Before the foreclosure crisis, which peaked in 2010, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, federal and state laws now heavily regulate loan servicing and foreclosure processes. And most of the laws give protections to borrowers.
Servicers generally have to provide borrowers with loss mitigation opportunities, account for each foreclosure step, and strictly comply with foreclosure laws. Also, most people who take out a loan to buy a residential property in Maine sign a promissory note and mortgage. These documents give homeowners some contractual rights in addition to federal and state legal protections.
So, don't get caught off guard if you're a Maine homeowner behind in mortgage payments. Learn about each step in a Maine foreclosure, from missing your first payment to a foreclosure sale. Once you understand the process, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
In a Maine foreclosure, you'll most likely get the right to:
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale actually happens as "preforeclosure," too.)
During this time, the servicer can charge you various fees, like late charges and inspection fees, and, in most cases, must inform you about ways to avoid foreclosure.
If you miss a payment, most loans include a grace period of ten or fifteen days, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. To find out your loan's late charge amount and grace period, look at the promissory note you signed. You can also find this information on your monthly mortgage statement.
Also, many Maine mortgages allow the lender (or the current loan holder, referred to as the "lender" in this article) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained. Inspections, which are generally drive-by, are usually ordered automatically once the loan goes into default and typically cost around $10 or $15.
Additional types of fees the servicer might charge include, among others, fees for broker's price opinions, which are like appraisals, and property preservation costs, such as for yard maintenance or winterizing an abandoned home.
Under federal mortgage servicing laws, if the property is your principal residence, the servicer must contact, or attempt to contact, you by phone to discuss loss mitigation options, like a loan modification, forbearance, or repayment plan, no later than 36 days after you miss a payment and again within 36 days after each following delinquency. (12 C.F.R. § 1024.30, 12 C.F.R. § 1024.39).
No later than 45 days after missing a payment, the servicer has to inform you in writing about loss mitigation options that might be available and appoint personnel to help you try to work out a way to avoid foreclosure. A few exceptions are in place for some of these requirements, though, like if you've filed for bankruptcy or asked the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39, 12 C.F.R. § 1024.40).
Federal mortgage servicing laws also prohibit dual tracking (pursuing a foreclosure while a complete loss mitigation application is pending).
Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments for your home in Maine, the foreclosure will be judicial.
If the property is the borrower's primary residence, the lender has to send a notice of the right to cure before officially starting a foreclosure. The notice must give the borrower at least 35 days to cure the default (make up the missed payments) and reinstate the loan. As of September 19, 2019, the lender must send this notice by both certified mail (return receipt requested) and first-class mail (postage prepaid). Before this date, the statute required the lender to send the notice by one or the other method. (Me. Rev. Stat. tit. 14, § 6111).
After the lender sends the notice of right to cure, it files a statement with the Bureau of Consumer Credit Protection. The Bureau then sends a notification to the borrower, which lays out a summary of the borrower's rights and available resources, including information about Maine's foreclosure mediation program. (Me. Rev. Stat. tit. 14, § 6111).
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender gives notice of the suit by serving you a summons and complaint. The summons will have instructions as to when and where to file an answer, along with other important foreclosure case information.
If the property is a residential property of no more than four units that's the primary residence of the owner-occupant, the borrower also gets a form to use to respond ("answer") to the complaint and request mediation. (Me. Rev. Stat. tit. 14, § 6321-A). Upon request, mediation will occur if the premises are an owner-occupied residential real property of no more than four units and the primary residence of the owner-occupant. (Me. Rev. Stat. tit. 14, § 6203-F).
If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, allowing it to hold a foreclosure sale. But if you choose to defend the foreclosure lawsuit, the case will go through the litigation process.
The lender might then ask the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because there's no dispute about the critical aspects of the case. If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment and order your home sold at auction.
After the redemption period expires (see below), the lender must publish a notice of sale in a newspaper for three weeks and, no less than 30 calendar days before the sale, mail the notice to everyone who appeared in the foreclosure action. (Me. Rev. Stat. tit 14, § 6323). The lender may then hold a foreclosure sale.
At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less. In some states, including Maine, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower.
If the lender is the highest bidder, the property becomes "Real Estate Owned" (REO). But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds (that is, money over and above what's needed to pay off all the liens on your property), you're entitled to that surplus money.
A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property before the sale (or for a short period after that), or filing for bankruptcy. (Of course, if you can work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.)
Under Maine law, the lender may allow you to reinstate the loan at any time before the sale. The foreclosure is then stayed (postponed) so long as you don't default again. (Me. Rev. Stat. tit 14, §§ 6321, 6323).
Also, the terms of your mortgage contract might provide you with a right to reinstate. Or the lender might agree to a reinstatement.
In some states, the borrower can redeem the property within a specific period after a foreclosure sale by paying off the total amount due on the mortgage (not just the arrears), plus interest, fees, and costs.
In Maine, however, the redemption period happens before the sale. The 90-day redemption period takes place after the court issues a foreclosure judgment. (Me. Rev. Stat. Ann. tit. 14 § 6322). Once the redemption period expires, if the borrower hasn't paid off the loan in full, the lender then publishes and mails the notice of the sale. (Me. Rev. Stat. Ann. tit. 14 § 6323)
The borrower may also redeem the home after the redemption period expires—but prior to the sale—if the lender agrees. (Me. Rev. Stat. Ann. tit. 14 § 6323).
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction that prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out about the options available, speak with a local bankruptcy attorney.
In a foreclosure, the borrower's total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency."
For example, say the total debt owed is $400,000, but the home sells for $350,000 at the foreclosure sale. The deficiency is $50,000. In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount (in our example, $50,000) from the borrower.
Under Maine law, the lender can get a deficiency judgment as part of the foreclosure lawsuit. (Me. Rev. Stat. Ann. tit. 14, § 6323). But if the lender buys the home at the foreclosure sale, the deficiency amount is limited to the difference between the property's fair market value at the time of the sale and the total outstanding debt. (Me. Rev. Stat. Ann. tit. 14, § 6324).
In most cases, the lender has two years following sale confirmation to collect the judgment. (Maine Rev. Code § 2329.08).
In this article, you'll find details on foreclosure laws in Maine, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.
To find Maine's laws, search online for "Maine statutes" or "Maine laws." Make sure you're reading the most recent, official laws. Usually, the URL will end in ".gov" or the statutes will be on an official state legislature webpage.
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Although the programs under the Making Home Affordable (MHA) initiative have expired, the MHA website still contains useful information for homeowners facing foreclosure.
How courts and agencies interpret and apply laws can change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you're facing a foreclosure. If you have questions about Maine's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the CFPB's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).