Question: Can my home be foreclosed while I am applying for a loan modification?
: Generally, no. Recent loan servicing regulations
prohibit “dual tracking”, a procedure where servicers review loan modifications while simultaneously pursuing foreclosure. These regulations restrict servicers from moving ahead with the foreclosure process while it is reviewing a loan modification application. There are, however, time limits on this: submitting a loan modification the day before the scheduled sale will not necessary stop a foreclosure.
In addition to these federal regulations, there are other legal defenses that may be available to stop a foreclosure while a loan modification is under review. Contact a lawyer
if you find yourself in this difficult situation.
Question: I received a letter from my loan servicer telling me my loan has been “accelerated.” What does this mean?
Answer: After a borrower has defaulted on their mortgage loan, the lender has the option––under most mortgages––to demand that the borrower pay the full amount of the loan due. The demand is referred to as “acceleration” of the loan, and is often made through a written letter to the borrower. The borrower has the opportunity to pay the entire amount due or risk foreclosure. This amount due includes the principle, interest, and other outstanding debt. A borrower can avoid foreclosure if they are able to pay this debt, but generally, most borrowers in default are unable to do so. After acceleration, the lender has no obligation to accept loan payments from the borrower and instead, can foreclose.
Borrowers who have received an acceleration letter are not without options. Most servicers will still accept and review a loan modification after acceleration. Moreover, the lender still needs to provide the borrower with ample notice prior to the foreclosure. Homeowners who have received an acceleration letter should contact a lawyer
right away to discuss their options.
Question: I’ve received a notice about a Servicemembers’ Civil Relief Act against me. What should I do?
Answer: The Servicemembers’ Civil Relief Act (“SCRA”) is a federal law that provides certain protections for those in military service. For foreclosure, the SCRA generally prevents lenders from foreclosing against homeowners in military service.
In Massachusetts, lenders determine whether borrowers fall under the protections of the SCRA through a court action, which is almost always brought in Land Court. The homeowner is served with a complaint and has a deadline for responding to the lawsuit and asserting any of their rights under the SCRA. If the borrower fails to respond, the lender is eligible to obtain a judgment from the Land Court declaring that the homeowner is not eligible for the protections of the SCRA. Lenders typically bring SCRA cases against all borrowers they are intending to foreclose, regardless of how likely it is that the borrower may be in the military.
When faced with an SCRA complaint, homeowners who are in the military should act quickly to protect their rights. Homeowners who are not in the military generally have no protections under the SCRA and as such, have few defenses in these cases. However, an SCRA case is a strong indication that the lender will begin a foreclosure soon, and homeowners faced with these cases should consult with an attorney to explore their options in avoiding foreclosure.