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.
If you need assistance with a foreclosure matter, contact me for a consultation.18-1559-2019-07-30
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.
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.
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.
If you need assistance with preventing foreclosure, contact me for a consultation.
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.
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.
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.
If you need assistance with a foreclosure matter, contact me for a consultation.17P1445
The First Circuit Court of Appeals issued a noteworthy decision earlier this month about one of the required notices for a Massachusetts foreclosure. The decision, Thompson v. JPMorgan Chase Bank, N.A., is included below.
Foreclosure Notice Requirement – “Paragraph 22”
This case concerns an interpretation of a foreclosure notice requirement commonly referred to as “paragraph 22.” This requirement is found in paragraph 22 of the standard mortgage agreement used in nearly every residential mortgage in the United States. Paragraph 22 requires that, prior to foreclosure, the mortgagee provide the borrower with several disclosures, including their right to cure the loan default and the right to reinstate the loan after acceleration, which was the subject of this appeal.
An acceleration of a loan is a demand by a lender to pay the entire balance of a loan prior to foreclosure. This generally comes after the borrower has defaulted on the loan, and is a sign that a foreclosure sale is forthcoming.
Strict Compliance for Paragraph 22 Notices
In Massachusetts, a lender is required to strictly comply with the paragraph 22 notice requirement. This comes from Pinti v. Emigrant Mortgage, a landmark 2015 Supreme Judicial Court decision. In Pinti, a minor mistake with one of the paragraph 22 notice provisions was grounds for invalidating a foreclosure sale.
Here, the First Circuit 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? The borrower’s mortgage required this reinstatement to occur five days before a foreclosure sale. The First Circuit held that, because the paragraph 22 notice was misleading, it made the underlining foreclosure sale invalid.
A critical part of Thompson v. JPMorgan Chase Bank, N.A is that the borrower did not need to show prejudice from this error in the paragraph 22 notice. There was no allegation that the borrower was able to bring his loan current, waited until the day of the foreclosure sale to pay this money, and was denied due to this five-day deadline in his mortgage. This is keeping with an important part of Massachusetts foreclosure law: a foreclosure can be unlawful from an error in the foreclosure process even if the borrower was never harmed from it.
Thompson is an important reminder of the importance of a proper foreclosure notice in Massachusetts. Even the smallest errors in the foreclosure process can be viable grounds for defending against foreclosure.
If you need assistance with foreclosure defense, contact me for a consultation.18-1559-2019-02-08
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.