Is My Home In Foreclosure?

Foreclosure by Sale

Struggling homeowners in Massachusetts often start a consultation with me with a simple question: is my home in foreclosure?  Those not familiar with Massachusetts law might laugh at this question, believing that the service of a foreclosure lawsuit easily answers this question.  In states like New York and Florida, which are known as judicial foreclosure states, that is correct: lenders in those areas must take a borrower to court to foreclose.  Massachusetts, however, is a non-judicial foreclosure state, where a lender does not need a court’s permission to foreclose (anyone interested in a good discussion between these different types of foreclosure should read two great articles on this topic from the Boston Bar Journal).

Because a lender does not need a court’s permission to foreclose, determining whether a home is in foreclosure is not always obvious.  The official start of the foreclosure process comes with the publishing of advertisements in the local newspaper and notices sent to the borrower.  Determining where the homeowner is before that step, however, can be tricky to figure out.

One of the quickest ways to determine a borrower’s foreclosure status is checking whether a servicemembers’ case has been brought against them.  When a client asks me, “Is my home in foreclosure?”, my first step is to check whether one of these cases has started.  A servicemembers’ case is a judicial proceeding to determine if a borrower is in the armed services, which sometimes allows a delay in foreclosure for military members.  To check on whether a  servicemembers’ case has been brought against a borrower, I look at the court records on Masscourts.org.  Servicemembers’ cases are typically brought in the Land Court, so I usually search for cases in that court.  Another way of checking to see if such a case has been filed is through the registry of deeds.  Generally, a lender files a notice of one these cases in the land records for the subject property, which will have the case number and court where the case is filed.

Determining the status of the servicemembers’ case is a good way to determine how far along the borower is in the foreclosure process.  If the servicemembers’ case has been completed, a foreclosure sale will likely begin soon.  If no such case has been filed, the foreclosure sale will likely take longer (I estimate the typical servicemembers’ case to take around four months to complete).

It is important to note that there are always exceptions to this general timeframe, a homeowner should never, never delay in seeking help against foreclosure.

The Big Short – Origins of the Foreclosure Crisis

the-big-short-1

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.

Paragraph 22 of the Standard Mortgage

Mortgage

An important foreclosure defense is paragraph 22 of the standard mortgage.  The “standard mortgage” is the mortgage agreement used by Fannie Mae and Freddie Mac, two of the largest holders of residential mortgages in the United States, making it a widely used form for residential home transactions.  If you borrowed money for a residential home, chances are excellent that your lender used the standard mortgage.

Paragraph 22 of the standard mortgage requires the lender to provide the borrower a default notice prior to foreclosure.  This default notice provision, often found in paragraph 22 of the standard mortgage, requires the following for a non-judicial foreclosure state like Massachusetts (where the lender does not need to go to court to foreclose):

Acceleration; Remedies.   Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise).  The notice shall specify:  (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale.  If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and those remedies permitted by Applicable Law may be invoked.  Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.

NOTE:  I have included, as a PDF below, an excerpt from the standard mortgage with this provision, as it applies to a non-judicial foreclosure state.  Note that this default requirement is not always found in paragraph 22; I have seen some mortgages include it in other paragraphs of the mortgage.

Paragraph 22 requires lenders to provide borrowers with an opportunity to cure their mortgage loan default prior to foreclosure, and requires in this notice specific disclosures.  This paragraph is also referred to as the “right to cure” notice or the “default” notice.

Not surprisingly, lenders often mess up these simple notices.  Can a paragraph 22 defect be a valid foreclosure defense?  In Massachusetts, only a notice with a defect sent after July 17, 2015 will invalidate a foreclosure (per the Supreme Judicial Court’s Pinti v. Emigrant Mortgage decision).  Interestingly, other states interpret the paragraph 22 requirement differently; many Florida courts require “substantial compliance” for paragraph 22 of the standard mortgage, in which a minor defect will not void a foreclosure by itself.

While the Supreme Judicial Court in Massachusetts made the paragraph 22 defense only applicable to those notices sent after July 17, 2015, I think there is a good argument  to be made that this only applies to post-foreclosure cases, and not pre-foreclosure.  In other words, if a homeowner has received a deficient paragraph 22 notice and raises a challenge before foreclosure, there is a strong argument to be made on equitable grounds that the foreclosure should be stopped.

Facing a foreclosure?  Contact me to see if a paragraph 22 defense can be used to help you save your home.

Paragraph-22

Sherwin Law Firm Wins Foreclosure Appeal!

 

SJC

Christmas came early for two of my clients this year.  I’m pleased to announce that I won a foreclosure appeal of a post-foreclosure eviction case this week in the District Court Appellate Division.  In this case, my clients were challenging the validity of the foreclosure in the eviction case, where the bank was attempting to remove them from the home on the grounds of a lawful foreclosure.  The basis of this foreclosure appeal was the lender’s failure to comply with the terms of the mortgage, an effective foreclosure defense following the Supreme Judicial Court’s Pinti v. Emigrant Mortgage decision.

In this case, which went to a full jury trial, the Trial Court denied our motion for a directed verdict, a request a defendant makes to end a trial on the basis that the plaintiff did not meet their burden of proof.  Simply put, because the bank never sent my clients the correct notice, the bank failed to perform a lawful foreclosure.

A foreclosure appeal requires an enormous amount of time: my records show I put over seventy hours of work into this case.  The effort, however, was well worth it, and just in time for the holiday season!  This is an important remindeer of the importance of hiring an experienced foreclosure defense attorney. for help with a foreclosure appeal: the complexity of these legal arguments (and extensive appellate requirements) makes an appeal a project that only an attorney should handle.  If you are facing foreclosure and need to do a foreclosure appeal, contact me for a consultation.

Sherwin Law Firm Helps Massachusetts Homeowner Beat Foreclosure

Foreclosure by Sale

I’m thrilled to announce that I helped a Massachusetts homeowner beat foreclosure, through one of my most successful (and hard fought) cases to date.  My client was foreclosed in 2009, as a result of a predatory loan that forced him into default.  I began representing this client during the bank’s post-foreclosure eviction (“summary process”) case against him, where the bank was attempting to evict him from the home on the basis of a lawful foreclosure.  To help him beat foreclosure, I developed a foreclosure defense based on the bank’s failure to send him proper notice prior to the foreclosure.

The case was anything but a cake walk: we went through a full jury trial and two appeals before settling with the bank.  The wait was worth it, however: my client has his foreclosure rescinded and a new loan modification, with a low interest rate and a $400,000 principle reduction.  My client did his part to save his home: he continued to work hard, save his money, and prove to the bank that he could make a modified loan payment.  In the end, both sides are winners: my client keeps his home, and the bank gets a fair return on its loaned money for the home (well in excess than the money it would have obtained from selling the home after an eviction of my client).

Is it possible to beat foreclosure?  As I always tell homeowners: absolutely.  I never promise that I can always succeed at a foreclosure defense, but I have found that many struggling homeowners have options to avoid foreclosure, in lieu of simply giving up and leaving their homes.  But, as I always say, homeowners need to do their part to beat foreclosure, by proving they can make reasonable, affordable payments on their mortgage loan.

To beat foreclosure, a homeowner should seek the assistance of an experienced foreclosure defense attorney.  While homeowners have the right to represent themselves in court (referred to as a pro se party) I have found that few homeowners are able to handle these tricky matters on their own.  The risks aren’t worth it: get the help of a professional if you are facing foreclosure (homeowners with limited income should contact the Massachusetts Attorney General’s HomeCorps program for assistance in finding a volunteer attorney).

How to Stop a Foreclosure in Massachusetts

Foreclosure by Sale

I often get asked how to stop a foreclosure in Massachusetts. Homeowners facing foreclosure need to be aware of the different options for stopping foreclosure and how they apply to different scenarios.  Stopping a foreclosure is priority number one in Massachusetts foreclosure defense; homeowners have a much, much better chance of saving their homes by preventing a foreclosure in the first place.  This isn’t to say that homeowners who have been foreclosed lack options, but pre-foreclosure is always the better place to be.

So, how do you stop a foreclosure in Massachusetts?

Paying Off the Owed Debt

The obvious way of stopping a foreclosure is simply to pay off the owed debt on the mortgage loan.  If this amount isn’t too large, this may be a feasible option for some homeowners.  As I have written before, Massachusetts requires lenders to offer borrower a final opportunity to “cure” their mortgage loan debt before starting foreclosure.  Homeowners should bear in mind, however, that even if they pay off their outstanding debt, the terms of their loan remain in place.  If the homeowner was struggling with the loan because it was unaffordable, the homeowner should give serious throught to applying for the next option for stopping a foreclosure: a loan modification.

Loan Modification

A loan modification application, under new federal regulations, requires a loan servicer to stop foreclosure while the application is pending.  Limits exist on this; repeated applications will not continuously stop a foreclosure.  Because foreclosure defense is not about getting a free home, a loan modification should always be a homeowner’s first attempt at stopping foreclosure.  If a homeowner is applying for a loan modification and the bank or loan servicer still begins foreclosure, the homeowner should consult an attorney right away to discuss options for stopping  the foreclosure sale.

Bankruptcy

Bankruptcy provides a debtor with an automatic stay, which will automatically stop a foreclosure.  Under bankruptcy law, the bank is prohibited from foreclosure, which can provide the homeowner with some time to work out their next course of action.  Bankruptcy is a good option for a homeowner with an impeding deadline for a foreclosure sale and no other viable options.  Long term, however, bankruptcy is not always the best choice for avoiding foreclosure in the long run (speak to a bankruptcy attorney to determine if this is a good option for you).  Click here for a great overview of bankruptcy, provided by the Massachusetts Court System.

Civil Lawsuit

Homeowners also have the option of seeking injunctive relief in a lawsuit against their bank or loan servicer.  An injunction is a court order that prevents (or requires) someone to do something.  For foreclosure defense, a court will not grant an injunction against a foreclosure sale automatically; the homeowner needs to show a likelihood of success against the validity of the foreclosure.  In other words, the homeowner needs to convince the court that the impeding foreclosure is being done wrongfully.  Filing a lawsuit and requesting an injunction can be tricky, and a homeowner in need of such services should seek the help of a foreclosure defense attorney.

99 Homes: Fact v. Fiction

99 Homes Movie Poster.jpg

When foreclosure defense comes to the big screen, you know I’m going to see it.  I took a break from work this weekend to watch 99 Homes, a movie about the 2o1o foreclosure crisis in Florida.  Overall, I thought it was a great movie that brought to life many of the issues I confront with foreclosure defense.   The movie tells the story of a father who, after losing his job, is foreclosed.  In need of work, he ends up getting hired by the same realtor who evicted him, and falls into the sleazy work of foreclosing people who were in his same situation.

For this post, I want to discuss the facts v. fiction of the depiction of the foreclosure/eviction process as shown in the movie.  Bear in mind that I am a Massachusetts attorney, which has a different foreclosure process than Florida.  However, many of the issues remain the same regardless of the state where a foreclosure occurs.

FACT

  • Difficulty in Contacting a Loan Servicer/Bank is a Major Reason Why Foreclosures Occur 

99 Homes does a great job of showing how a homeowner’s inability to successfully work with a loan servicer/bank is often the reason for foreclosure.  Too often, I have seen banks willfully ignore loan modification applications for qualifying homeowners and create excuse after excuse for refusing to properly consider homeowners for loss mitigation assistance.  99 Homes shows how the banks’ refusal to properly offer this assistance has forced many homeowners into foreclosure.

  • The Court Process is Not “User Friendly”

99 Homes shows many of the homeowners attempting to represent themselves in court, with disastrous results.  The movie takes place in 2010, when courts were flooded with foreclosure cases, and many judges simply pushed these matters through.  While things are better now, the court process can still be very difficult to understand, especially for a lay person.  For foreclosure defense, a homeowner should strongly consider seeking the assistance of an experienced lawyer with these matters.

  • The Federal Government is a Major Owner of Foreclosed Properties 

The realtor in 99 Homes often discussed how “Fannie/Freddie” were two of his largest clients.  Fannie Mae and Freddie Mac are government-sponsored entities who are the owners of many mortgage loans across the country.  When a foreclosure occurs, these entities often become the owner of these homes.

  • “Cash for Keys” Is a Popular Means of Shortening the Foreclosure/Eviction Process

The movie depicts the use of “cash for keys” for settling post-foreclosure eviction cases: the bank offers the homeowner a cash settlement (usually $3,000-$5,000) to immediately leave the home.  “Cash for keys” isn’t a terrible option for homeowners who wish to leave their homes and need financial assistance in doing so.  A homeowner interested in this deal should still consult an attorney to discuss this option.

FICTION

  • A Homeowner Facing Foreclosure Can Be Out in a Matter of Days

99 Homes seems to suggest that a homeowner can be out of a foreclosed home in a matter of days.  In Massachusetts, the entire foreclosure process can take 2-3 years, which leaves homeowners with the time necessary to try and save their homes.  Sooner is always better than later in fighting a foreclosure, but rarely does a homeowner only have a matter of days to deal with a foreclosure.

  • Homeowners Have Limited Means of Fighting Foreclosure

Many of the homeowners in the movie are depicted as having few, if any, defenses to foreclosure.  In reality, homeowners have many more defenses available, such as a loan servicer’s refusal to properly consider a loan modification and failure to send the required notices required by the mortgage and law.  Not all of these defenses will work for each homeowner, but homeowners often do have means of defending themselves in these cases.

In need of assistance with foreclosure defense?  Contact me for a consultation.

Firm News: Sherwin Law Firm Scheduled to Argue Two Foreclosure Defense Appeals in October

SJC

October promises to be a busy month for me.  In addition to my trial court cases, I’ll be arguing two appeals on foreclosure defense cases this month.  These cases include a “smorgasbord” of foreclosure law issues:  the right of a loan servicer to send notices required for a lender, evidentiary issues regarding what a foreclosing entity must show to prove that it complied with the required foreclosure laws, and the application of recent foreclosure law cases on other pending, related matters.

In an appeal, a party asks the appellate court to review the decisions made by the lower court (the “trial court”).  An appeals court does not take evidence from witnesses or otherwise rehear the case but rather, decides whether the lower court did their job correctly.  An appeals court decides whether the judge properly applied the law, such as whether the judge gave proper instructions to the jury during trial, or properly considered certain matters of evidence.

In one of my appeals, I’m representing the appellant (arguing that the lower court got the decision wrong); in the other, I’m representing the appellee (arguing that the lower court got the decision correct).  Both cases involve tricky questions of law and I plan to work hard on each.

Appeals require an enormous amount of time and resources:  I can easily spend 50-75 hours for an appeal and the final written product can total hundreds of written pages.  The rules for appeals themselves are tricky; I know many excellent lawyers who purposely avoid appeals because of these requirements!  An appeal requires the preparation of a brief (a fifty page legal document explaining the reasons why the lower court was right or wrong) and an oral argument  (a 15-20 minute presentation before the judges).

In general, I have mixed feelings about people doing their own cases at the trial level.  For appeals, my advice is much more clear cut: don’t do an appeal if you are not a lawyer.  Appeals are too much work and too complex for someone without a legal education and training to try on their own.  If you are considering appealing a case, contact me for a consultation.

Sherwin Law Firm Settles Post-Foreclosure “Ibanez” Case

 

Image result for settlement clipart

I’m pleased to announce that I settled a post-foreclosure “Ibanez” case this week.  I represented a former homeowner who had been improperly foreclosed due to the Supreme Judicial Court’s decision in U.S. Bank v. Ibanez, which invalidated thousands of foreclosures across Massachusetts.  My client was a former homeowner, and the entity who foreclosed her home lacked a proper mortgage assignment at the time of foreclosure, making the foreclosure void.  As I have written before, this has happened to thousands of homes across Massachusetts during the recent foreclosure crisis (a reason why the Massachusetts Legislature is presently considering a foreclosure title clearing bill). 

My client had been included in a lawsuit brought by the current owner of the foreclosed home and the lender who had done the void foreclosure.  After a lengthy court case, we reached a settlement with the lender agreeing to pay my client a cash settlement in exchange for her remaining interest in the home.

The settlement did not give my client a free home, nor did it make her rich.  It did, however, provide her with compensation for the lender’s disregard of Massachusetts foreclosure law, something that has become all too common in recent years.

These “Ibanez” problems continue to exist today, and have no easy solution.  If you find yourself in such a situation, contact me to see if I can be of help.

Foreclosure Title Bill Pending in Massachusetts Legislature

A pending bill is before the Massachusetts Legislature that would limit the time for former homeowners to challenge foreclosures against their homes.  This bill, which the Legislature introduced in the previous term, is intended to address the ramifications of U.S. Bank v. Ibanez, a seminal Massachusetts Supreme Judicial Court decision that has invalidated thousands of  foreclosures across Massachusetts.  Many of these homes that have been improperly foreclosed have been sold to third-party buyers who, despite having nothing to do with the underlining foreclosure, have a major title problem with their properties.

The bill would require homeowners to bring challenges to a foreclosure within three years of the foreclosure sale or forever be barred from doing so.  Presently, there really isn’t a deadline for raising such challenges; some suggest that the twenty-year deadline under the law of adverse possession may apply, but to my knowledge, this has never been tried in court.

Third-party owners of improperly foreclosed properties do have options for fixing title problems:  these owners can bring quiet title lawsuits against the former owners and lenders asking the court to fix the problem (or simply ask the former owner to deed over any interest they have remaining in the property).  These solutions, however, can be timely and costly, hence the reason why the title insurance industry continues to lobby for a title clearing bill.

This bill died last year over concerns that the deadline was too short for those homeowners who had been improperly foreclosed.  Governor Patrick sent the bill back with a recommendation that the deadline be increased to ten years, which kept the bill from passing,  This year, with a Republican governor, things could turn out differently.