Breaking News: Supreme Judicial Court Rules in Favor of Banks in City Foreclosure Ordnance Case

The Supreme Judicial Court ruled in favor of the banks today in a challenge to the City of Springfield's foreclosure ordinances. The Court held that towns and cities are not permitted to pass local ordinances that conflict with state foreclosure law.  In essence, the Court held that the state legislature--and the state legislature alone-- is responsible for Massachusetts foreclosure law.  

While these local ordinances would have been beneficial to homeowners facing foreclosure, the Court's decision makes sense.  Foreclosure law has always come from state statute and the creation of anti-foreclosure protections by local towns and cities, while noble, is a job really left for the Legislature.  I agree with the Court's concluding remarks in the case, which read:

We recognize that the city of Springfield has attempted to

address the serious problem of urban blight within its borders

through these ordinances. Although we conclude that the city

may not achieve its goal by ordinance as it has here attempted, a solution may be provided through the Legislature. 

Hopefully, the Court's decision will encourage state lawmakers to take on these challenges in the upcoming legislative session. 

BLOG URL:  http://maforeclosurelawblog.sherwinlawfirm.com/2014/12/breaking-news-supreme-judicial-court.html

Extend the Mortgage Forgiveness Debt Relief Act!

Last week, the U.S. House of Representatives passed a much needed one-year extension to the Mortgage Forgiveness Debt Relief Act of 2007.  The Senate is expected to take up this measure soon and will hopefully have it passed by the end of the year.

Few people, myself included, completely understand the tax code, but this concept is simple enough: forgiven debt is considered "income" for purposes of the income tax.  For example, if someone lends you $500 but later decides to forgive you from repaying it, the IRS considers that $500 of taxable income.

This rule is incredibly problematic for struggling homeowners who have received loan modifications or opted to do short sales of their home to avoid foreclosure.  Often, these arraignments result in the cancellation of mortgage debt for the homeowner; a necessity for avoiding foreclosure.

The problem?  Many of these homeowners, who have avoided foreclosure, faced steep tax bills as a result of this forgiven debt.  It is a problem not just for homeowners, but also realtors and attorneys who are stuck "between a rock and a hard place" in navigating this tricky area.  Hopefully, Congress will have this important measure passed by the end of 2014.

This issue is a reminder, however, that homeowners accepting any type of loss mitigation assistance should seek the advice of a tax professional when considering their options.

BLOG URL:  http://maforeclosurelawblog.sherwinlawfirm.com/2014/12/extend-mortgage-forgiveness-debt-relief.html

Breaking News: Fannie Mae/Freddie Mac Agree to Sell Back Foreclosed Properties to Prior Owners

In a welcome turn of events, Fannie Mae/Freddie Mac have agreed to begin selling foreclosed properties back to former owners or third-party organizations at market value.  Previously, these organizations has refused to consider these types of deals, leaving many former homeowners who had the means to repurchase their homes from being unable to do so.  Several months ago, the Commonwealth of Massachusetts lost its case against Fannie Mae/Freddie Mac  to require these organizations to comply with state law that required buy-back deals for former homeowners.  

This news is welcome relief for many former homeowners, who often face Fannie Mae/Freddie Mac in foreclosure cases.

Defending Against Deficiency Judgments

A recent New York Times article reports that many loan servicers and lenders are increasingly pursuing deficiency judgments against former homeowners who have gone through foreclosure.

A deficiency judgment is the amount a former homeowner owes following a foreclosure sale.  This amount is the difference between the debt owed and the foreclosure sale price.  For example, if the former homeowner owed the lender $600,000 and the home sold at the foreclosure sale for $400,000, the deficiency judgment is $200,000.  Under Massachusetts law, the lender has two years to try and collect this judgment against the former homeowner.  

In the past, lenders have rarely attempted to collect these judgments; usually, former homeowners do not have any assets to make a debt collection case worthwhile.  Moreover, a borrower can generally eliminate this debt through a bankruptcy.

Fortunately, former homeowners do have options in defending against a deficiency judgment lawsuit.  If you are facing a claim, seek legal assistance right away.

BLOG URL:  http://maforeclosurelawblog.sherwinlawfirm.com/2014/12/defending-against-deficiency-judgments.html

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