Foreclosure Help

Foreclosure Help

Foreclosure help is available for homeowners in danger of losing their homes, or homeowners who have already gone through a foreclosure sale.  While saving a home from foreclosure is never a guarantee, foreclosure help may be an option in your case depending upon the circumstances.

Before a Foreclosure 

Foreclosure help for homeowners pre-foreclosure largely consists of attempting to obtain a loan modification or similar means of paying the outstanding loan debt.  Despite the best efforts of homeowners to properly apply for this assistance with their lenders, it is not uncommon for lenders to make a mess out of reviewing loan modification applications, by claiming to “lose” paperwork and deny such applications for absurd reasons.  In such a case, an attorney can provide foreclosure help through a lawsuit against a lender’s repeated refusal to properly review of these applications.

An attorney can similarly help a homeowner defend against foreclosure by determining whether a mortgage lender complied with the requirements for starting a foreclosure sale.  Errors in the notice requirements and pre-foreclosure laws can all be effective defenses against a foreclosure sale.

After a Foreclosure

Foreclosure help is also available after a foreclosure has occurred.  Massachusetts is a “non-judicial foreclosure” state, and a mortgage lender is not required to file a court case to foreclose a home.  A mortgage lender, however, must strictly comply with the applicable laws and mortgage terms to conduct a lawful foreclosure.  The failure to do so can be grounds for defending against a foreclosure sale and getting a home back.

In addition to errors in the foreclosure requirements, a homeowner can also pursue equitable challenges to a foreclosure’s validity.  Such claims are circumstances where the lender complied with the basic foreclosure requirements, but otherwise acted in a manner that justifies the foreclosure being void.

Avoid Foreclosure Defense Scams 

A critical reminder for seeking foreclosure help is to avoid foreclosure scams.  There are many con artists who try and take advantage of struggling homeowners by promising them services that are unrealistic or not otherwise legitimate.  Avoid anyone who promises you a free home, guaranteed loan modification, or something else that seems “too good to be true.”  The Attorney General’s Office provides helpful resources for homeowners who have been victims to these scams.

Speak to An Experienced Foreclosure Defense Attorney 

Needless to say, the importance of speaking to an experienced foreclosure defense attorney cannot be overstated.  Foreclosure help may be available to you, but such assistance generally requires the knowledge of someone familiar with this area of law and the options available for saving  a home.

Appeals Court Issues Decision on Legal Rights Following a Loan Modification

 

The Massachusetts Appeals Court issued an important decision last week concerning a homeowner’s legal rights following a loan modification.  In Barrasso v. New Century Mortgage Corporation, the Appeals Court held that a homeowner was unable to raise prior claims related to their mortgage loan after accepting a modification of that loan (a copy of the decision is below).

Background

In Barrasso, the homeowner entered into a loan modification with their lender, for the purpose of making the loan payments more affordable.  Years later, the homeowner brought a lawsuit against the lender, challenging several of the mortgage loan assignments and whether the present holder of the mortgage was the proper holder of the loan.

Legal Decision

Barrasso held that the homeowner was estopped from challenging the transfer of his mortgage due to the homeowner’s signing of this loan modification.  Estoppel is a legal defense that prevents a party from making an allegation or defense that contradicts a prior representation.  The loan modification in Barrasso, like most loan modification agreements, required the homeowner to agree to several factual representations about the mortgage loan, namely, who held the mortgage.  The Court reasoned that, because the homeowner benefited from this loan modification agreement, it could not then deny one of the prior statements in this agreement that it had agreed to: who the owner of the mortgage was.

Implications to Homeowners

Barrasso follows a line of reasoning that I have often taken with loan modifications: the signing of one of these agreements generally waives any prior legal claims associated with the loan.  A loan modification, in essence, is a new loan, with new terms and conditions.  If a homeowner had legal claims arising from the original loan (such as predatory lending), the homeowner probably won’t be able to raise them following a loan modification.  As explained by Barrasso, if a homeowner gets the benefits of a loan modification, it can’t then go back and raise matters that arose before the modification.

Some loan modification agreements, such as those coming from the federal Home Affordable Modification Program (“HAMP”), do not require a homeowner to waive any legal rights against a lender.  Barrasso makes clear, however, that  a loan modification has strong implications for one’s legal rights following one of these agreements.  Homeowners should keep this in mind when considering accepting a loan modification: homeowners generally won’t be able to raise claims arising out of the prior loan.

Barrasso should not scare homeowners away from accepting a loan modification.  Loan modifications are the best means of avoiding foreclosure, and a homeowner should absolutely accept a modification with an affordable loan payment.  The key is to make sure that such a modification is right for the homeowner.  If you find yourself in such a scenario, contact me for a consultation.

Barrasso v. New Century

Foreclosure Judgment

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.

MA SJC Issues Important Decision on Consumer Protection Demand Letters

The Massachusetts Supreme Judicial Court issued an important decision on consumer protection demand letters last week, that is of particular importance to Massachusetts foreclosure defense.  The case, Moronta v. Nationstar Mortgage LLC,  is an interpretation of the consumer protection demand letters that are required for Massachusetts’s Consumer Protection Law (a full copy of the decision is below).

Overview of Massachusetts’s Consumer Protection Law

Massachusetts’s Consumer Protection Law (commonly known as “Chapter 93A”) prohibits “unfair and deceptive” practices by businesses.  The scope of this law is broad, and has been used successfully for a variety of consumer protection claims.  For foreclosure defense, Chapter 93A claims have been effective for loan modification denial claims; courts have increasingly allowed these lawsuits based on a loan servicer’s repeated refusal to properly review a loan modification application.

To bring a Chapter 93A claim against a business, a consumer is required to send the business a demand letter and provide them thirty days to make a settlement offer.  These consumer protection demand letters are an essential requirement of this law; courts have thrown out Chapter 93A claims for a claimant’s failure to send one of these letters (or to send a letter that makes a proper demand to the business).

Exceptions to the Demand Letter Requirement

A consumer does not need to send a demand letter if “if the prospective respondent does not maintain a place of business or does not keep assets within the commonwealth.”  The question in Moronta was whether one or both of these two exemptions are needed to avoid sending the demand letter.  As the Court explained: “if the defendant keeps assets in the Commonwealth, but does not maintain a place of business here, must the plaintiff serve a demand letter?”  The Court answered no: either one of these exceptions (no assets or no place of business in the Commonwealth) is an exception to the consumer protection demand letters under Chaper 93A.

How Does Moronta Affect Massachusetts Foreclosure Defense?

Moronta is of particular importance for Massachusetts foreclosure defense.  Because Massachusetts is a non-judicial foreclosure state (where a bank does not need to go to court to do a foreclosure), homeowners often need to go on “the offense” in avoiding foreclosure, through a civil action.  The demand letter requirement under Chapter 93A can be a burden for borrowers who have less than thirty days before a scheduled foreclosure to pursue a legal action.  Moronta will be a help for homeowners with cases against national banks and loan servicers, many of which do not have offices in Massachusetts, and would trigger the exception to the demand letter requirement.

Despite the benefit of Moronta for consumers, I caution consumers (especially homeowners with foreclosure defense claims) from pursuing Chapter 93A claims without the benefit of legal counsel.  Chapter 93A may be intended to help consumers, but consumer protection claims are often still too complicated for a non-lawyer to take on.  Consult an attorney if you believe you have a viable cause of action.

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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.

The Big Short – Origins of the Foreclosure Crisis

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Last weekend, I went to see The Big Short, which portrays the origins of the foreclosure crisis.  As a foreclosure defense attorney, I was interested in seeing how the movie explained the events of the financial meltdown and its effect on residential foreclosures across the United States.  Notably, this is the second foreclosure defense movie that has come out in the past two years.  Who knew foreclosure defense could ever be so entertaining? 

The Big Short has an all star cast (Christian Bale gives a great performance) and a compelling story line.  Unfortunately, the movie is a bit long, even for someone highly interested in the origins of the foreclosure crisis.  The movie would have been much, much better if it was shorten and focused on fewer characters.   With all of the good movies out now, you are best waiting to see this one on video.

Nonetheless, if you are interested in the origins of the foreclosure crisis, The Big Short is worth watching.  The movie does a good job of explaining how the secondary mortgage market, securitization, and incompetent bankers lead to the mortgage meltdown.  The short answer to the origins of the foreclosure crisis is that bankers were given enormous incentive to give out mortgage loans, because these loans could be easily sold on the secondary market (allowing the loan originator to “wash their hands” clean of the original lending transaction).  Securitization, which I have written about before, played an important role as well: these complex financial transactions allowed investors to diversify risk, giving a great incentive for lenders to make toxic loans.  If you are interested in reading more about this, check out this op-ed from the New York Times, written by Michael J. Burry, one of the characters from The Big Short (played by Christian Bale).

I liked The Big Short because it provides important ammunition in fighting big banks in foreclosure defense cases.  Bank like to blame everyone but themselves for the origins of the foreclosure crisis, but this movie shows where the real blame lies.  I’ve seen first hand the effects of these toxic loans from the early 2000s, with homeowners having been given loans and refinances despite no supporting income and documentation.  Many of these borrowers were “setup to fail” from the beginning.

An important word of caution about The Big Short.  I know some will see this movie and think that these origins of the foreclosure crisis alone are enough to beat foreclosure.  A few, unfortunately, may even believe that foreclosure defense can result in a free home.  Foreclosure defense is much, much more complex than that and struggling homeowners should consult an experience attorney in handling one of these cases.

Overview of the Massachusetts Foreclosure Title Clearing Bill

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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.

Background

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.