Foreclosure Notices in Massachusetts: What’s Required?

Massachusetts’s Supreme Judicial Court issued its long-awaited decision in the Thompson case, concerning foreclosure notices in Massachusetts. This is a decision that lenders, title examiners, and other real estate professionals have been closely following since the original federal court decision. The full decision is below.

Thompson was a federal court case brought by a borrower challenging a foreclosure sale against his home. In 2019, the First Circuit of Appeals ruled that the foreclosure in this case was void due to an error in the right to cure notice, which both state law and the terms of most mortgages required to be sent prior to foreclosure.

This decision surprised many (including yours truly) because it seemed to “stretch the limits” on what is required for one of these notices, per established law.

For this reason, Thompson generated a great deal of concern and criticism, leading the Supreme Judicial Court to take this decision for the purpose of resolving this matter.

Foreclosure Notices in Massachusetts: Basic Requirements

To be clear, there are several required foreclosure notices in Massachusetts, including those notifying the property owner about the scheduled foreclosure sale. Here, I am focusing on the required default notice that must provide the mortgagor with an opportunity to cure their loan default, prior to foreclosure. Both state law, as well as the terms of most standard mortgages, require such notice.

Under the SJC’s decision in Pinti v. Emigrant Mortgage, a lender must strictly comply with the mortgage requirements for such notices. Even a minor error in one of these notices could seemingly invalidate a foreclosure.

In Thompson, the question for the court was whether an alleged error in one of these notices was fatal to a foreclosure’s validity.

Here, the First Circuit had held that a paragraph 22 notice sent to a borrower made the foreclosure sale void because it misrepresented the borrower’s rights. The notice told the borrower that he could reinstate his loan after acceleration , anytime before the foreclosure was to occur. The problem with this was that the borrower’s mortgage required this reinstatement to occur five days before a foreclosure sale.

The SJC ruled that, because state law gave the borrower a longer time to reinstate than the mortgage itself, the default notice was not deceptive.

Implications of Thompson

Due to a series of SJC decisions in the wake of the 2008/2009 financial crisis (including Pinti), the validity of many Massachusetts foreclosures have been often called into question, with many areas of foreclosure law remaining unclear. Thompson is a step away from this trend, and avoided a circumstance where many foreclosures across Massachusetts could have been voided.

The SJC, however, avoided answering an underlining question in this decision: how strict is strict compliance? In other words, how much of a mistake needs to occur in a foreclosure notice for an underlining foreclosure to be invalidated? Such a question remains unclear, and will likely be resolved in future court cases.

Conclusion

If you need assistance with a foreclosure matter, contact me for a consultation.

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Foreclosure in Massachusetts: What to Know

One of my projects this fall has been writing for LexisNexis’s Practical Guidance series. LexisNexis, in my opinion, is the best source for legal research, and it is honor to be part of their team. My article, Residential Foreclosure in Massachusetts, is available on my website and included below.

This article provides a background on foreclosure in Massachusetts, for both lenders and borrowers. For the past seven years, I’ve helped homeowners and purchasers of foreclosed homes navigate this tricky area of law. I’ve help many homeowners avoid foreclosure, and have advised real estate professionals with some of the pitfalls that can occur when purchasing a foreclosed home.

Foreclosure law can arise in almost every area of real estate, including landlord-tenant law, title matters, and property disputes. Having an understanding of this process is critical when foreclosure arises in a legal dispute.

My article touches on some important areas of Massachusetts foreclosure law:

  • Pre-Foreclosure Requirements: Massachusetts is a non-judicial foreclosure state. This means that a lender doesn’t need a court case to foreclose. The caveat, however, is that a lender must strictly comply with Massachusetts’ detailed foreclosure requirements. Failure to do so can make the underlining foreclosure void.
  • Foreclosure Defenses: In certain cases, it is possible to defend against foreclosure, with the goal of working out a permanent solution to the problem. My article discusses what to consider when defending against foreclosure, and, importantly, the defenses that are not viable in these cases.
  • Post-Foreclosure Evictions: An eviction is required for any occupants who remain in a home following foreclosure. This is a entire topic on its own, as these types of evictions follow a slightly different process than a typical landlord-tenant eviction.

I hope this article is helpful . . . let me know what you think. If you need assistance with a foreclosure matter, contact me for assistance.

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Buying a Foreclosed Home in Massachusetts

Buying a foreclosed property must be done with care. Compared to the purchase of other real property, foreclosed properties come with their own specific challenges.

Purchasing a foreclosed property usually occurs (1) at the public foreclosure auction sale or (2) from the bank or lender who foreclosed the property, commonly known as a real estate owned (“REO”) property.

Here, I’ll discuss some important topics for buying a foreclosed property.

Foreclosed Properties Are Often Sold “As Is”

Compared to the process of purchasing most other properties, buyers of foreclosed properties generally have few opportunities to inspect the property in advance. Moreover, in most sales of foreclosed properties, a buyer takes the property “as is”, and has limited recourse for any problems later arising in the property.

Title Problems With a Foreclosure Can Become the Buyer’s Problem

Massachusetts is known as a non-judicial foreclosure state, which means that a foreclosure can occur without a court case. Foreclosures, however, must be done with strict compliance under the law. An error in this process can invalidate the foreclosure sale, and can impede a subsequent buyer’s ownership of the property.

Not every error in the foreclosure process will affect the property’s title. However, a buyer of a foreclosed home needs to be mindful of the potential errors that can arise in the foreclosure process, and ensure that such issues have not occurred for the property they wish to purchase.

An Eviction Is Required for Occupants in the Home

If any occupants remain in a property after foreclosure, they must be evicted, through a formal court case. Any attempt to remove occupants without an eviction case is highly illegal and will lead to many problems down the road.

Compared to standard evictions, evictions for foreclosed homes are a slightly different process, and requires knowledge of Massachusetts foreclosure law. This is especially true if the occupant is the former homeowner, and wishes to challenge the foreclosure sale.

Final Thoughts

If you need assistance with buying a foreclosed home, contact me for a consultation.

Fixing a Foreclosure Problem in Massachusetts

Challenging a Foreclosure

Fixing a foreclosure problem is a matter that may be necessary if a mistake is made in the foreclosure process. If such a mistake occurs, and the foreclosure is void, the buyer does not have full ownership of the property, which will prevent them from evicting any of the occupants or selling the home at a later date.

Fortunately, there are options available for fixing a foreclosure. As someone who has both helped buyers of foreclosed properties with these matters, and homeowners attempting to avoid foreclosure, I know many of the common pitfalls in this area of law.

Overview of Foreclosure In Massachusetts

Massachusetts is a non-judicial foreclosure state. This means that, unlike many other states (such as New York and Vermont), a lender does not need to go to court to foreclose. Rather, a lender can foreclose through a series of legal notices and a public auction sale.

The requirements for a foreclosure in Massachusetts are detailed and must be strictly complied with. Even a minor, innocent mistake can be grounds for arguing that a foreclosure is void.

Common Errors In Massachusetts Foreclosures

Common errors in Massachusetts foreclosures include, but are not limited to, the following:

For a third-party buyer of a foreclosed property, these defects can be problematic. Even though the lender made the error, such defenses can be used against the subsequent buyer of the foreclosed property, to challenge the home’s ownership.

Fixing a Foreclosure: What Can Be Done?

The first step for attempting to resolve a foreclosure problem is to try and negotiate with the former homeowner, if possible. If the former homeowner no longer lives in the home, or has no interest in keeping the property, it may be possible to reach an agreement where ownership of the home can be resolved.

If this is not possible, a court action will likely be necessary. In such a case, a third-party buyer can ask a court to quiet title for the property or allow it to perform a new foreclosure sale.

Final Thoughts

Addressing an issue with a foreclosure should never be done without an experienced attorney’s help. If you need assistance with such a matter, contact me for a consultation.

Sherwin Law Firm Prevails in Consumer Protection Law Cases

Although the COVID-19 pandemic has slowed the judicial process in Massachusetts, cases are still going forward. I’m pleased to write that I obtained two favorable decisions for Consumer Protection Law cases: one in state court and the other in federal court.

I didn’t win these cases . . . yet. Rather, I prevailed against the opposing sides’ attempt to dismiss each matter at the start of the case, for failure to state a claim upon which relief can be granted.

My opposition argued that our lawsuits didn’t have any merit, and should be dismissed at the onset of the case. The courts, however, agreed with me that my clients had viable lawsuits and were entitled to their day in court.

These cases, which concern issues of foreclosure defense, can and will be dismissed by courts if not properly drafted. In both cases, I faced opposition from two excellent attorneys who served their clients well.

What is the Consumer Protection Law?

The Consumer Protection Law, also known as “Chapter 93A”, protects consumers from “unfair and deceptive business practices.” There are several laws that fall under Chapter 93A, but the relevant portion for consumers is Section 9.

Chapter 93A has an incredibly broad reach, and covers nearly every area of law that can impact consumers. While my cases discussed above concern foreclosure, Chapter 93A often comes up in landlord-tenant disputes, debt collection matters, and a myriad of other consumer issues.

“Unfair and deceptive business practices” under this law is purposely broad and can cover an infinite number of violations. Moreover, the Attorney General is permitted to issue regulations that make certain practices automatic violations of Chapter 93A.

Benefits of the Consumer Protection Law

Because the Consumer Protection Law is broad, it can be used for many types of misconduct that are not otherwise violations of the law. Chapter 93A, importantly, also includes equitable powers, which allows a court to do more than just issue monetary damages.

A prevailing party under Chapter 93A, under the right circumstances, is also entitled to attorney fees.

Chapter 93A, importantly, allows courts to impose penalties on parties who refuse to settle cases that should be resolved without a lawsuit. This provides a strong incentive for parties to settle cases on their own.

Conclusion

Preparing a Chapter 93A case needs to be done properly. Even before a lawsuit is file, a claimant (in most cases) needs to serve a demand letter to the opposing party, in an attempt to resolve the dispute prior to court. Once a case is filed, a claimant must be sure to make a strong case that the other side violated this law.

If you need assistance with such a matter, contact me for a consultation.

Foreclosure Moratorium in Massachusetts: FAQs

UPDATE: The eviction and foreclosure moratorium has been extended through October 2020.

Earlier this week,  Governor Baker signed into law “An Act providing for a moratorium on evictions and foreclosures during the COVID-19 Emergency.” I previously wrote about how this law affects evictions. In this post, I’ll discuss the foreclosure moratorium.

What Foreclosures Are Covered Under the Moratorium?

The moratorium covers all residential foreclosures in Massachusetts. This law broadly prohibits all action related to a Massachusetts foreclosure, including the start of a Servicemembers Case and the publishing of a foreclosure sale notice.

An exception is allowed for “vacant or abandoned” property. The law does not cover foreclosures for commercial property.

What Relief is Available to Homeowners Under the Moratorium?

The law allows a homeowner to request a forbearance of their mortgage loan, which temporarily suspends payments on the loan. This is only allowed for those who have a “certain mortgage loan”, which is defined under a pre-foreclosure law, G.L. c. 244, § 35B. This forbearance, importantly, requires that the unpaid loan expenses be added to the end of the loan.

Forbearances are presently allowed for many homeowners under the federal CARES Act. However, to the best of my knowledge, a forbearance under the CARES Act does not require a lender to add the unpaid balance at the end of the loan, as the state moratorium does.

How Long Will the Moratorium Last?

120 days after the passage of the bill or 45 days after the COVID-19 emergency declaration has been lifted . . . whichever is sooner. The Governor also has the power to extend this moratorium.

What Impact will the Moratorium Have on Future Foreclosures?

A common misconception about foreclosure is that the process begins immediately after a homeowner misses a loan payment. In Massachusetts, nothing can be further from the truth. A myriad number of state and federal laws and mortgage requirements must be followed before a foreclosure sale can occur. It can easily be at least a year (and often longer) from the default of a loan up to a foreclosure sale.

As such, even without the moratorium, I wouldn’t have expected too many foreclosure sales to occur during the coronavirus pandemic. Some lenders may have started the process, but few homes would have actually been foreclosed. This moratorium will delay the inevitable foreclosures that will eventually arise from the pandemic.

What will happen next? It is possible that a wave of foreclosures may occur in the next several years, similar to what happen after the 2007/2008 financial meltdown. In my opinion, the most likely scenario is that loan servicers and other mortgage holders will be flooded with requests for mortgage relief in the next year. Many homeowners, unfortunately, will have difficulty getting the assistance they need.

Final Thoughts

If you need assistance with a foreclosure matter, contact me for a consultation.

Tips for Obtaining Mortgage Payment Assistance

Due to the ongoing coronavirus pandemic, many homeowners will likely need mortgage payment assistance in months ahead. Here are some tips for homeowners in need of such help.

Speak to Your Lender

For anyone seeking mortgage payment assistance, the first step is to speak with your lender. Most lenders have some form of mortgage assistance available, which can sometimes be granted through a simple phone call with the lender.

The most important piece of advice for obtaining mortgage payment assistance is (1) get it in writing and (2) keep a timeline of your communications with the lender. If a problem arises later, having this information can be critical in trying to avoid foreclosure.

Understand the Relief Available

Most lenders are offering mortgage forbearances as assistance during the coronavirus pandemic. A forbearance is a postponement of mortgage payments. It gives the homeowner a break from paying their mortgage.

A forbearance, importantly, does not forgive what is owed, or permanently modifies the loan. A homeowner who receives a forbearance needs to remember that their mortgage payments will resume in the future.

I have a feeling that the federal government (and many lenders on their own) will be pushing through more permanent mortgage assistance options in the future, so additional relief may be available soon.

Foreclosures Are Not Occurring Anytime Soon

While many homeowners, understandably, are concerned about losing their homes, foreclosures will not be occurring soon, due to federal and state regulations. Homeowners, however, do need to be proactive in addressing these matters, as foreclosures will resume at some point in the future.

Conclusion

If you need assistance with a foreclosure matter, contact me for a consultation.

Elderly Parents Facing Foreclosure

I often get consultation requests from adult children whose parents are facing foreclosure. As if foreclosure is not stressful enough already, the potential foreclosure for one’s parents is particularly difficult. Elderly parents facing foreclosure is a sensitive topic that requires appropriate action.

Overview of Foreclosure in Massachusetts

Massachusetts is a non-judicial foreclosure state. This means that a bank is permitted to foreclose a home without going to court, through the sending of legal notices to the homeowner and a public foreclosure auction.

For senior citizens, Massachusetts’s foreclosure process can present a real challenge. It is not uncommon for elderly homeowners to misunderstand these foreclosure notices and get overwhelmed by this situation. Adult children who are helping parents facing foreclosure often tell me that their parents had little recollection about the status of their mortgage loan and the start of the foreclosure process.

Options for Elderly Parents Facing Foreclosure

Elderly parents facing foreclosure need to carefully consider their options. For most homeowners, a loan modification is the best option for attempting to avoid foreclosure. This, however, is not always a viable option for senior citizens, who may be on limited income or not in a position to make loan payments for an extended period of time.

Most lenders, however, do consider a household member’s income when reviewing a borrower for a modification. Seniors who have adult children living with them and earning income may make a loan modification feasible.

Another option for elderly parents facing foreclosure is to simply sell the home. This is something to strongly consider if the home has significant equity in it. Rarely does a foreclosure give the borrower a good financial return from a home sale.

If these options are not feasible, it may also be possible to negotiate a deed in lieu of foreclosure, short sale, or other alternatives for avoiding foreclosure.

Conclusion

I’ve helped many Massachusetts homeowners avoid foreclosure, including elderly parents and senior citizens. If you or your parents need such assistance, contact me for a consultation.

Who Can Foreclose in Massachusetts?

The Appeals Court issued a decision this week concerning an important topic for Massachusetts foreclosure law: who can foreclose in Massachusetts? The decision, Mitchell v. U.S. Bank National Association, is included below.

Background

In this case, two homeowners challenged the validity of a foreclosure sale against their home. As is the case with many residential mortgages in the United States, these homeowners had a securitized mortgage loan.

Securitization is a process by which mortgage loans are put together into a trust, with shares of this trust (known as “certificates”) sold to investors. A trustee (often U.S. Bank National Association or Deutsche Bank) manages these trusts, with a loan servicer responsible for the day-to-day handling of the loan responsibilities, such as collecting loan payments and handling customer inquires.

Who Can Foreclose in Massachusetts?

The homeowners in Mitchell argued that U.S. Bank was not entitled to foreclose their home because this entity was not entitled to enforce their mortgage loan. Rather, they argued, the certificate holders were the only persons entitled to do so, and in turn, foreclose the home.

The Appeals Court rejected this argument. Because U.S. Bank was entitled to receive payments from the mortgage loan, it was therefore entitled to foreclose. The Appeals Court did not agree that, because these payments were for the benefit of the certificate holders, only these investors could foreclose.

Practical Implications

Mitchell reaffirms that attempts to challenge foreclosures on the basis of the loan securitization process is an uphill battle. Massachusetts courts have almost always rejected these arguments, with Mitchell being the most recent example.

That’s not to say that anyone can foreclose in Massachusetts. A valid foreclosure requires that the foreclosing entity hold the mortgage and promissory note, and comply with pre-foreclosure notice requirements. Mitchell, however, again declined to extend the scope of these foreclosure requirements to include the underlining loan securitization process.

Conclusion

If you need assistance with a foreclosure matter, contact me for a consultation.

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Recent First Circuit Decision on Required Massachusetts Foreclosure Notice

The First Circuit Court of Appeals issued a noteworthy decision earlier this month about one of the required notices for a Massachusetts foreclosure. The decision, Thompson v. JPMorgan Chase Bank, N.A., is included below.

Foreclosure Notice Requirement – “Paragraph 22”

This case concerns an interpretation of a foreclosure notice requirement commonly referred to as “paragraph 22.” This requirement is found in paragraph 22 of the standard mortgage agreement used in nearly every residential mortgage in the United States. Paragraph 22 requires that, prior to foreclosure, the mortgagee provide the borrower with several disclosures, including their right to cure the loan default and the right to reinstate the loan after acceleration, which was the subject of this appeal.

An acceleration of a loan is a demand by a lender to pay the entire balance of a loan prior to foreclosure. This generally comes after the borrower has defaulted on the loan, and is a sign that a foreclosure sale is forthcoming.

Strict Compliance for Paragraph 22 Notices

In Massachusetts, a lender is required to strictly comply with the paragraph 22 notice requirement. This comes from Pinti v. Emigrant Mortgage, a landmark 2015 Supreme Judicial Court decision. In Pinti, a minor mistake with one of the paragraph 22 notice provisions was grounds for invalidating a foreclosure sale.

Here, the First Circuit held that a paragraph 22 notice sent to a borrower made the foreclosure sale void because it misrepresented the borrower’s rights. The notice told the borrower that he could reinstate his loan after acceleration . . . anytime before the foreclosure was to occur.

The problem? The borrower’s mortgage required this reinstatement to occur five days before a foreclosure sale. The First Circuit held that, because the paragraph 22 notice was misleading, it made the underlining foreclosure sale invalid.

Practical Implications

A critical part of Thompson v. JPMorgan Chase Bank, N.A is that the borrower did not need to show prejudice from this error in the paragraph 22 notice. There was no allegation that the borrower was able to bring his loan current, waited until the day of the foreclosure sale to pay this money, and was denied due to this five-day deadline in his mortgage. This is keeping with an important part of Massachusetts foreclosure law: a foreclosure can be unlawful from an error in the foreclosure process even if the borrower was never harmed from it.

Thompson is an important reminder of the importance of a proper foreclosure notice in Massachusetts. Even the smallest errors in the foreclosure process can be viable grounds for defending against foreclosure.

Conclusion

If you need assistance with foreclosure defense, contact me for a consultation.

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