Understanding what is a deed in lieu of foreclosure is important for knowing all of a homeowner’s options available for foreclosure defense.
Foreclosure defense isn’t always about trying to keep a home. For some homeowners, getting rid of their home and avoiding foreclosure is a better option than attempting to save a home that the homeowner is not able to afford. Foreclosure defense is not about getting a free home; if a homeowner has no means to afford a modified mortgage loan payment, foreclosure is almost always inevitable.
With a deed in lieu of foreclosure, the homeowner voluntarily conveys the home to the bank or lender. The homeowner no longer owns the home, and the bank or lender becomes the record title owner. This is the same result that occurs in a foreclosure, with the exception that no foreclosure occurs: the homeowner has instead voluntarily given up the property. A deed in lieu of foreclosure helps a homeowner avoid the stress, hassle, and stigma of foreclosure, and lets them get rid of the property on their own terms. For a bank or lender, a deed in lieu of foreclosure saves the time and expense of having to do an often lengthy foreclosure proceeding.
Banks or lenders will generally only consider a deed in lieu of foreclosure if there are no encumbrances on the property, such as a lien or second mortgage. A foreclosure, with few exceptions, provides a foreclosing entity with a “clean” title: all encumbrances second to the lender’s interest are wiped out in a foreclosure. In contrast, if a lender accepts a property with a lien on it, this lien remains on the property, making it difficult to resell.
Homeowners interested in a deed in lieu of foreclosure can contact their loan servicers to see if this option is available to them. Compared to a loan modification, a deed in lieu of foreclosure is generally a straightforward process. Homeowners, however, should still speak with an attorney to review their paperwork and ensure the process is done to their advantage. It is important, for example, that any potential deficiency judgment coming from the deed in lieu of foreclosure is waived by the lender, and the tax consequences of one of these deals is considered.
The Massachusetts Foreclosure Law Blog is proud to have Attorney Uri Strauss guest blog on the Massachusetts foreclosure title clearing bill and its upcoming December 31, 2016 deadline for homeowners who have lost their homes to foreclosure. Uri Strauss is an attorney at Community Legal Aid in Springfield, MA. He has been a Massachusetts attorney since 2010, and has focused on foreclosure law since 2011. He may be reached at email@example.com.
HOW TO PRESERVE YOUR RIGHT TO CHALLENGE A WRONGFUL FORECLOSURE IN MASSACHUSETTS
If your Massachusetts home has been unlawfully foreclosed, you may need to act very soon to preserve your ability to challenge it.
On November 25, 2015, Governor Baker signed into law An Act Clearing Title to Foreclosed Properties, which amended, among other laws, Massachusetts General Laws Chapter 244, Section 15. In a nutshell, the act aims to force homeowners who have left their homes after a foreclosure to bring their case to court within three years, or lose the right to do so against bona fide buyers. This is a reduction of the previous 20-year period during which people could challenge foreclosures that failed to comply with the power of sale.
The deviltry is in the details of this confusing law. This post aims to clear up some of the confusion, and especially to help homeowners identify if they need to act before December 31, 2016 when the first set of people will lose their rights. The other point of this post is to warn people against misinformation about what they need to do to preserve their rights. In all cases, you should consult an attorney, if possible, about your particular situation. I am offering guidance in general, not legal advice for your particular situation.
My aim is to respond to three questions: Who needs to act before December 31? How does a homeowner need to act to preserve his or her rights? And who is entitled to challenge the foreclosure?
Who needs to act before December 31?
If it has been fewer than three years since the foreclosure affidavit has been recorded in your registry of deeds, you do not need to act before December 31 to preserve your rights. You will have until at least three years after the recording of the affidavit. However, if you are already in court in a foreclosure challenge, it is a good idea to record your pleadings. See below for details about the foreclosure affidavit, and about what it takes to challenge the foreclosure.
If it has been three or more years since the foreclosure affidavit was recorded, you need to act to preserve your rights if you fall in one of the following three categories.
- People who have moved out of their homes, without the validity of the foreclosure ever being litigated.
- People who are currently in litigation over the validity of their foreclosure.
- People who have litigated the validity of their foreclosure and won, when there is no deed granting the property back to the owner after foreclosure.
Please note that most lenders and servicers will also conduct a foreclosure by entry at the same time as the foreclosure auction, and that foreclosure is effective after 3 years if it is not opposed. Foreclosure by entry is a whole separate and complicated topic, and I won’t get into it here. If you intend to challenge a foreclosure, be certain to contact your local anti-foreclosure group and/or an attorney about it well before three years have passed.
If you are currently in litigation, do not assume that you are protected. Do not assume that your attorney has thought to take the necessary steps to protect you. Raise the issue with them. Depending on how courts interpret the law, you might get away with missing the deadline if you win your case, but it is risky to rely on it.
You may notice, if you read the amended M.G.L. Chapter 244, Section 15, that only bona fide third party buyers, and not the lender or related organizations like Fannie Mae or Freddie Mac, have the benefit of the new law. Do not rest assured just because the bank or a related entity has bought your property at foreclosure and has not sold it. As I read the law, your failure to act by the deadline, followed by a sale to a third party, eliminates your right to challenge the foreclosure once it is sold. In other words, your title can be laundered while in the bank’s control, then sold clean to a third party buyer.
The three-year clock starts ticking when the mortgagee records an affidavit of sale in the registry of deeds. The affidavit of sale you are looking is usually recorded together with the foreclosure deed as a document type called “Foreclosure Deed/Affidavit”. It might be titled something different than “Affidavit of Sale.” The affidavit identifies the mortgage that was foreclosed, says that the conditions of the mortgage were not performed, and states that notices were published in a newspaper on three dates and sent by mail to the required parties. A copy of the newspaper publication is attached to it as an exhibit. Do not confuse this affidavit with other affidavits that may have been filed, such as an affidavit concerning the note (also called an “Eaton” affidavit), an affidavit concerning compliance with M.G.L. chapter 244, section 35B, an affidavit certifying compliance with 209 C.M.R. section 18.21A, or an affidavit concerning the right to cure (also called an “Pinti” affidavit).
It is the opinion of some respected attorneys that the affidavits of sale typically filed by mortgagees do not start the clock running, because they do not, as the law requires, “fully and particularly stat[e] the acts” done to foreclose the property. The affidavits are usually brief, do not fully state the facts, state legal conclusions instead of facts, and are made by people who do not have firsthand knowledge of the facts. I believe that this is a mistake, and that the courts will accommodate this failure by the banks to comply with the law, just as they have done with almost every other failure that they have considered.
How does a homeowner need to act in order to preserve his or her rights?
To preserve your right to challenge your foreclosure, it is necessary to record the relevant *pleadings* in the registry of deeds. It is not enough to record an *affidavit* in the registry, as the Massachusetts Alliance Against Predatory Lending (MAAPL) has been informing people. The law is very clear that pleadings must be filed.
What is the difference? An affidavit is a sworn statement of facts based on personal knowledge. A pleading is a document filed in court in which legal claims are made. The purpose of the new law is to force people to litigate their claims by the deadline, not simply to make a sworn statement and record it in the registry of deeds. If your deadline is coming up and there is no existing litigation, you need to create litigation by filing a lawsuit. What is more, if you want to actually succeed, you need to file a good case. That means that you need to have a good argument based on your particular circumstances. It will not do to use far-fetched theories of the kind that often circulate on the internet. It is important to speak to an attorney to determine whether you have a good legal argument.
Note that to be valid, the pleadings should be from a court case from a court of competent jurisdiction. In my view, if you challenged the foreclosure as a defense to foreclosure proceedings in Housing Court, that is definitely an appropriate court. If it was in a state district court, that is almost certainly an appropriate court. If you were the plaintiff and you filed your case in Superior Court, Land Court, or the federal District Court, you are probably fine. If it was any other court, consult an attorney about whether it was a court of competent jurisdiction.
That means that if you fall into category (1) above, you need to file a lawsuit in the next few weeks, and record an attested copy of your complaint, to avoid losing your home. If you are in categories (2) or (3), your task is easier. You need to get an attested copy of your complaint, if you were the plaintiff, or of your answer, if you were the defendant, from the clerk’s office of the court in which the litigation is taking place or took place. If the complaint or answer was amended, make sure to get the most recent version, since the complaint or answer should state the foreclosure challenge that the court ruled on, or that you hope the court will rule on.
If you have fought and won your case, you still need to record the *pleadings*, rather than the court’s judgment, in the registry. You might think it makes more sense to record the judgment, in which the court states that it finds in your favor. I would agree, but that is not what the law says you need to do.
According to the law, you need to record a “true and correct” copy of the pleading in the registry of deeds. Does this mean that you can rely on just a photocopy of the pleading? In my view, yes – but the challenge is to get the registry of deeds to record it. The registry is not required to accept any piece of paper you hand to it. The new law requires registries of deeds to accept and record attested copies of pleadings, and this is what I recommend. “Attested” here presumably means attested by the court in which the case is being decided. It may be possible to preserve your rights under the act by signing an affidavit under M.G.L. Chapter 183, section 5B, attaching the pleading is an exhibit, swearing that it is a true and correct copy of a document filed in the court, and having it certified by an attorney as bearing on title – but I recommend getting an attested copy to be on the safe side.
To get an attested copy of your pleading, first call ahead to the court in which your case is being heard and let them know you want this. They might ask for a couple of hours to create an attested copy. Then show up and get your copy. It currently costs $2.50 per page to get attested copies of court documents. If you are poor, low-income or on state assistance, you may qualify for a waiver of fees – ask the court about it. Then go in person to the Registry of Deeds in your district, and ask them to record it. Take a printed copy of the statute – Massachusetts General Laws, Chapter 244, Section 15, Subsection (d) – with you. Registries of Deeds have not historically accepted attested copies of pleadings for recording, so you may need to show them the law that says they need to. I believe the cost of recording the document is $75. You can ask the Registry of Deeds about waiver of fees for poor, low-income or state-assisted people as well.
Who is entitled to challenge the foreclosure?
To be eligible to challenge the foreclosure, you need to be a person entitled to a notice of foreclosure, which means that you need to be the person who gave a mortgage to the lender (which is not necessarily the same as the person who obtained the loan), or else a person who held an interest in the property junior to the mortgage more than thirty days before the foreclosure sale. Based on this statute, you are not entitled to challenge the foreclosure if you are the spouse of the mortgagor, the child of the mortgagor, or the tenant of the mortgagor, unless you yourself are a mortgagor, or you happen to have a junior lien on the property.
This represents an apparent change in the law. It used to be the case that if a foreclosure was void, any person whose rights were affected by it – a spouse, a child, a tenant, a long-term guest – could challenge its validity. The new law clearly restricts it so that only persons entitled to notice can challenge the foreclosure.
What about after the pleadings are recorded?
If you have recorded your pleadings challenging a foreclosure within the time limit, do you have the benefit of the previous 20 year rule? Not necessarily. There are at least two ways a foreclosure can be undone by a court. A foreclosure is void if it is not conducted strictly in accordance with the power of sale, or if it fails to comply with preconditions to foreclosure stated in the mortgage. Void foreclosures can be challenged up to 20 years afterwards. A foreclosure is voidable if the power of sale and the preconditions in the mortgage are complied with, but the manner in which it was conducted was fundamentally unfair or perhaps violated some other law. In all likelihood, you need to assert a claim to undo a voidable foreclosure within the statute of limitations of some other law. For example, if you have a claim under the consumer protection statute, M.G.L. section 93A, there is a four year statute of limitations from the time of the unfair or deceptive act. If you have a tort claim, you may have to bring the case within three years. You should consult an attorney about whether your unlawful foreclosure claim is a claim that the foreclosure was void or voidable.
Everything in this article is directed at what it takes to preserve your claim of illegal foreclosure. Of course, it is not enough to have your case in court. You need to actually win your case in order to undo the foreclosure. The legislature has set up a tough procedure for illegally foreclosed homeowners to undo the harm that was done to them. It might seem very unfair that a bank can abuse you, deceive you, and illegally foreclose on you without going to court, yet you have to go to court and follow an unclear procedure just to avoid losing your home. For better or worse, this is the process that your elected representatives have chosen to impose on you, so you need to take care to comply with it.
This will be my last blog post for a iteawhile. President Obama has named me to the U.S. Supreme Court, as a replacement nominee for Judge Merrick Garland, to fill the seat of the late Justice Antonin Scalia. Garland, I’m told, has decided to withdraw his name as a nominee to the Court, in fact of opposition from Senate Republicans.
I’m deeply humbled by the confidence that President Obama has shown in me and will do my best to serve my country well.
The White House will be released a statement soon, but gave me permission to break the news here.
The White House
FOR IMMEDIATE RELEASE
I would like to first thank Judge Garland for his outstanding service to our country. Although I am disappointed that the Senate would not consider Judge Garland’s nomination, I know America will continued to be well served with his tenure on the U.S. Court of Appeals.
In his place, I have nominated Attorney Sherwin of Massachusetts. Attorney Sherwin has a long and distinguished career as a Massachusetts litigator and will bring a wealth of experience to the Supreme Court. I am confident that Democrats, Republicans, and Independent alike can agree that he will be a strong addition to the federal judiciary.
For more information on this, click here.
“Use-and-occupancy” is a common request in landlord/tenant cases, where the tenant is residing in the rental property without paying rent to the landlord while the eviction case is ongoing. Use-and-occupancy payments are “rent” that the tenant pays for the duration of the case. If granted, the court will order the tenant to make monetary payments into an escrow account. These funds are set aside and no party is permitted to touch them until the case is resolved.
While landlords often request use-and-occupancy during an eviction case, few obtain this form of relief. A landlord can certainty obtain a monetary judgment against a tenant after the case is over, if the landlord wins. It becomes tougher, however, for a landlord to obtain use-and-occupancy payments before a case is concluded. Massachusetts eviction law does not expressly allow for use-and-occupancy payments before an eviction is over, and many judges are reluctant to grant this relief.
Landlords who are trying to obtain use-and-occupancy during a landlord/tenant case need to make a strong case for a court to permit this form of relief. A court can sometimes be persuaded to allow use-and-occupancy payments through a preliminary injunction if a landlord can show that it will suffer irreparable harm if the tenants pay no rent through the duration of the case. This, however, is a tough argument to make.
If a landlord cannot obtain use-and-occupancy payments, another option for a landlord in this scenario is to request that the court schedule the trial as soon as possible, so as to avoid delaying the case. Sometimes a court can be pursuaded to move up a trial if one party demonstrates a real need for a quick resolution to the matter.
Are you in need of legal assistance for a landlord/tenant case? Contact me for a consultation.
Earlier this month, several banks filed a federal court lawsuit challenging several Massachusetts city ordinances related to foreclosure prevention. These ordinances, among other things, require lenders to engage in mediation prior to foreclosure and rent to homeowners who have been foreclosed.
Foreclosure law in Massachusetts, like the rest of the country, primarily comes from state law. It is unusual for a town or city to pass an ordinance relating to foreclosure, making these laws ripe for legal challenge. This is an important case about whether local government can get involved in foreclosure defense, and will undoubtedly decide the fate of other local efforts to prevent foreclosure. Stay tuned!
Yesterday marked the one year anniversary of the Boston Marathon bombing; an event that shook up our city but brought our community together stronger than ever. Boston has been my home for the past four years and not a day goes by where I’m not grateful to call this place my home.
Of course, you knew that I would tie this post to law somehow and here it goes: aside from being a great city to live, Boston is, hands down, the best place possible to practice law. We have an amazing legal community filled with with talented, courteous attorneys, bright judges, and an abundance of legal resources, including the fantastic Boston Bar Association and MA Trial Court Law Libraries. Boston is one the few places where fellow attorneys will not hesitate to drop everything and help a fellow attorney or pro se party with a legal question; a favor I am always willing to return for anyone in need of my help. And, is it coincidence that some of the best legal movies took place in Boston? I think not!
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.
Welcome to my blog! This blog is a resource on Massachusetts foreclosure law. I am a practicing foreclosure defense attorney and hope you find this website to be informational and useful. Please contact me with any questions or to see if I can be of help with your case.