Massachusetts’s Right to Request a Modified Mortgage Loan

In 2012, Massachusetts passed “An Act Preventing Unlawful and Unnecessary Foreclosures," aimed at helping struggling homeowners stay in their homes.  One of the key components of this law, the right to request a modified mortgage loan, is an effective tool for foreclosure defense. 

This law, found in G.L. c. 244, § 35B, requires lenders to make a "good faith effort" to avoid foreclosure for borrowers with "certain mortgage loans."  The definition of "certain mortgage loans" is lengthy, but does cover a large share of residential mortgage loans.  Pursuant to the Division of Bank's regulations, if the lender cannot determine if the loan falls into this list of definitions, it is considered a "certain mortgage loan" and the lender therefore must consider the borrower for a modification.  The right to request a modified mortgage loan only applies to borrowers who have received a right-to-cure notice after November 1, 2012.

The right to request a modified mortgage loan law requires lenders to consider borrowers for a loan modification.  Lenders have several different loan modification models to choose from, but the federal Home Affordable Modification Program ("HAMP") is likely to be the most widely used option.  For this reason, this law is also known as "State HAMP," because it makes HAMP a requirement at the state level (HAMP is presently a federal program that only applies to a list of specific lenders).

Borrowers who are entitled to request a modified mortgage loan will receive a notice from their lender informing them of this right, and the documentation needed to process such an application.  The deadline for the borrower to respond to this letter is generally thirty days, so borrowers need to act quickly in preparing an application.  After receipt of the application, the lender is suppose to respond to the applicant's request with an assessment of their eligibility for a modification. 

G.L. c. 244, § 35B is important for foreclosure defense because it makes many Massachusetts residents eligible for a loan modification who previously had not been.  I also like this law because it explicitly requires a lender to perform a "compliant" loan modification analysis.  While it is no secret that lenders routinely mess up loan modification applications, fighting these mistakes are not always easy, as consumer protection laws and common law remedies do not always cover these abuses.  However, G.L. c. 244, § 35B appears to open the door for allowing homeowners to challenge loan modification denials.

If you are in need of assistance in preparing a loan modification application or fighting the denial of your modification, contact me.

Blog Post URL:  http://maforeclosurelawblog.sherwinlawfirm.com/2014/08/massachusettss-right-to-request.html

Practice Pointers: Lessons from a Successful Foreclosure Defense Lawsuit

I'm happy to write that I settled a foreclosure defense lawsuit for one of my clients this week.  I won a temporary restraining order to stop the foreclosure several days before the sale and negotiated a loan modification for my client that will keep him in his home with an affordable mortgage loan payment--my goal in every foreclosure defense case. 

My experience in this reminded me of some important practice pointers in foreclosure defense:

• Earlier is always, always better in stopping a foreclosure. While I encourage anyone in any stage of foreclosure to consult an attorney, sooner is always better in trying to save a home.

• The more paperwork you can provide to your attorney about your mortgage loan and home, the better of a chance that they can help you.  My client had papers going back to the closing of his home, and every notice he had received since then, which made my job much more effective (at less cost to him).

• Working with the bank can help you save your home.  I know few, if any, bank attorneys who want to see someone lose their home.  Most, if they can, will make every effort to find a way to avoid this.  Developing a good working relationship with the other side can go a long way towards an effective resolution of the problem. 

In need of foreclosure defense assistance?  Contact me.

Blog Post Link:  http://maforeclosurelawblog.sherwinlawfirm.com/2014/08/practice-pointers-lessons-from.html

Better Call . . . Sherwin!

As a huge fan of the television show Breaking Bad, I'm looking forward to Better Call Saul, the widely anticipated spin-off involving Walter White's attorney: Saul Goodman.  Saul was one of my favorite characters on the show; the type of lawyer I never want to be, but one who I can't help enjoy watching.

The trailer for the new show is out, and while I wouldn't look to Saul Goodman for legal advice, I do admit that his words of wisdom in this clip are spot on, especially in the area of foreclosure defense.  He compares lawyers to health insurance: one hopes you never need either of these services, but not having these types of protection are a recipe for disaster.  Unfortunately, I've seen far too many clients who have not followed this advice, and forced themselves into foreclosure when they might have been able to solve the problem with legal assistance.  

So, if you are facing foreclosure or another tricky legal situation, follow Saul's advice and talk to a lawyer.  Just like a sickness, no one wants to be in a legal proceeding, but if you are, make sure you get the help you need.  In other words, Better Call Sherwin!    

Breaking News: Governor Sends Back to the Legislature "An Act Clearing Titles to Foreclosed Properties"

Governor Patrick today sent back to the Legislature "An Act Clearing Titles to Foreclosed Properties."  Rather than vetoing the bill, Governor Patrick recommended that the bill be amended to a ten-year deadline for challenging a foreclosure.

A little background.  Several years ago, the Supreme Judicial Court in U.S. Bank v. Ibanez held that a valid foreclosure required the foreclosing entity to have record assignment of the mortgage at the time of foreclosure.  Ibanez came at a time when mortgagees were doing foreclosures by the dozens, and being very sloppy in their paperwork.  Ibanez, in effect, invalidated thousands of foreclosures and created a nightmare for title insurance companies and homeowners who purchased these foreclosed properties.  

The Legislature responded to this problem by attempting to pass "An Act Clearing Titles to Foreclosed Properties," which would give former homeowners three years from the date of foreclosure to challenge the foreclosure.  Under the law of adverse possession, a former homeowner would likely be barred if they did nothing to challenge the foreclosure after twenty years; this bill would shorten this period to three years.  Supporters of the bill considered it necessary for salvaging the real estate market while opponents lobbied against it as a denial of homeowner rights.  I have little doubt that this legislation will come back to the Legislature next year, as the problem of void foreclosures will not be going away anytime soon.  

The fate of this legislation also highlights the importance of understanding foreclosure by entry.  As I have written before, foreclosure by entry is a "back up" option for a non-judicial foreclosure and can be successful even when the non-judicial foreclosure is not.  I predicted before that foreclosure by entry will be an important topic as the foreclosure crisis continues and with the Governor's veto of this legislation, I expect that to continue.

Overview of Important Paperwork in a Foreclosure

There is no shortage of paperwork involved in a foreclosure. I have found that some of my best educated, most informed clients do not understand all of the important documents involved in the purchase of a home and subsequent foreclosure.  Here is a quick overview of these items.

Promissory Note

When a home is purchased, the buyer signs a contract with his or her lender to borrow money to buy the home.  This contract is called a promissory note.  In it, the borrower promises to repay the lended money with interest over a period of time.  An important feature of a promissory note is that it may--and probably will--be transferred to another person or entity.  This person or entity is permitted to enforce this agreement just as the original lender could. Transfers of a promissory note are often made with endorsements, that assign the debt to another entity.  These endorsements can be found on the note itself or another slip of paper, called an allonge.

Pursuant to the Supreme Judicial Court's landmark Eaton v. Federal National Mortgage Association case, the foreclosing entity needs to be the holder of this note at the time of foreclosure. This, however, only applies to foreclosures occurring after June 22, 2012.

If you do not have a copy of your promissory note, you can obtain one by submitting a Qualified Written Request to your lender, requesting that they show you proof they are the lawful owner of your note.  

Someone who signs a promissory note is on the hook for repaying the borrowed money.  However, a borrower can discharge (ex. "wipe out") this debt in bankruptcy.  Because of this fact, the lender will want additional protection for their investment, also known as security.  This is the reason for a mortgage.

Mortgages

A mortgage is a security interest that allows a lender to repossess ("foreclosure") the underlining property if the debt is not repaid.  While it is common for homeowners to talk about paying their mortgage when making payments on their home, they are actually referring to the mortgage loan.  A mortgage is merely the lender's means of protecting its financial investment. 

In Massachusetts, mortgages are almost always recorded in the local county's Registry of Deeds.  These can be found online at www.masslandrecords.com. 

Just like your promissory note, your mortgage can--and almost certainty will--be assigned throughout the life of your loan.  In another landmark decision, the Supreme Judicial Court in U.S. Bank v. Ibanez held that, at the time of foreclosure, the foreclosing entity must have record assignment of the mortgage.  Anyone involved in one of these cases should therefore review their mortgage assignments carefully to see if this requirement has been complied with. 

Mortgage Assignments

Mortgages are often assigned throughout the life of a loan.  Like mortgages, these assignments are almost always recorded in the Registry of Deeds.  In a typical mortgage assignment, the grantor (the person or entity giving the assignment) assigns the mortgage to the grantee (the person or entity receiving the assignment).

Deeds 

A deed is the document that passes property ownership to another person or entity.  When a home is purchased, the seller deeds the property to the buyer through a quitclaim deed (the standard type of deed in Massachusetts).

When a home is foreclosed, the foreclosing entity records a foreclosure deed that passes ownership of the property from the prior homeowner to the person or entity who purchased the property at the foreclosure sale (typically the entity who held the mortgage and conducted the foreclosure sale).

Included in a typical foreclosure deed is an affidavit of sale, stating the steps taken to comply with Massachusetts foreclosure law, as well as a copy of the notice of sale used to advertise the foreclosure.

Blog Post Link:  http://maforeclosurelawblog.sherwinlawfirm.com/2014/08/overview-of-important-paperwork-in.html