A common inquiry about foreclosures in Massachusetts is regarding a foreclosure judgment. What does a bank get from a homeowner after it forecloses?
In judicial foreclosure states, where a bank needs to go to court to foreclose, a foreclosure judgement is a court order allowing the bank to do a foreclosure sale. Massachusetts, in contrast, is a non-judicial foreclosure state, where a bank doesn’t need a court order. A foreclosure judgment in Massachusetts, therefore, generally refers to what a bank can get after foreclosure: possession of the property and a deficiency judgment.
Even if a bank performs a lawful foreclosure, it must still bring an eviction (“summary process”) case to get possession of the property. A foreclosure only changes title to the subject property; a eviction is required to get the former homeowners out of the home. A post-foreclosure eviction case generally occurs several months after the foreclosure sale, and is usually brought in District or Housing Court. If a bank is successful in one of these cases, it is entitled to an execution for possession, allowing the sheriff or constable to physically remove the occupants and their possessions from the property. In one of these eviction cases, a bank can also obtain a judgment for use-and-occupancy against the former owners, which amounts to rent for the time that the former owner resided in the home after the foreclosure sale. While banks generally request use-and-occupancy in post-foreclosure eviction cases, it is rare for a bank to pursue this claim for money; the bank generally just wants possession of the home.
Another foreclosure judgment in Massachusetts is a claim for any deficiency judgment that exists following the foreclosure sale. This is the difference between the amount that the homeowner owes on the mortgage loan and the amount obtained at the foreclosure sale. For example, if the homeowner owes $400,000 on the mortgage loan, and the bank obtains $300,000 at the foreclosure sale, the homeowner is potentially liable for the difference: $100,000. Claims for deficiency judgments are not frequently pursued. Generally, most former homeowners do not have sufficient assets to make one of these claims worth pursuing. Additionally, a bank has a two-year deadline (“statue of limitations”) from the foreclosure sale to bring one of these claims, which many banks fail to do. A homeowner can also usually file a bankruptcy to get rid of this type of debt.
Each type of foreclosure judgment in Massachusetts is an important consideration for homeowners who are facing foreclosure or who have been foreclosed. If you find yourself in either situation, contact me for a consultation.