In what has become a yearly tradition, Congress voted to extend the Mortgage Forgiveness Debt Relief Act to 2017. This bill is incredibly important for foreclosure defense. As I have written before, homeowners who have received loan modifications and done short sales often have a portion of their mortgage loan debt forgiven by their servicer. Under the tax code, this forgiven debt is income, and can result in an enormous tax bill for homeowners trying to avoid foreclosure. If this forgiven debt is taxable, the benefits of foreclosure defense would go out the window: the homeowner would save the home, but face a huge tax bill from the IRS. Given this reality, the Mortgage Forgiveness Debt Relief Act is essential for foreclosure defense. One would hope in the future, however, that the President and Congress would make this legislation permanent, and avoid the end-of-year drama of determining whether or not this important relief is extended.
Christmas came early for two of my clients this year. I’m pleased to announce that I won a foreclosure appeal of a post-foreclosure eviction case this week in the District Court Appellate Division. In this case, my clients were challenging the validity of the foreclosure in the eviction case, where the bank was attempting to remove them from the home on the grounds of a lawful foreclosure. The basis of this foreclosure appeal was the lender’s failure to comply with the terms of the mortgage, an effective foreclosure defense following the Supreme Judicial Court’s Pinti v. Emigrant Mortgage decision.
In this case, which went to a full jury trial, the Trial Court denied our motion for a directed verdict, a request a defendant makes to end a trial on the basis that the plaintiff did not meet their burden of proof. Simply put, because the bank never sent my clients the correct notice, the bank failed to perform a lawful foreclosure.
A foreclosure appeal requires an enormous amount of time: my records show I put over seventy hours of work into this case. The effort, however, was well worth it, and just in time for the holiday season! This is an important remindeer of the importance of hiring an experienced foreclosure defense attorney for help with a foreclosure appeal: the complexity of these legal arguments (and extensive appellate requirements) makes an appeal a project that only an attorney should handle. If you are facing foreclosure and need to do a foreclosure appeal, contact me for a consultation.
Governor Baker signed into law the Massachusetts Foreclosure Title Clearing Bill last week. This bill, which supporters have been trying to pass for years, imposes a deadline for challenging the validity of foreclosures in Massachusetts. Here, I’ll present an overview of the Massachusetts Foreclosure Title Clearing Bill and what homeowners and lawyers need to know about this new law.
The Massachusetts Foreclosure Title Clearing Bill is largely the direct result of the Supreme Judicial Court’s U.S. Bank v. Ibanez decision, which invalidated thousands of foreclosures across Massachusetts. In Ibanez, the Supreme Judicial Court held that a mortgagee needs a valid assignment to perform a foreclosure, and the failure to have one at the time of foreclosure makes the foreclosure void.
The Supreme Judicial Court later held in Bevilacqua (a companion case to Ibanez) that a defective foreclosure can’t be fixed by simply going to court and asking the court to fix the problem. The result of this made it extremely difficult to correct a void foreclosure. Consequently, homeowners who purchased these improperly foreclosed homes were stuck with properties that had bad title.
New Deadline for Challenging a Foreclosure
The Massachusetts Foreclosure Title Clearing Bill imposes a new deadline for challenging a foreclosure (akin to a statute of limitations). Under this law, a homeowner has three (3) years from the recording of the affidavit of sale in the land records (usually done several months after the foreclosure sale) to challenge the foreclosure. For foreclosures that occurred over three years before the effective date of this new law, homeowners have one (1) extra year to raise a foreclosure challenge.
A challenge to foreclosure can be brought on the offense (as a lawsuit against the foreclosing entity) or the defense (as a challenge to an eviction case brought by the bank, on the basis on a lawful foreclosure). The law recognizes either type of action as a basis for challenging a foreclosure.
This law, importantly, is only about a homeowner’s right to reverse a foreclosure; the law does not impose a deadline on lawsuits bought solely for monetary damages. The law recognizes that violations of Massachusetts foreclosure law are violations of the state’s Consumer Protection Law, which allows for monetary damages.
What is Required Under this New Law
The Massachusetts Foreclosure Title Clearing Bill requires a homeowner to bring a defense to a foreclosure within three (3) years of the foreclosure sale, or forever be barred from doing so. The law requires a former homeowner to record a true and accurate copy of their lawsuit in the local registry of deeds in order to meet this deadline.
Possible Legal Challenges
Now that the Massachusetts Foreclosure Title Clearing Bill is law, several legal challenges are expected to be raise against the legality of this bill. Stay tuned.
Take Home Lesson
What’s the take home lesson of the Massachusetts Foreclosure Title Clearing Bill? Sooner is always better than later in addressing a foreclosure. If you are a homeowner who may be impacted by this new law, contact me for a consultation. The risks of not acting soon enough are greater than ever, and homeowners who have valid foreclosure defenses should not delay in acting on these important matters.
I’m thrilled to announce that I helped a Massachusetts homeowner beat foreclosure, through one of my most successful (and hard fought) cases to date. My client was foreclosed in 2009, as a result of a predatory loan that forced him into default. I began representing this client during the bank’s post-foreclosure eviction (“summary process”) case against him, where the bank was attempting to evict him from the home on the basis of a lawful foreclosure. To help him beat foreclosure, I developed a foreclosure defense based on the bank’s failure to send him proper notice prior to the foreclosure.
The case was anything but a cake walk: we went through a full jury trial and two appeals before settling with the bank. The wait was worth it, however: my client has his foreclosure rescinded and a new loan modification, with a low interest rate and a $400,000 principle reduction. My client did his part to save his home: he continued to work hard, save his money, and prove to the bank that he could make a modified loan payment. In the end, both sides are winners: my client keeps his home, and the bank gets a fair return on its loaned money for the home (well in excess than the money it would have obtained from selling the home after an eviction of my client).
Is it possible to beat foreclosure? As I always tell homeowners: absolutely. I never promise that I can always succeed at a foreclosure defense, but I have found that many struggling homeowners have options to avoid foreclosure, in lieu of simply giving up and leaving their homes. But, as I always say, homeowners need to do their part to beat foreclosure, by proving they can make reasonable, affordable payments on their mortgage loan.
To beat foreclosure, a homeowner should seek the assistance of an experienced foreclosure defense attorney. While homeowners have the right to represent themselves in court (referred to as a pro se party) I have found that few homeowners are able to handle these tricky matters on their own. The risks aren’t worth it: get the help of a professional if you are facing foreclosure (homeowners with limited income should contact the Massachusetts Attorney General’s HomeCorps program for assistance in finding a volunteer attorney).
I often get asked how to stop a foreclosure in Massachusetts. Homeowners facing foreclosure need to be aware of the different options for stopping foreclosure and how they apply to different scenarios. Stopping a foreclosure is priority number one in Massachusetts foreclosure defense; homeowners have a much, much better chance of saving their homes by preventing a foreclosure in the first place. This isn’t to say that homeowners who have been foreclosed lack options, but pre-foreclosure is always the better place to be.
So, how do you stop a foreclosure in Massachusetts?
Paying Off the Owed Debt
The obvious way of stopping a foreclosure is simply to pay off the owed debt on the mortgage loan. If this amount isn’t too large, this may be a feasible option for some homeowners. As I have written before, Massachusetts requires lenders to offer borrower a final opportunity to “cure” their mortgage loan debt before starting foreclosure. Homeowners should bear in mind, however, that even if they pay off their outstanding debt, the terms of their loan remain in place. If the homeowner was struggling with the loan because it was unaffordable, the homeowner should give serious throught to applying for the next option for stopping a foreclosure: a loan modification.
A loan modification application, under new federal regulations, requires a loan servicer to stop foreclosure while the application is pending. Limits exist on this; repeated applications will not continuously stop a foreclosure. Because foreclosure defense is not about getting a free home, a loan modification should always be a homeowner’s first attempt at stopping foreclosure. If a homeowner is applying for a loan modification and the bank or loan servicer still begins foreclosure, the homeowner should consult an attorney right away to discuss options for stopping the foreclosure sale.
Bankruptcy provides a debtor with an automatic stay, which will automatically stop a foreclosure. Under bankruptcy law, the bank is prohibited from foreclosure, which can provide the homeowner with some time to work out their next course of action. Bankruptcy is a good option for a homeowner with an impeding deadline for a foreclosure sale and no other viable options. Long term, however, bankruptcy is not always the best choice for avoiding foreclosure in the long run (speak to a bankruptcy attorney to determine if this is a good option for you). Click here for a great overview of bankruptcy, provided by the Massachusetts Court System.
Homeowners also have the option of seeking injunctive relief in a lawsuit against their bank or loan servicer. An injunction is a court order that prevents (or requires) someone to do something. For foreclosure defense, a court will not grant an injunction against a foreclosure sale automatically; the homeowner needs to show a likelihood of success against the validity of the foreclosure. In other words, the homeowner needs to convince the court that the impeding foreclosure is being done wrongfully. Filing a lawsuit and requesting an injunction can be tricky, and a homeowner in need of such services should seek the help of a foreclosure defense attorney.
Getting a loan modification isn’t easy. As I have often written, the loan modification process can be long, complex, and costly. Banks and loan servicers routinely lose paperwork and make the process a thousand times harder than it needs to be. Borrowers, however, need to do their part in making it easier to get a loan modification. One important part of this is being able to show reliable, documented income.
For a loan servicer to agree to a loan modification, the servicer needs to be convinced you have income. In order to do this, the servicer will likely request paystubs or a profit/loss statement if you are self-employed. Additionally, the servicer will also want to see your bank account statements, showing that you actually received this income. If you don’t have a record of this, you make it much hard to get a loan modification. If you plan to apply for a modification, be sure that you deposit your income into a bank account, and keep copies of your monthly statements. This is especially true if you work for yourself or have rental income: if the servicer can’t see a record of it, they are less likely to consider it as income.
I often get asked about “prospective” income: income from future sources. For example, some people wish to acquire income from renting rooms in their home or starting a business. Generally, a servicer won’t consider uncertain income: you need to show consistent income before qualifying for a modification.
If you aren’t showing income and need a loan modification, don’t despair. It is possible at times to get a “no document” loan modification or work out some other deal with the servicer. However, to increase your changes of getting the modification, showing documented income is always the best course.
In true Halloween spirit, a recent news article reports that “zombie” foreclosures are down nationwide, especially in Massachusetts. A “zombie” foreclosure is where a borrower abandons their home prior to a foreclosure occurring. I suspect that zombie foreclosures do not occur too often in Massachusetts because we are a non-judicial foreclosure state, where the process of removing homeowners from foreclosed properties comes well after the foreclosure has occurred.
I never recommend that a homeowner simply pack up their things and leave a foreclosed home. Even if the homeowner has no intention of staying in the home, there are many things that can be done to ensure that a homeowner will suffer no liability for leaving their home prior to (and after) a foreclosure. A foreclosure attorney can often assist a homeowner in receiving a “cash for keys” settlement to assist with moving costs, and ensure that a homeowner will owe nothing to the bank after foreclosure. If you find yourself in such a scenario, contact me for a consultation.
When foreclosure defense comes to the big screen, you know I’m going to see it. I took a break from work this weekend to watch 99 Homes, a movie about the 2o1o foreclosure crisis in Florida. Overall, I thought it was a great movie that brought to life many of the issues I confront with foreclosure defense. The movie tells the story of a father who, after losing his job, is foreclosed. In need of work, he ends up getting hired by the same realtor who evicted him, and falls into the sleazy work of foreclosing people who were in his same situation.
For this post, I want to discuss the facts v. fiction of the depiction of the foreclosure/eviction process as shown in the movie. Bear in mind that I am a Massachusetts attorney, which has a different foreclosure process than Florida. However, many of the issues remain the same regardless of the state where a foreclosure occurs.
- Difficulty in Contacting a Loan Servicer/Bank is a Major Reason Why Foreclosures Occur
99 Homes does a great job of showing how a homeowner’s inability to successfully work with a loan servicer/bank is often the reason for foreclosure. Too often, I have seen banks willfully ignore loan modification applications for qualifying homeowners and create excuse after excuse for refusing to properly consider homeowners for loss mitigation assistance. 99 Homes shows how the banks’ refusal to properly offer this assistance has forced many homeowners into foreclosure.
- The Court Process is Not “User Friendly”
99 Homes shows many of the homeowners attempting to represent themselves in court, with disastrous results. The movie takes place in 2010, when courts were flooded with foreclosure cases, and many judges simply pushed these matters through. While things are better now, the court process can still be very difficult to understand, especially for a lay person. For foreclosure defense, a homeowner should strongly consider seeking the assistance of an experienced lawyer with these matters.
- The Federal Government is a Major Owner of Foreclosed Properties
The realtor in 99 Homes often discussed how “Fannie/Freddie” were two of his largest clients. Fannie Mae and Freddie Mac are government-sponsored entities who are the owners of many mortgage loans across the country. When a foreclosure occurs, these entities often become the owner of these homes.
- “Cash for Keys” Is a Popular Means of Shortening the Foreclosure/Eviction Process
The movie depicts the use of “cash for keys” for settling post-foreclosure eviction cases: the bank offers the homeowner a cash settlement (usually $3,000-$5,000) to immediately leave the home. “Cash for keys” isn’t a terrible option for homeowners who wish to leave their homes and need financial assistance in doing so. A homeowner interested in this deal should still consult an attorney to discuss this option.
- A Homeowner Facing Foreclosure Can Be Out in a Matter of Days
99 Homes seems to suggest that a homeowner can be out of a foreclosed home in a matter of days. In Massachusetts, the entire foreclosure process can take 2-3 years, which leaves homeowners with the time necessary to try and save their homes. Sooner is always better than later in fighting a foreclosure, but rarely does a homeowner only have a matter of days to deal with a foreclosure.
- Homeowners Have Limited Means of Fighting Foreclosure
Many of the homeowners in the movie are depicted as having few, if any, defenses to foreclosure. In reality, homeowners have many more defenses available, such as a loan servicer’s refusal to properly consider a loan modification and failure to send the required notices required by the mortgage and law. Not all of these defenses will work for each homeowner, but homeowners often do have means of defending themselves in these cases.
In need of assistance with foreclosure defense? Contact me for a consultation.
October promises to be a busy month for me. In addition to my trial court cases, I’ll be arguing two appeals on foreclosure defense cases this month. These cases include a “smorgasbord” of foreclosure law issues: the right of a loan servicer to send notices required for a lender, evidentiary issues regarding what a foreclosing entity must show to prove that it complied with the required foreclosure laws, and the application of recent foreclosure law cases on other pending, related matters.
In an appeal, a party asks the appellate court to review the decisions made by the lower court (the “trial court”). An appeals court does not take evidence from witnesses or otherwise rehear the case but rather, decides whether the lower court did their job correctly. An appeals court decides whether the judge properly applied the law, such as whether the judge gave proper instructions to the jury during trial, or properly considered certain matters of evidence.
In one of my appeals, I’m representing the appellant (arguing that the lower court got the decision wrong); in the other, I’m representing the appellee (arguing that the lower court got the decision correct). Both cases involve tricky questions of law and I plan to work hard on each.
Appeals require an enormous amount of time and resources: I can easily spend 50-75 hours for an appeal and the final written product can total hundreds of written pages. The rules for appeals themselves are tricky; I know many excellent lawyers who purposely avoid appeals because of these requirements! An appeal requires the preparation of a brief (a fifty page legal document explaining the reasons why the lower court was right or wrong) and an oral argument (a 15-20 minute presentation before the judges).
In general, I have mixed feelings about people doing their own cases at the trial level. For appeals, my advice is much more clear cut: don’t do an appeal if you are not a lawyer. Appeals are too much work and too complex for someone without a legal education and training to try on their own. If you are considering appealing a case, contact me for a consultation.