Bring E-Filing to Massachusetts!

Briefs

My blog post today isn’t directly on point with the legal topics I generally blog about, but I think it’s a post that has important relevance to the work I do and clients I serve.   Let me tell you about why we need to bring e-filing to Massachusetts.

Permit me a story, that I will call “a tale of two cases.”  Both cases were complex matters, requiring extensive research, writing, and preparation.  In the end, though, one was far easier to get filed with the court than the other, saving my client money (and freeing my time for other important matters).   What was the difference?  One case was in federal court, which permits e-filing, and the other was in Massachusetts state court, which does not.

“E-filing” lets an attorney file papers with a court online.  The attorney merely needs to turn his papers into a PDF (which almost all word programs allow a user to do today), upload them on the federal court website, and submit.  No need to send the other side a copy of what you filed; the other attorneys and court get an automatic notification when something is filed.  Same when the court issues an order or decision.

Massachusetts state courts, in contrast, still require paper filing.  A lawyer needs to print a copy of what they want to file and mail or hand deliver it to the court and other side.  For large lawsuits and motions, the process requires enormous amounts of paper and clerical work to get done.

E-filing is of equal benefit to all attorneys, but is especially needed for solo and small firms like myself.  I don’t rely on clerical staff for my administrative needs and the extra time I spend filing papers with the court takes away valuable time from my clients.  It makes legal services more expensive than they need to be.  Moreover, as a proud alumnus of the nation’s top environmental law school, paper filing consumes enormous amounts of paper.  The picture above is from a recent appeal I did.  The required filing of seven copies of my brief and transcript amounted to several hundred printed pages and hundreds of dollars in printing costs.

E-filing has other advantages as well: it provides attorneys the convenience of working remotely and the ability to view the filings in a case without a trip to the courthouse.  Research is also easier: a lawyer interested in learning about a case can do so from their computer, and not in a busy clerk’s office.

E-filing has worked wonders in federal court, and its time to bring e-filing to Massachusetts.  There are several pilot projects  underway on this important endeavor and here’s hoping that e-filing becomes a permanent part of the Massachusetts state court system.

 

Tips on Applying for a Loan Modification

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Applying for a loan modification can be an incredibly frustrating experience.  Anyone who hasn’t tried to submit one of these applications to a loan servicer has little idea of how much time and work can go into this process.  I certainty didn’t before I began working in this area of law.  Here are some tips on applying for a loan modification, which I hope are helpful in completing one of these applications.

  • Read the Application Instructions Carefully:  Bank and loan servicers will not hesitate to reject an loan modification application if a page is missing or a line item is not correctly filled out.  One particular trouble spot is with bank account statements: loan modification applications often require every page of these statements, even if several of these pages are blank.  Are some of these requirements overkill?  Absolutely.  But, failing to follow them will result in denied applications and lost time.
  • Show Proof of Income:  To show that you can sustain a loan modification, you need to prove that you have income.  If you work for someone else or receive benefits (such as Social Security), this can easily be done through your paystubs or bank statements.  If you work for yourself, or receive rental income, this gets trickier: the loan sevicer will want to see deposits of this income into a bank account.  If you can’t show this, you can’t prove you have this income.  Be sure that you can show sufficient proof of your income.
  • Show Proof that the Loan Servicer Received Your Application:  Loan modification applications and supplemental information for your application should always be sent through some form of certified mail, to show that the recipient got the information.  If you are submitting the application by fax, get a confirmation that the fax was sent.  Moreover, be sure to follow-up with the loan servicer several days after sending in these documents.
  • Be Prepared to Apply More Than Once:  The unfortunate reality of applying for a loan modification is that the process can take a while, even if you have been applying for it correctly.  Be prepared to apply more than once.
  • Create a Log of Your Applications:  The single most important one of my tips for applying for a loan modification is to create a paper trail of your applications and communications with the loan servicer.  This record will be a tremendous help if you need to take further action later on against the servicer.

If, after several attempts, you have not been successful in getting a review of your loan modification applications, obtain a consultation with a foreclosure defense attorney, who can help you determine the best way to proceed.

Is My Home In Foreclosure?

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Struggling homeowners in Massachusetts often start a consultation with me with a simple question: is my home in foreclosure?  Those not familiar with Massachusetts law might laugh at this question, believing that the service of a foreclosure lawsuit easily answers this question.  In states like New York and Florida, which are known as judicial foreclosure states, that is correct: lenders in those areas must take a borrower to court to foreclose.  Massachusetts, however, is a non-judicial foreclosure state, where a lender does not need a court’s permission to foreclose (anyone interested in a good discussion between these different types of foreclosure should read two great articles on this topic from the Boston Bar Journal).

Because a lender does not need a court’s permission to foreclose, determining whether a home is in foreclosure is not always obvious.  The official start of the foreclosure process comes with the publishing of advertisements in the local newspaper and notices sent to the borrower.  Determining where the homeowner is before that step, however, can be tricky to figure out.

One of the quickest ways to determine a borrower’s foreclosure status is checking whether a servicemembers’ case has been brought against them.  When a client asks me, “Is my home in foreclosure?”, my first step is to check whether one of these cases has started.  A servicemembers’ case is a judicial proceeding to determine if a borrower is in the armed services, which sometimes allows a delay in foreclosure for military members.  To check on whether a  servicemembers’ case has been brought against a borrower, I look at the court records on Masscourts.org.  Servicemembers’ cases are typically brought in the Land Court, so I usually search for cases in that court.  Another way of checking to see if such a case has been filed is through the registry of deeds.  Generally, a lender files a notice of one these cases in the land records for the subject property, which will have the case number and court where the case is filed.

Determining the status of the servicemembers’ case is a good way to determine how far along the borower is in the foreclosure process.  If the servicemembers’ case has been completed, a foreclosure sale will likely begin soon.  If no such case has been filed, the foreclosure sale will likely take longer (I estimate the typical servicemembers’ case to take around four months to complete).

It is important to note that there are always exceptions to this general timeframe, a homeowner should never, never delay in seeking help against foreclosure.

FHA Loan Foreclosure Requirements

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The Massachusetts Appeals Court issued an important decision on FHA loan foreclosure requirements in Jose v. Wells Fargo Bank (full decision below).  This decision reaffirms the strict requirements that come with foreclosing one of these loans.

A Federal Housing Administration (“FHA”) loan is a loan guaranteed by the federal government, aimed at helping lower income Americans buy homes.  For purposes of foreclosure, FHA loans have much detailed and elaborate requirements than traditional, private loans.  One of these requirements is a “face-to-face meeting” prior to accelerating the loan and foreclosure. This requires the lender to actually meet with the borrower before going forward with the foreclosure process, in an effort to help avoid foreclosure.  This requirement has a practical purpose: the federal government backs these loans if the borrower defaults, so the lender should be making every effort possible to avoid foreclosure.

Jose v. Wells Fargo Bank concerned one of the exceptions to the face-to-face meeting requirement, which allows a lender to avoid this requirement if it has no offices within 200 miles of the borrower.  Wells Fargo argued that this exception applied because there were no branch offices of the mortgagee (the holder of the loan) within this distance from the borrower.  Wells Fargo, undeniably, had branch offices of its servicer within 200 miles of the borrower (who is responsible for the day to day responsibilities of administering the loan).

The Court rejected this argument, holding that under the plain terms of the law, an office within 200 miles of either the mortgagee or servicer does not allow a foreclosing entity to qualify for this exception to the FHA loan foreclosure requirements.  As such, the lender was required to do a face-to-face meeting with the borrower, and its failure to do so made the foreclosure void.

This decision is an important win for homeowners, in that it makes this exemption to the FHA loan foreclosure requirements less viable for many lenders, who frequently have loan servicing offices across the state.  The decision also reaffirms the need to strictly comply with these FHA loan requirements, and the consequences of a lender’s failure to do so.

If you have a FHA loan and are facing a possible foreclosure, contact me to see if I can be of assistance.

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Santos v. U.S. Bank: Loan Modification Denial

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The Massachusetts Appeals Court issued an important decision last week in Santos v. U.S. Bank (full decision below) regarding a loan modification denial.  The Court rejected the borrower’s negligence claim, but acknowledge that other grounds exist for fighting a loan modification denial. (Disclaimer: I was involved briefly in both the trial court and appeal of this case).

In Santos, the homeowner was denied a loan modification under the Home Affordable Modification Program (“HAMP”), a federal program that encourages servicers to give struggling homeowners a loan modification.  HAMP, by all accounts, has been a mess: servicers routinely “loose” required paperwork for these applications, deny borrowers for baseless reasons, and stall the process as long as possible.  The failure to properly review these applications, in my opinion, is a major reason for thw continued foreclosure crisis across the country.

After being denied a loan modification, the homeowner in Santos sued the servicer on a claim of negligence: a cause of action against someone for failure to take proper care in doing something (negligence claims are often raised in personal injury cases).  One of the required elements for a negligence claim is that the opposing party have a duty of care to the claimant.  In Santos, the Appeals Court rejected the borrower’s lawsuit because the Court determined that the loan servicer owed no duty of care to the borrower for reviewing his loan modification (despite being a participant in the HAMP program).  Because the servicer owed no duty to the borrower, the borrower in Santos was not permitted to pursue a negligence claim.

The Appeals Court did, however, acknowledge that other grounds could be used for fighting a loan modification denial, such as a Consumer Protection Law (“Chapter 93A”) claim.  To bring such a claim, however, the borrower needs to do more than merely alleged that the servicer failed to follow the HAMP guidelines but instead, that the servicer committed unfair and deceptive business practices (a higher burden than negligence).

Santos illustrates a strange paradox in foreclosure defense: participating loan services in the HAMP program are required to consider homeowners for loan modifications, but failure to properly review a modification application, by itself, will not provide a homeowner with their “day in court” on these matters.  This occurrence is frustrating for homeowners (and foreclosure defense attorneys!) who see that an applicant is entitled to a loan modification, but may not necessarily have a legal cause of action on this important matter.

Santos also discussed another important legal question: whether homeowners can “split” foreclosure defenses in different cases. The Court ruled on the homeowner’s attempt to pursue a foreclosure defense that he had an opportunity to do in the prior, post-foreclosure eviction case (the homeowner filed this case after being evicted from the home).  The Court ruled that res judicata, a legal defense preventing a party from raising claims in multiple cases, barred the homeowner’s later attempt to pursue this defense.  A homeowner, simply put, gets “one bite at the apple” in fighting a foreclosure.  If a homeowner does not raise a foreclosure defense in their legal case, they run the risk of losing it forever.

So, what are the take home lessons from Santos?

  1. Pursuing a case for a loan modification denial requires a showing of a pattern of abuse by the lender in reviewing an application.  Homeowners pursuing a loan modification should always, always keep a paper trail on their application attempts to help build such a case if a lawsuit becomes necessary.
  2. A successful foreclosure defense requires a homeowner to pursue all of their potential claims in a lawsuit, or risk losing them down the road.  This often becomes an issue for homeowners who attempt to represent themselves in court, fail to raise important defenses, and find themselves with limited options if their initial lawsuit is unsuccessful: a reason why such claimants should speak with a foreclosure defense attorney to discuss their options.
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Can I Sell My Home Before Foreclosure?

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Homeowners facing foreclosure often ask a common question: can I sell my home before foreclosure?  As with all legal questions, the answer depends.

A lender brings a foreclosure to recoup the money owned on the underlining mortgage loan.  Paying off this debt is the simplest way to avoid foreclosure. If a homeowner can sell the home and satisfy the loan, foreclosure is avoided.

This, however, is dependent on the home selling for equal to or greater than the mortgage loan.  If the home is worth less than the owed money, the home is underwater.  To sell the property, the borrower needs the permission of the lender to do a short sale (where the lender accepts less than the amount owed on the loan).

If the homeowner has equity in the property (where the home value is greater than the amount owed on the loan), a sale of the home to avoid foreclosure is a possibility.  In such a case, the homeowner simply sells the home, pays off the loan, and pockets the difference from the sale.  This choice is especially good for homeowners with alot of equity in their home, but insufficient income to support a modified loan payment.

What is the worst thing that a homeowner with equity in their home can do? Let the home get foreclosed.  In a foreclosure sale, the homeowner collects the difference in money between the foreclosure sale and the amount owed on the loan.  For example, if the home sells for $500,000 and the homeowner owed $400,000 on the loan, the homeowner is entitled to the surplus: $100,000 (minus legal fees and other foreclosure costs).  While a homeowner is entitled to such a surplus (if one exists),  a foreclosure sale almost never collects the same amount as a regular home sale.  This is because foreclosed properties come with a “stigma”, resulting in a lower sale price than the market average.  Simply put, the risk of purchasing a foreclosed property prevents many potential buyers from considering these home, which limits the pool of buyers in a foreclosure sale.  If a homeowner has no options for saving the home, and has equity in the property, they should give serious thought towards selling the home and maximize the amount they can get from the sale.

When considering whether to sell a home to avoid foreclosure, timing is of critical importance.  If the lender has proceeded with the foreclosure process, the lender may not willingly stop the foreclosure: even if the homeowner truly is committed to selling the home.   I have seen some outrageous behavior from banks, who appear “hell bent” on proceeding with a foreclosure despite a homeowner’s ability to sell the home on their own.  Fortunately, there are options in such a scenario.  In such a case, seek the help of a foreclosure defense lawyer right away.  An attorney may help you stop the foreclosure and get the time necessary to sell the home.

How Long Does a Foreclosure Take?

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One of the most common questions I get from homeowners facing foreclosure is, how long does a foreclosure take?  The quick answer is: a while.  Compared to other states that have expedited the foreclosure process, foreclosures in Massachusetts generally take a long time to perform, from default of the loan to the foreclosure sale date.  While earlier is always better for attempting to avoid foreclosure, this lengthy period of time works to a homeowner’s benefit in trying to resolve these matters.

While every foreclosure is different, the following are the typical steps in the process, which helps answer how long does a foreclosure take.

  • Default of Loan (6 – 12 months):  The first stage of the foreclosure process is when the homeowner defaults on the loan.  While a lender can technically begin a foreclosure after the first missed payment, I have typically found that lenders wait 6-12 months after the initial default before moving ahead with the next steps towards foreclosure.
  • Right to Cure/Request a Modified Loan (3-5 months):  The next stage of the foreclosure process is the right to cure/right to request a modified loan period.  Massachusetts law requires lenders to offer borrowers an opportunity to cure their loan default prior to foreclosure, as well as the opportunity to pursue a loan modification.  Depending on the circumstances, a homeowner will either have 90 or 150 days for these options.
  • Servicemember’s Case (4 months):  Following the right to cure/request a modified loan, the next step in the foreclosure process is a Servicemembers’ Case, usually brought in the Massachusetts Land Court.  A servicemembers’ case is solely to determine whether the homeowner is in the military and entitled to a postponement of the foreclosure.  Unless a homeowner or their family member is in the military, the homeowner generally doesn’t have a defense in one of these cases.  However, the lender will usually wait until it gets a default judgment against the homeowner and court order before commencing a foreclosure sale.
  • Foreclosure Sale (1 – 3 months):  Following the Servicemembers’ Case, the bank then begins the foreclosure sale process itself.  This requires notice to the homeowner thirty days before the scheduled sale, as well as publication of three notices in the local newspaper.  Sometimes, foreclosure sales may get postponed, for a number of different reasons.
  • Post-Foreclosure Eviction Case (1 – 6 months):  Following a foreclosure sale, the lender or the party who brought the property at the foreclosure sale needs to obtain possession of the property, through a post-foreclosure eviction.  The eviction case generally begins 3-5 months after the foreclosure sale (through a notice to quit served upon the homeowner).  The time period of the eviction case generally depends on whether the homeowner fights it: if the matter is uncontested, the lender will generally be able to evict in one month.  If the homeowner raises a defense or counterclaim, the eviction can take up to six months (and sometimes even longer).

In answering how long does a foreclosure take, bear in mind that there are many factors that will delay the listed stages above.  A loan modification application, for example, generally delays a foreclosure, while the lender considers whether the homeowner is eligible for loss mitigation assistance.  A bankruptcy will also delay foreclosure: a lender generally can’t foreclose until its gets permission from the bankruptcy court.  Finally, there is often delay in going from one step to the other: the ongoing foreclosure crisis continues to create a backlog of cases, which delays how quickly foreclosures go from start to finish.

Nonetheless, this summary provides a rough estimate of the stages of the foreclosure process and how long to expect each part of the process to take.  If you find yourself in any part of the foreclosure process, contact me to see if I can be of assistance.

Interview with David Dayen, Author of Chain of Title

Slander of Title

The Massachusetts Foreclosure Law Blog is pleased to present an interview with David Dayen, author of Chain of Title, a new book about the foreclosure crisis.  Chain of Title is an account of how three ordinary Americans uncovered foreclosure fraud in the wake of the ongoing foreclosure crisis.  I started it during the Memorial Day weekend and recommend it as a great resource on foreclosure defense.  

Please tell us about your background and what inspired you to write Chain of Title.

I had a career in film and television production when I discovered political blogging back in 2004. I got more and more interested in it and then in 2009 started to work for a popular website of the time named Firedoglake writing political and news stories. The foreclosure crisis was this critical yet under-covered event in American life, affecting so much of our economy. I worked on stories about nightmares in the Home Affordable Modification Program (HAMP) and then heard about foreclosure fraud. Lisa, Michael and Lynn ran the most comprehensive websites about the scandal, and became sources of mine after I met them at a one-day conference about foreclosure fraud in late 2010. When I heard their stories about moving from foreclosure victims to activists, I knew it would be a great way to tell the story of the financial crisis at the ground level.

What is the most shocking thing you under covered while researching and writing Chain of Title?

Just the total lack of quality control on the part of the mortgage industry. You got the sense that they didn’t care what the piece of paper they put in front of judges or county officials said, as long as they could use it to dispossess someone of their home. There were mortgage assignments that were notarized but unsigned. There were entire filing cabinets of original notes that went missing. There were documents where the effective date was never filled in, leaving the date of execution of the mortgage assignment as 9/9/9999. Barack Obama’s own release of mortgage on his condo was signed by a robo-signer. The fraud was so systemic.

In Chain of Title, you discuss U.S Bank v. Ibanez, a landmark Massachusetts court decision that invalidated thousands of foreclosures across Massachusetts.  How do you feel other states and the federal government have responded to the foreclosure crisis? 

Every state is different because foreclosure law is generally adjudicated at the state level. Some states created verification standards where lawyers for the banks had to personally verify that the documents in their cases were legitimate. In other states, like those where you don’t need judicial sign-off for a foreclosure, the response was far more limited. I think Hawaii is a good example, they went from a non-judicial to a judicial foreclosure state. Lisa Epstein, one of my subjects, played a role in that, she testified via Skype to a legislative session in Honolulu to argue for the change.  I think the federal government took a walk on the rampant fraud that was evident in the foreclosure process, making no effort to criminally prosecute and wrapping up the whole thing into a large settlement designed to produce a penalty with a big headline dollar amount that didn’t correspond to reality. I believe it’s the greatest disappointment of the current Administration, and it fed a belief that there’s a two tiered system of justice in America. In many ways it fueled the anxiety and discontent we see in our politics.

While many Americans have struggled with the foreclosure crisis, others know little about the abuses of the lending industry.  What do you hope readers of Chain of Title learn from your work?

I do hope that the book sheds more light into just how many different types of abuses were heaped on homeowners and investors before, during, and after the crisis. More than that, I wanted to recognize these incredible people who did more investigation into this misconduct than the whole of state or federal government. And I wanted to let the public know that there was a real alternative here, that they could have gotten the accountability they so desperately sought. And we have to reckon with the consequences of how in America, who you are matters more than what you did.