Maine Foreclosure Laws and Procedures

Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, many federal and state laws now give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully 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 usually give homeowners certain contractual rights after a home loan default.

So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about Maine foreclosure laws and how the Maine foreclosure process works, from missing your first payment to a foreclosure sale.

What Are My Rights During Foreclosure in Maine?

In a Maine foreclosure, you'll most likely get the right to:

• receive preforeclosure notices
• apply for loss mitigation
• participate in mediation
• get notice of the foreclosure and the chance to respond in court
• receive special protections if you're in the military
• pay off the loan to prevent a foreclosure sale, and
• get any excess money after a foreclosure sale.

Once you understand the Maine foreclosure process and your rights, 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.

What Is Preforeclosure?

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 happens as "preforeclosure," too.)

During the preforeclosure period, the servicer can charge you various fees. Also, in most cases, federal law requires the servicer to let you know how to avoid foreclosure, and most mortgage contracts require the servicer to send you a breach letter.

When Can Foreclosure Start in Maine?

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 sufficient time to submit a loss mitigation application to the servicer.

What Is the Foreclosure Process in Maine?

If you default on your mortgage payments for your home in Maine, the foreclosure will be judicial.

Preforeclosure Notices in Maine

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).

Is Maine a Judicial Foreclosure State?

Yes. A Maine 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.

How Do Foreclosure Sales Work in Maine?

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.

What Are the Options Available for Borrowers During Foreclosure in Maine?

A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.

Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. (But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.)

Reinstating the Loan

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.

Redeeming the Property

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).

Filing for Bankruptcy

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.

Foreclosure Protections and Military Servicemembers

The federal Servicemembers Civil Relief Act provides legal protections to military personnel in foreclosure. Also, under state law, certain military service members (including state military forces on active state service) get the opportunity to stay (postpone) court proceedings. (Me. Rev. Stat. tit.37-B, § 389-A).

Are Deficiency Judgments Allowed in Maine?

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.

Maine law allows deficiency judgments, subject to some limitations.

Maine Deficiency Judgment Laws

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).

What Are the Potential Consequences of Foreclosure?

A foreclosure could result in serious consequences, like lower credit scores, a deficiency judgment (as discussed above), or tax ramifications.

Read More Articles

Get tips on what to do—and what not to do—if you're facing a foreclosure.

Learn about last-minute strategies to stop foreclosure.

Find out if foreclosures are on the rise.

More Foreclosure Information

For more information on federal mortgage servicing laws and foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.

Getting Help

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. Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.