Before the foreclosure crisis, 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 Massachusetts sign a promissory note and a mortgage. These documents give homeowners specific contractual rights after a borrower defaults.
So, don't get caught off guard if you're a Massachusetts homeowner behind in mortgage payments. Learn about the Massachusetts foreclosure process and laws, from missing your first payment to a foreclosure sale.
In a Massachusetts foreclosure, you'll most likely get the right to:
Once you understand the process and these 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.
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 this time, the servicer can charge you various fees, including late and inspection fees, and, in most cases, must let you know how to avoid foreclosure, and send you a breach letter (a preforeclosure notice).
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 couple of exceptions. (12 C.F.R. § 1024.41). This 120-day period is a good time to submit a loss mitigation application to the servicer.
If you default on your mortgage payments in Massachusetts, the lender may foreclose using a judicial or nonjudicial method.
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender will automatically win the case if you don't respond with a written answer. But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold.
If the lender chooses a nonjudicial foreclosure, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home at a foreclosure sale. Most lenders go with the nonjudicial process because it's quicker and cheaper than litigating the matter in court.
Again, most residential foreclosures in Massachusetts are nonjudicial, although a court might have some minimal involvement. Here's how the process works.
If your home is a borrower-occupied, principal residence with four or fewer units (investment properties and second homes don't qualify), the foreclosing lender must personally deliver or mail a notice to you (the borrower) giving 90 days to bring the loan current, called "curing the default.". (In 2010, the cure period was increased to 150 days except under limited circumstances, but this time frame reverted back to 90 days in 2016.) (Mass. Gen. Laws ch. 244, § 35A).
You get the right to cure the default once during any five-year period. (Mass. Gen. Laws ch. 244, § 35A).
Who's eligible for a mortgage modification? The mortgage loan must have one or more features that are characteristic of a subprime loan like:
Eligible borrowers get a right to request a loan modification once during any three-year period, regardless of who owns the mortgage.
How to request a mortgage modification if you receive this kind of notice. If you want to request a loan modification or other foreclosure alternative option, you have to complete and return the form included with the notice, along with any supporting information, no later than 30 days from the date the notice was sent.
Not more than 30 days after receiving the borrower's loan modification request and a completed loan modification application, the foreclosing party (the creditor) has to then provide you with a written assessment of your ability to make an affordable monthly payment, including:
Protections for people with other kinds of loans. Keep in mind that even if you don't get the right to request a modification and the associated protections under this state law because you don't have a subprime mortgage loan, you may still apply for a loan modification or other loss mitigation (foreclosure avoidance) option from your servicer.
If you submit a complete loss mitigation application more than 37 days before a foreclosure sale, federal mortgage servicing laws usually protect you from a foreclosure, at least until the servicer reviews your application and denies your request (and any appeal is exhausted), you reject all loss mitigation offers, or you fail to comply with the terms of a loss mitigation agreement.
Call your loan servicer to find out how to apply for a loan modification or other foreclosure alternative.
The lender has to mail the borrower a "Notice of Intent to Foreclose and of Deficiency After Foreclosure of Mortgage" at least 21 days before the sale date if it wants to get a deficiency judgment (see below). (Mass. Gen. Laws ch. 244 § 17B).
In a Massachusetts nonjudicial foreclosure, the lender will likely file a lawsuit, often called a "servicemember's case," in the Superior Court Department or the Land Court Department of the Trial Court for a determination as to whether the homeowner is entitled to protections under the federal Servicemembers Civil Relief Act (SCRA). The SCRA provides military servicemembers with protections against a foreclosure while on active duty.
Even though a servicemember's case isn't a required part of the Massachusetts foreclosure process, lenders often will file this suit so the borrower can't later claim that the foreclosure was invalid because the lender failed to comply with the SCRA.
The lender then publishes a notice of sale once a week for three weeks and mails the notice to the homeowner at least 14 days before the sale. (Mass. Gen. Laws ch. 244 § 14).
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 Massachusetts, 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, subject to some limitations (see below).
The property becomes REO if the lender is the highest bidder. 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, you're entitled to the surplus money left over after all liens are paid off.
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.
As discussed earlier, borrowers usually get 90 days to cure the default and reinstate the loan before the foreclosure officially starts. Again, under Massachusetts law, you can exercise this right to cure only once during any five-year period. (Mass. Gen. Laws ch. 244, § 35A).
Also, the mortgage terms might give you additional time to reinstate. Check your contract to see if you get the right to complete a reinstatement and the deadline for doing so. If not, the lender might agree to let you reinstate the loan.
One way to stop a foreclosure is by "redeeming" the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.
Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. Massachusetts law, however, doesn't provide a post-sale redemption period when it comes to nonjudicial foreclosures. (Mass. Gen. Laws ch. 244 § 18).
If you're facing a foreclosure, filing for bankruptcy might help. If a foreclosure sale is scheduled to occur very soon, filing for bankruptcy is the best way to stop the sale immediately. After you file for bankruptcy, an "automatic stay" goes into effect. The stay acts as an injunction, prohibiting the lender from foreclosing on your home or 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 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 $500,000, but the home sells for $450,000 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 from the borrower.
In Massachusetts, the lender may get a deficiency judgment after a nonjudicial foreclosure if it:
For more information on federal mortgage servicing laws and foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
If you have questions about Massachusetts'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 about different loss mitigation options.