to occur in a foreclosure notice for an underlining foreclosure to be invalidated? Such a question remains unclear, and will likely be resolved in future court cases.
If you need assistance with a foreclosure matter, contact me for a consultation.g12798
One of my projects this fall has been writing for LexisNexis’s Practical Guidance series. LexisNexis, in my opinion, is the best source for legal research, and it is honor to be part of their team. My article, Residential Foreclosure in Massachusetts, is available on my website and included below.
This article provides a background on foreclosure in Massachusetts, for both lenders and borrowers. For the past seven years, I’ve helped homeowners and purchasers of foreclosed homes navigate this tricky area of law. I’ve help many homeowners avoid foreclosure, and have advised real estate professionals with some of the pitfalls that can occur when purchasing a foreclosed home.
Foreclosure law can arise in almost every area of real estate, including landlord-tenant law, title matters, and property disputes. Having an understanding of this process is critical when foreclosure arises in a legal dispute.
My article touches on some important areas of Massachusetts foreclosure law:
- Pre-Foreclosure Requirements: Massachusetts is a non-judicial foreclosure state. This means that a lender doesn’t need a court case to foreclose. The caveat, however, is that a lender must strictly comply with Massachusetts’ detailed foreclosure requirements. Failure to do so can make the underlining foreclosure void.
- Foreclosure Defenses: In certain cases, it is possible to defend against foreclosure, with the goal of working out a permanent solution to the problem. My article discusses what to consider when defending against foreclosure, and, importantly, the defenses that are not viable in these cases.
- Post-Foreclosure Evictions: An eviction is required for any occupants who remain in a home following foreclosure. This is a entire topic on its own, as these types of evictions follow a slightly different process than a typical landlord-tenant eviction.
I hope this article is helpful . . . let me know what you think. If you need assistance with a foreclosure matter, contact me for assistance.Residential-Foreclosures-1
Fixing a foreclosure problem is a matter that may be necessary if a mistake is made in the foreclosure process. If such a mistake occurs, and the foreclosure is void, the buyer does not have full ownership of the property, which will prevent them from evicting any of the occupants or selling the home at a later date.
Fortunately, there are options available for fixing a foreclosure. As someone who has both helped buyers of foreclosed properties with these matters, and homeowners attempting to avoid foreclosure, I know many of the common pitfalls in this area of law.
Overview of Foreclosure In Massachusetts
Massachusetts is a non-judicial foreclosure state. This means that, unlike many other states (such as New York and Vermont), a lender does not need to go to court to foreclose. Rather, a lender can foreclose through a series of legal notices and a public auction sale.
The requirements for a foreclosure in Massachusetts are detailed and must be strictly complied with. Even a minor, innocent mistake can be grounds for arguing that a foreclosure is void.
Common Errors In Massachusetts Foreclosures
Common errors in Massachusetts foreclosures include, but are not limited to, the following:
- Failing to strictly comply with the statutory foreclosure requirements
- Failing to have a proper mortgage assignment at the time of foreclosure
- Failing to hold the promissory note at the time of foreclosure
- Failing to strictly comply with paragraph 22 of the standard mortgage
For a third-party buyer of a foreclosed property, these defects can be problematic. Even though the lender made the error, such defenses can be used against the subsequent buyer of the foreclosed property, to challenge the home’s ownership.
Fixing a Foreclosure: What Can Be Done?
The first step for attempting to resolve a foreclosure problem is to try and negotiate with the former homeowner, if possible. If the former homeowner no longer lives in the home, or has no interest in keeping the property, it may be possible to reach an agreement where ownership of the home can be resolved.
If this is not possible, a court action will likely be necessary. In such a case, a third-party buyer can ask a court to quiet title for the property or allow it to perform a new foreclosure sale.
Addressing an issue with a foreclosure should never be done without an experienced attorney’s help. If you need assistance with such a matter, contact me for a consultation.
Although the COVID-19 pandemic has slowed the judicial process in Massachusetts, cases are still going forward. I’m pleased to write that I obtained two favorable decisions for Consumer Protection Law cases: one in state court and the other in federal court.
I didn’t win these cases . . . yet. Rather, I prevailed against the opposing sides’ attempt to dismiss each matter at the start of the case, for failure to state a claim upon which relief can be granted.
My opposition argued that our lawsuits didn’t have any merit, and should be dismissed at the onset of the case. The courts, however, agreed with me that my clients had viable lawsuits and were entitled to their day in court.
These cases, which concern issues of foreclosure defense, can and will be dismissed by courts if not properly drafted. In both cases, I faced opposition from two excellent attorneys who served their clients well.
What is the Consumer Protection Law?
The Consumer Protection Law, also known as “Chapter 93A”, protects consumers from “unfair and deceptive business practices.” There are several laws that fall under Chapter 93A, but the relevant portion for consumers is Section 9.
Chapter 93A has an incredibly broad reach, and covers nearly every area of law that can impact consumers. While my cases discussed above concern foreclosure, Chapter 93A often comes up in landlord-tenant disputes, debt collection matters, and a myriad of other consumer issues.
“Unfair and deceptive business practices” under this law is purposely broad and can cover an infinite number of violations. Moreover, the Attorney General is permitted to issue regulations that make certain practices automatic violations of Chapter 93A.
Benefits of the Consumer Protection Law
Because the Consumer Protection Law is broad, it can be used for many types of misconduct that are not otherwise violations of the law. Chapter 93A, importantly, also includes equitable powers, which allows a court to do more than just issue monetary damages.
A prevailing party under Chapter 93A, under the right circumstances, is also entitled to attorney fees.
Chapter 93A, importantly, allows courts to impose penalties on parties who refuse to settle cases that should be resolved without a lawsuit. This provides a strong incentive for parties to settle cases on their own.
Preparing a Chapter 93A case needs to be done properly. Even before a lawsuit is file, a claimant (in most cases) needs to serve a demand letter to the opposing party, in an attempt to resolve the dispute prior to court. Once a case is filed, a claimant must be sure to make a strong case that the other side violated this law.
If you need assistance with such a matter, contact me for a consultation.
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.
If you need assistance with a mortgage matter, contact me for a consultation.y19P1222
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.
UPDATE: The eviction and foreclosure moratorium has been extended through October 2020.
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.
If you need assistance with a foreclosure matter, contact me for a consultation.
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.
If you need assistance with a foreclosure matter, contact me for a consultation.
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.
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.