I confess that this news may not qualify as still being “breaking” because it came out several weeks ago, but my crazy schedule kept me from blogging sooner. However, as this is a major foreclosure decision, I am going to stick with calling it breaking news. 🙂
The Supreme Judicial Court issued the long-anticipated U.S. Bank v. Schumacher decision and held that the required right-to-cure notice was not a power of sale requirement.
The right to cure statute, found in G.L. c. 244 Section 35A, requires mortgagees to provide homeowners with a right to cure their mortgage loan debt prior to foreclosure. Unlike other states, such as Maine, Massachusetts’s law has specific requirements about what these notices must include, including the name of the mortgagee, mortgage loan broker/originator, and amount needed to cure the default.
These specific requirements of these notices became a problem for foreclosing entities, who would often send these notices loaded with defects and mistakes. A growing number of trial courts in Massachusetts held that any defect in these notices invalidated the underling foreclosure; a interpretation based on the “strict compliance” standard required for foreclosures.
The Supreme Judicial Court held otherwise, and decided that these right-to-cure notices were not part of the applicable statues for foreclosure. As such, strict compliance is not required for these notices and a defect in one of these letters alone is not enough to invalidate a foreclosure.
The Court did hold that a foreclosure may be challenged against one of these notices as a matter of equity, if the homeowner can show that as a matter of fairness, the defective notice is enough to justify stopping a foreclosure.
So, what are the take home lessons of Schumacher?
- Earlier is better than later for fighting a foreclosure. While post-foreclosure cases can sometimes be won, there are many claims available to homeowners that are much more effective if brought as early as possible in the process. However, with that said . . .
- Schumacher reaffirmed strict compliance for the power of sale statutes: G.L. c. 244 Sections 11-17C. From my reading of Schumacher, foreclosures not strictly complying with one of these statutes are void. This leaves some defenses available for homeowners fighting a foreclosure after it occurred.
The Judicial Branch’s recent Housing Court recommendation is a great step in the right direction for ensuring a proper forum for foreclosure defense and landlord/tenant cases in Massachusetts.
The Judicial Branch last week submitted a proposal to the Legislature recommending that Housing Court be expanded to all of Massachusetts by 2015. Currently, only a select number of towns/cities in Massachusetts are within the jurisdiction of a Housing Court. Malden, for example, a city where many of my clients reside, is not covered by a Housing Court and requires summary process and other housing cases to be heard in the local District Court or Superior Court.
I support this new proposal because, as anyone who has sat in a summary process session has learned, foreclosure cases (and many landlord/tenant cases) have become really, really complicated matters. Having a court with some specialized knowledge of these cases could go a long way towards having these matters promptly and effectively resolved.
Last week, the Supreme Judicial Court issues its decision in the “Peeping Tom” case and held that state law did not cover “upskirt” photos taken by cell phones and other recording devices. The Court’s decision, and the Legislature’s prompt passage of a bill to prohibit these practices, has important lessons for foreclosure defense.
Unsurprisingly, the reaction to the Court’s decision was negative, with some believing that the Supreme Judicial Court supported
the right of perverts to take lewd pictures. Not quite. The job of the SJC, like any Court, is to interpret the law and here, Massachusetts law didn’t include these acts as crimes under the law. This, of course, is not the outcome that many would have wanted, but as as a government of laws and not men
, we are bound by only what is included in the law.
So what’s this have to do with foreclosure defense? As stated by the SJC
, foreclosure law comes primarily from written law. As such, the rules on what can and can’t be done are mostly found in statutes; most of which are in Chapter 244 of the General Laws of Massachusetts
. These laws are the starting point for any foreclosure defense case.
As I frequently say, Massachusetts has the best legal community around. The same, however, can’t be said about its laws. I find many Massachusetts statutes to be complex and confusing and in need of a rewrite. Nonetheless, until this happens, we are stuck with them and need to do our best in understanding what they mean, and what they do not mean. In the area of foreclosure defense, which comes primarily from statutory authority, the importance of reading and understanding these laws cannot be overstated.
Homeowners have the option of challenging the validity of their foreclosures in a civil action case. A common cause of action that foreclosure attorneys bring in these case are declaratory judgments.
A declaratory judgment, simply put, asks the court to make a legal determination that resolves legal uncertainty for the parties. Under Massachusetts law, the power to make a declaratory judgment is broad and covers a broad array of matters. For pre-foreclosure defense cases, I often ask for a declaratory judgment that the foreclosing entity is not entitled to perform a foreclosure of my client’s home and in post-foreclosure cases, a declaratory judgment that the foreclosure is void because the foreclosing entity did not comply with the terms of the mortgage and/or applicable foreclosure statutes.
An important requirement for requesting a declaratory judgment is that all parties “who have or claim any interest which would be affected by the declaration” need to be a party of the lawsuit. For foreclosure cases, this often means that all parties to the mortgage and all entities involved in the foreclosure need to be included in the lawsuit. For post-foreclosure cases where my clients have tenants, I include them as well, as the validity of the foreclosure would affect the tenants’ landlord/tenant relationship.
The purpose of a declaratory judgment is “to remove, and to afford relief from, uncertainty and insecurity with respect to rights, duties, status and other legal relations . . .” A court issues a declaratory judgment through a simple court order stating its legal determination on the disputed issues. In foreclosure cases, a declaratory judgment holding that a foreclosure was void can be recorded in the Registry of Deeds and has the effect of restoring the homeowner’s title to the property.
Declaratory judgments can be raised in Superior Court, Land Court, and Federal Court. I find declaratory judgments to be useful in foreclosure defense cases because they provide resolution to matters of law that do not always fit in with other kinds of causes of action.
A foreclosure defense attorney may be able to do many things for you, such as fighting a foreclosure, preparing a loan modification application, or negotiating a leave from your home. However, a foreclosure defense attorney is not—and should not—be your financial adviser.
Homeowners facing foreclosure need to make tough decisions on what to do with their homes. For some, fighting a foreclosure and trying for a loan modification is the best way to go. For others, walking away and going for a fresh start may make more sense. A lawyer can advise you of your legal options and what to expect in your case, but advice on the financial implications of your situation is best left to a financial adviser, and not a lawyer.
Now, of course there are many lawyers with financial backgrounds; some who are even financial advisers themselves. Even so, clients should always get a second opinion on their cases. Even under the best circumstances, fighting a foreclosure is difficult and you should be certain you are fighting for the right outcome.
Loan modifications are an essential tool in foreclosure defense. The goal is almost all of my cases is to get the homeowner a monthly mortgage payment they can afford. Unfortunately, a federal program aimed at helping homeowners has become a source of its own problems.
In 2009, in an effort to assist struggling homeowners, the federal government created the Home Affordable Modification Program (“HAMP”). The goal of HAMP is to offer a loan modification for qualifying borrowers with a monthly mortgage payment of 31% of the borrower’s income. Lenders and servicers are suppose to use a “waterfall” approach to create affordable monthly payments through 1) capitalization of the outstanding debt 2) interest rate reduction or 3) term extension.
Simple enough? Not quite. HAMP has fallen well below expectations and has helped far fewer homeowners than was expected. I’ll give you my reason for these dismal numbers: lenders and servicers aren’t playing by the HAMP guidelines. I’ve heard horror stories of borrowers who have spent years submitting applications and constantly being told their paperwork is missing or being denied for reasons that make not the slightest bit of sense.
It gets worse: in a ongoing class action lawsuit here in Boston, several Bank of America employees have given sworn testimony that their employer rewarded employees for denying HAMP modification applications.
With this in mind, anyone applying for a HAMP modification should keep detailed records on the application process and–most importantly–have proof that they submitted all of the paperwork.
If you’ve been denied a HAMP modification, seek an attorney immediately. While courts differ in their approaches to allowing HAMP lawsuits, Massachusetts has a strong consumer protection law that can often be used in these cases.
I’ve help many homeowners with HAMP denials. Contact me for a consultation.
As the foreclosure crisis continues throughout Massachusetts and the rest of the country, mortgage/deed reformations continue to be popular cases in Massachusetts Land Court and Superior Court. With the right approach, these cases can be effective tools in foreclosure defense.
Reformation cases, simply put, are attempts by banks and lenders to fix mistakes in mortgages and deeds. When a mortgage loan is in default, the foreclosing entity often takes a close look at the title to see if the paperwork is in order. In many cases, these foreclosing entities are finding huge mistakes in mortgages and deeds, including incorrect property descriptions and missing information (a reason why real estate law has one of the highest areas of legal malpractice).
The bank and lenders will often first try to contact the borrowers and see if they will consent to correcting the mistake. If they won’t, the bank or lender needs to bring a court action to reform the mortgage or deed. These cases are generally brought in either Superior Court or Land Court and ask the Court to correct the error based on principles of equity and fairness.
Following a common piece of advice given on this blog: if you get notice of one of these lawsuits against you, don’t ignore it. The foreclosing entity is bringing one of these lawsuits for a simple reason: unless it corrects the mistake in the land records, it can’t foreclose. With this in mind, you may be able to use this mistake to your benefit and negotiate with your lender for a loan modification or some alternatives.
If you find yourself in one of these situations, contact me for a consultation.
While foreclosure defense attorneys are generally in the business of helping people save their homes, struggling homeowners should also consider an attorney when they simply want to walk away.
For many reasons, some homeowners are ready to be done with their homes and move on. Either they cannot afford the home even with the best loan modification or they have simply had enough and are ready for a change. In any case, the worst thing these homeowners can do is simply pack up and move away. Why? Until a foreclosure happens or you convey the property, you still own the home. Therefore, you’re still liable for anything that happens at the home (and still responsible for any state/city taxes and services). For example, if someone is hurt as a result of you not maintaining the property after you’ve walked away, you could very well be responsible for any injuries or expenses caused by your failure to maintain the premises.
Homeowners in these situations have several opportunities to gracefully leave their homes, including a short sale and deed-in-lieu of foreclosure. Not only do these options prevent any potential liability, they also avoid the stigma of having a foreclosure on one’s record.
This advice also applies to former homeowners living in foreclosed homes. Even if you’re ready to move, it is a good idea to notify the new owner in writing and let them know you are no longer in possession of the home. Moreover, these former homeowners can often make “cash for keys” settlements that will provide them money for relocation expenses in exchange for leaving the home.
Do any of these situations apply to you? Contact me for a consultation.
As a foreclosure defense attorney, I’m in the business of helping struggling homeowners save their homes. Potential clients who are facing home foreclosure often ask me, “What can I do to help my case?”
The best way to help your attorney with your case is the preparation you do before you meet with an attorney. Here are some things I find that clients can do to help me do my job better (and, save them less money in legal fees). These tips are geared towards foreclosure defense but also apply to most other areas of law:
- Create a Timeline: Most foreclosure cases (and many other areas of law) are fact intensive, and its a huge help for a client to have a timeline of the case, from beginning to end.
- Keep Copies of Everything: Having ready access to the important papers in your case save incredible time for your attorney. Keep copies of everything. With that in mind . . .
- Stay Organized: Find a way to organize your materials. I’m a huge believer in going “paperless” by scanning all my documents and then storing them into easy-to-find folders on my computer. Services like Google Drive and Dropbox are great for this. Being able to provide your attorney with an organized file of your paperwork makes everyone’s life much easier.
- Create a “cast of characters“: Make a list of every person who has anything to do with your case (or knows something about it). Include as much information about each person you know. Not only will this help your lawyer better prepare your case, it helps your lawyer determine if he or she has a conflict in taking your case.
The Supreme Judicial Court issued its decision in Galiastro v. MERS and allowed homeowners on appeal to use “produce the note” arguments in their foreclosure defense cases. In Eaton v. Federal National Mortgage Association, the Court held that a foreclosing mortgagee must hold the promissory note at the time of a foreclosure sale. This decision, however, was prospective and applied only to foreclosures whose notices of sale were issued after the date of the decision: June 22, 2012. In Galiastro, the Court extended the “Eaton rule” to parties who had appeals pending in the Appeals Court when the Court decided Eaton.
More on this to come, but the Court’s decision makes sense. It would be unjust to allow Eaton to apply for that single case that made it to the Supreme Judicial Court but not for others who were similarly on appeal.