Counterclaims in Massachusetts Eviction Cases

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Massachusetts tenants in eviction (“summary process”) cases have the option of suing the landlord who is trying to evict them, in an action known as a counterclaim.  A counterclaim, simply put, is a lawsuit brought against the party who first filed the lawsuit.  Counterclaims are permitted in eviction cases brought for a tenant’s failure to pay rent or a no-fault eviction.  Counterclaims are not permitted for cause evictions (ex. violating the terms of a lease).

Counterclaims are allowed for “any claim against the plaintiff relating to or arising out of such property, rental, tenancy, or occupancy for breach of warranty, for a breach of any material provision of the rental agreement, or for a violation of any other law.”  Examples of counterclaims by tenants include retaliation, violation of the Consumer Protection Law, and allegations that the rental property was not habitable.

An important thing about counterclaims in summary process is that they are not mandatory.  A tenant can choose to file a counterclaim, but does not lose that claim if he or she does not file it.  This is unlike most other civil cases, where the party can lose that claim if they do not raise it in a prior case.

Should you raise counterclaims in summary process?  Counterclaims can sometimes be good leverage for a tenant trying to negotiate a settlement, and it can save time for the tenant by having these issues determined in one single lawsuit.  On the other hand, eviction cases in Massachusetts move at a fast pace, with limited discovery (the ability to learn about the other’s side position through written questions and document requests).  Some claims are too complex for summary process, and are better pursued in a separate court case (a personal injury claim, for example, is probably too complex for summary process).

Tenants should also bear in mind that if they do pursue a counterclaim and are unsuccessful, they may not get a chance to try the claim again.

Consult with an attorney if you find yourself in an eviction and need help in determining whether to raise counterclaims in your case.

Third-Party Buyers of Foreclosed Properties: Buyer Beware

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The ongoing foreclosure crisis in Massachusetts hasn’t just impacted homeowners. Third-party buyers of foreclosed homes who purchase unlawfully foreclosed properties can also be really hurt in this process, and need to be aware of the risks of purchasing foreclosed homes.

When a home is sold at a foreclosure sale, the lender is most often the person who ends up purchasing the property (against its own financial interest in the home).  Occasionally, an unrelated buyer (aka a third-party buyer) ends up buying the property at the sale.  This often occurs when the foreclosed property is in a desirable location or the home has significant equity (the difference between the property’s value and what is owed on it).  The third-party buyer often thinks he or she is getting a great deal, as foreclosed properties are often sold below the market rate for comparable properties.

However, buying a foreclosed property comes with enormous risks.  Massachusetts law is abundantly clear that the failure to strictly comply with the foreclosure process makes the foreclosure void (as in, it never happened in the first place).  If a mistake occurred in the foreclosure, even years in the past, the property’s title is shot (Ibanez and Bevilacqua are two examples of major foreclosure law cases on this matter).  Recent cases reaffirm that even minor defects can have serious consequences on the validity of a foreclosure.

If the former homeowner is still residing in the property, it gets even more tricky.  To obtain possession of the home, the third-party buyer needs to evict the former owner, and the former owner is permitted to argue as a defense that the foreclosure was void even though an unrelated party did the foreclosure.  In other words, the third-party buyer needs to defend a foreclosure it never performed and bears the full burden of proving it was done correctly.

This isn’t to say that all foreclosures are void.  Many are done correctly, and even if the foreclosure was done improperly, such mistakes can eventually be corrected.  But, there is no doubt that the purchase of a foreclosed property comes with risks.

What’s a potential third-buyer of a foreclosure to do?  Proceed with caution. These potential buyers need to do their research and, most importantly, get title insurance to protect themselves if a mistake did occur in the foreclosure process.  When possible, third-party buyers should also reach out to the former homeowners and see if a settlement can be reached to avoid problems down the road.

Practice Pointers: A Picture is Worth a Thousand Words

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As a landlord/tenant attorney, I have learned that sometimes the simplest advice is the best.  It is common, especially with contentious landlord/tenant relationships, for allegations to surface regarding the failure of one party to properly maintain the property.  When one of these situations arises, the old adage that “a picture is worth a thousand words” has much meaning.  This advice comes into play when dealing with allegations by both landlords and tenants alike regarding poor conditions in rental property.

In law, it is not what you know; it is what you can prove.  An allegation that a tenant has damaged the rental property, or a claim that a landlord has not properly fixed something in the unit, means little if you cannot prove it. One’s testimony on these matters is helpful, but the best proof is photographic evidence.  If you find yourself in such a scenario, do yourself a favor and take good pictures of what you want the court to see.  To leave no doubt that the picture was taken at a certain date, include a copy of the daily newspaper in the pictures.  Everyone today has a smartphone and/or tablet, and there is really no excuse for not documenting this evidence.  And you do not need to wait until a problem has arisen to do this; both landlords and tenants should take pictures of rental property before and after moving into the unit.  If problems arise, these photos can make or break your case.

If you ever do need to show these photos to the court, remember that the court will generally not look at these pictures on your phone and/or tablet.  You will need hard copies of these photos, so print these pictures in advance of your court date.

Moreoever, photos are often the preferred means of presenting unfavorable rental conditions in court.  Believe it or not, some tenants have come to court with dead rodents and bedbugs to present as evidence; something the court will not be happy about!  A picture is the much better alternative.

Are you in such a scenario?  Contact me for a consultation.

Loan Securitization and Foreclosure Defense

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In recent years, loan securitization has become a hot topic among mortgage lending and foreclosure defense.  Borrowers often first learn about securitization when reviewing the assignments of their mortgage:  many are shocked to learn that their mortgage is being held by a trust, often with a long name with many numbers and dates.  (Ex.  Deutsche Bank National Trust Company, as Trustee of the IndyMac INDX Mortgage Trust 2007-FLX3, Mortgage Pass-Through Series 2007-FLX3).  The borrower, who usually made their loan with a local bank or lender, has no idea what this entity has to do with their loan.  The answer is that their loan has been securitized.  With the ongoing foreclosure crisis, challenges to the loan securitization process have become a popular foreclosure defense.

In the old days, when you borrowed money from a bank, the bank held onto the loan until it was paid off.  The promissory note (the contract you signed to borrow this money) remained in the vault of the local bank, and there was generally no dispute over who owned what.  (The Christmas movie, It’s A Wonderful Life, has many scenes showing this traditional role of a lender).

In the last half century, things began to change.  Lenders no longer held onto the loan they originated for the life of the loan and instead, began to sell them in the secondary market for loans.  The two biggest buyers of these loans were Fannie Mae and Freddie Mac:  government-sponsored corporations whose sole purpose was to buy loans from originators, so these lenders had more money to lend again.  A change to the federal tax code in the 1980s opened the door for more participants to get involved in securitization.  Securization is often blamed as a major reason for the recent financial meltdown; the rush to sell these loans on the secondary market encouraged many banks to freely lend money and ignore underwriting standards.

Understanding securitization is an oxymoron; the process is too complicated for anyone to really understand.  The short explanation of securitization is that loans are intended to be transferred among several different entities and finally into a trust, where shares of the loans are sold to investors.  This securitization process has strict rules and deadlines.  During the ongoing foreclosure crisis, it became apparent that few of these securitizited trusts followed these requirements.  I, personally, have never seen a loan that has complied with the applicable securitization requirements.

Can mistakes in the securitization process help with foreclosure defense?  The trend in Massachusetts is that these mistakes alone will not beat a foreclosure.  Even if a mistake did occur in the securitization process, courts generally say that the borrower has no “skin in the game” for raising it as a defense.  Some courts have disagreed, and I expect appeals courts to resolve this issue in the near future.  However, loan securitization has, at times, revealed problems in the transfers of promissory notes that can be a defense to foreclosure, pursuant to the foreclosing entity’s requirement to hold the note at the time of foreclosure.

Speak to a foreclosure defense attorney if you have a securitized loan and are in need of assistance.

Recent News: Federal Report Shows Loan Servicers Offering Few Loan Modifications to Borrowers

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A recent report from the federal government shows that loan servicers are offering few loan modifications to borrowers through the federal government’s Making Home Affordable Program.  This program, created in the wake of the financial crisis, was intended to keep struggling owners in their homes.  Instead of providing a necessary defense to foreclosure, the program has become a mess, with many borrowers being rejected for loan modifications through the Home Affordable Modification Program (“HAMP”).  One article suggests that an astonishing 70% of all loan modification applications are denied by servicers.

I can count on my right hand the number of struggling borrowers who have been promptly considered for a loan modification by their servicer.  The majority go through months of back and forth communications with their lenders, who typically “lose” the required documentation or come up with absurd reasons for denial.

What’s a homeowner in need of a loan modification to do?  Create a paper trail of one’s efforts to apply for a loan modification and contact a lawyer if you are not getting the results you need.

 

Beware of Foreclosure Defense Scams

Beware of Foreclosure Defense Scams

In addition to the loss of homeownership for many Americans, the continuing foreclosure crisis has another dire consequence: the rise of foreclosure defense scams.  A recent story from New Jersey about a family losing their home due to a nationwide foreclosure scheme demonstrates the importance of struggling homeowners needing to be careful in seeking foreclosure defense assistance.

Foreclosure scams often involve attempts to provide loan modifications to struggling homeowners.  These often come from purported companies offering to assist with the loan modification process.  Often, they reference the Home Affordable Modification Program (“HAMP”)–a federal loan modification program.  Almost always, these scammers directly solicit homeowners through mail, the Internet, or phone.  These con artists often require homeowners to pay large, upfront fees and typically do little to assist with foreclosure defense.

How should struggling homeowners avoid these scams?  By staying away from any shady offer to assist with foreclosure defense.  I recommend that homeowners only accept help from a reputable attorney, a non-profit organization, or a state or federal government agency.  Private companies offering loan modification or other foreclosure defense assistance should raise a red flag for homeowners, if these purported businesses do not have proper credentials.
Let me add an important caveat to this advice: I’m not suggesting that those in need of foreclosure defense avoid seeking the help of anyone requiring a fee for their services.  While there are many free services available for homeowners trying to avoid foreclosure, these programs aren’t the best for everyone.  There are many reputable professionals–myself included–who do charge a fee for their work.  Homeowners should not rule out paying someone to help save their home, but do need to be diligent in making sure that their money goes to a reputable professional.

“Strategic Default” and Foreclosure Defense

 

If you have been following the news in the last few weeks, you have probably heard about the New York Times’s editorial Why I Defaulted on My Student Loans.  In this opinion piece, the author gives his reasons for not paying his student loans and encourages other borrowers in a similar scenario to do the same.  The article has generated alot of buzz, with several financial and legal experts criticizing this approach.  (Click here and here for good reads on this topic).
With this in mind, I thought I would discuss in this blog post a related question I sometimes get regarding foreclosure:  does it ever make sense to do a “strategic default” on a mortgage loan?  Is it ever worth it to stop paying for a home?
If the goal is to live at the home for a few years rent free (without concern to the impact on one’s credit history), then I suppose a default may make sense.  Otherwise, purposely deciding not to pay a mortgage loan is a bad idea.
As I have written before, getting a free home from a foreclosure defense lawsuit is an unrealistic goal.  The much more realistic goal is affordability: a loan payment that the borrower can pay. However, even with a strong case, foreclosure defense is tough. With that said, a borrower should never risk loosing their home in hopes of getting a free home or a reduced principle balance.  If a borrower is having trouble affording their home, they should try for a loan modification (and consult an attorney if they are not making any progress in this difficult process).

Practice Pointers: “I’m Not a Lawyer, But . . .”

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In my work as a foreclosure defense attorney, I have met many passionate professionals committed to keeping hardworking homeowners in their homes.  Unfortunately, given the high stakes involved in these cases, I have also seen alot of bad advice being passed on to vulnerable homeowners; many of whom are too quick to accept the help being offered to them.  These conversations always begin the same way, with the disclaimer “I’m not a lawyer, but . . .”

The Internet is not always helpful in this regard; while the web makes it easier for homeowners to learn about foreclosure defense options, it also helps to spread rumors and lies.  I often come across defenses and strategies that are proclaimed to be effective foreclosure defense methods but in reality, are meritless strategies routinely rejected by courts.

If you are facing a foreclosure, you should absolutely read up about this area from reputable sources.  But, before you commit to a specific strategy or course of action, seek the advice of a lawyer in this area of law.

 

Practice Pointers: Overcoming a Default Judgment

 

Homeowners facing foreclosure, like defendants in other types of lawsuits, sometimes find themselves in one of the toughest spots available: facing a default judgment.  A default judgment occurs when the defendant does not respond to the lawsuit.  This allows the plaintiff (the person bringing the lawsuit) to automatically get what they want.  In a post-foreclosure eviction, for example, the foreclosing entity automatically gets an execution (which allows them to obtain possession of the home).  A recent Boston Globe article discusses the rise of default judgments in debt collection cases and the shocking fact that many defendants were never notified about the lawsuit.  This applies equally to foreclosure defense cases as well.

What should someone do if they are the victim of a default judgment?  Get a lawyer . . . right away.  Default judgments, fortunately, can be lifted if the court is convinced there is a good reason for doing so.  A lawyer can help identify possible arguments to accomplish this.  For example, I have succeeded in lifting a default judgment based on the wrong date in the lawsuit’s paperwork.  Other possible grounds include challenging service of the lawsuit and raising extenuating circumstances for the failure to originally respond to the lawsuit.

A lawyer can also help you in determining how best to fight the underlining lawsuit against you.  As I heard judges state before, the court is more likely to remove a default judgment if you can show that you have a real defense to the case.
Are you facing a default judgment?  Contact me for a consultation.

Practice Pointers: Qualifed Written Requests (“QWRs”)

Homeowners who have questions about their mortgage loans or wish to dispute an error with their servicer have a useful tool at their disposal: a qualified written request (“QWR”).

A QWR is a requirement for loan servicers under the Real Estate Settlement Procedures Act (“RESPA”).  QWRs are written requests to loan servicers to dispute an error in a mortgage loan. For example, if a homeowner believes that their loan servicer has not properly credited their account with a mortgage loan payment, they can notify the servicer of this through a QWR.

QWRs are useful not only for fixing errors, but also for obtaining important information about their mortgage loan.  A homeowner can request that the mortgage servicer notify them of which entity owns the loan and request a copy of the promissory note (the contract that the homeowner entered into for the purchase of the home).  Believe it or not, this information is not always easy to find, and a QWR is a useful means of getting this information.

A QWR needs to be in writing, and should be sent separately from a regular loan payment to the servicer.  Loan servicers often have separate addresses for QWRs (which can often be found on their websites).  If you cannot find this address, you can call the servicer and ask where it should be sent to.  A QWR should always be sent using certified mail, so there is proof that the servicer received the request.

When preparing a QWR, avoid making a “laundry list” of documents that you are looking for.  Case law suggests that a loan servicer does not need to respond to a long list of requested documents, but instead, merely needs to address a borrower’s specific concerns.  The best practice in a QWR request is to state your reason for writing the letter and request any relevant documents related to the inquiry.  For example, I always ask for a validation of the underlining debt; specifically a copy of the promissory note and any documents showing how this instrument has been sold during the life of the loan.

A borrower can sue a loan servicer for its failure to comply with a QWR.  With this in mind, borrowers should keep detailed records of their QWR letter and proof that it was sent.