|
|
Immediate Foreclosure Solutions |
|
HOME |
|
Massachusetts The Process In Massachusetts, there are two methods by which a
mortgage may be foreclosed: the lender may enter and take possession of the
property by several alternative means, in which case the lender's ownership
can become final after three years, and the lender may complete a non-judicial sale under
a power of sale clause. The first method, entry and possession, is seldom
used as the primary means of foreclosure. Instead it is used as a backup in
case of technical error in non-judicial sale procedures. The first method is
essentially a variation on the strict foreclosure theme. The second method, a
foreclosure sale under a power of sale clause, is the usual procedure. The
power of sale foreclosure takes place out of court. In spite of the fact that
the power of sale foreclosure is conducted out of court, it is nevertheless
customary to file a lawsuit before attempting such a sale in order to make
sure that the federal Soldier and Sailor's Relief Act does not apply to the
borrower's situation. Entry and Possession Procedures A lender can foreclose in Massachusetts by
lawfully taking possession of the premises and then waiting three years for
title to become final in the name of the lender. Lawful recovery of
possession can be done by several alternative means: file a lawsuit and obtain a court order giving the
lender possession, enter peaceably and take possession or obtain the borrower's proper consent to entry. The first method consists of filing a lawsuit to
recover possession. The lender's lawsuit must allege that there was a breach
of a condition in the mortgage, such as failing to pay the loan. If so, the
court may render a conditional judgment giving the lender possession. The
court will also grant a writ of entry which will permit eviction of the
borrower. However, the borrower may recover possession within two months by
paying the amount due under the mortgage or correcting any other breach of
the mortgage. Unless the borrower can come up with enough money to pay off
the mortgage within three years, however, the lender's ownership becomes
final and the borrower's right to redeem the property is cut off. The second method the lender can use to recover
possession lawfully is for the lender to openly and peaceably enter the
mortgaged premises. Two witnesses must swear that the entry was proper. Once
in possession, the lender has to wait three years for full title. The third method the lender can use to recover
possession is to obtain the borrower's consent. The borrower must sign and
record a written memorandum to the mortgage deed. The recording must be done
within 30 days from the signing. Once again, the lender must wait three years
for full title under this method. During the time the lender obtains possession
pending foreclosure, the lender must account for rents and profits. The
lender may deduct the costs of reasonable repairs and improvements. Power of Sale Clause Foreclosure In Massachusetts the usual method of foreclosure
is through sale under a power of sale clause in the mortgage. The sale must
be conducted in accordance with the requirements specified in the power of
sale clause. Notice of the foreclosure must be published once a week for
three weeks in a newspaper of general circulation in the town where the land
is located. The first publication must be at least 21 days before sale.
Notice must also be sent by registered mail to any owner whose interest was
recorded as of 30 days prior to the sale. The actual date of mailing must be
at least 14 days prior to the foreclosure sale. In Massachusetts there is an exhaustive list of
potential addresses to which the lender must mail the foreclosure notice, the
purpose of which is to make sure the borrower gets a copy of the notice, if
it is at all possible. Initially the lender should mail the notice to the
address found in the registered land records, or if none is found, then to
the last known address appearing in the lender's records, or if none is
found, then to the address on the deed or probate petition. If the address is
still not found, then it should be mailed to the last address to which a tax
bill was sent any time within the previous three years. If that address can
not be found, then to any address shown in the deed or documentation for any
other land owned by the same owner. Nevertheless, there is no requirement for
the borrower to actually receive the notice, merely for the lender to make a
diligent effort to locate the borrower. Notice should also be sent to any
junior lien holders. The actual sale must be conducted at the date,
time and place specified in the notice. The sale will be made to the highest
bidder. Within 30 days after sale, the person selling the property at
foreclosure must record a copy of the notice of sale and an affidavit that
the foreclosure sale was properly conducted. Any lien or encumbrance on the
property that was not part of the mortgage that was foreclosed on and not
included in the auctioneer's bargain remains intact and can affect the title
to the property after the foreclosure sale. If there is any money left from
the foreclosure sale after paying off the lender, the surplus goes to the
borrower. A proper sale prevents the borrower from exercising any right to
reclaim the property through redemption. If a suit in equity is filed to clear up problems
that could result from the Soldier and Sailor's Relief Act of 1940, service
is considered sufficient if the above described notices were published 21
days before the return day and mailed 14 days before the return day for the
lawsuit. The return day is the day by which the lawsuit must be answered. Deficiency If the foreclosure sale proceeds are not enough to
pay off the lender, then the borrower is liable for any deficiency. However,
the statutory notice of intention to foreclose must have been sent at least
21 days before the sale. Furthermore, the affidavit that the sale was
complete must be on record 30 days after the sale. Otherwise, no deficiency
can be obtained. The statute of limitations on deficiency judgments is two
years after the date of foreclosure or two years after the loan payments were
accelerated and the loan's unpaid balance was made due entirely. If there was
no foreclosure sale under a power of sale clause, and the lender attempts to
sue the borrower on the theory that the value of the real estate the lender
obtained at foreclosure was less than the balance due on the loan, then the
borrower has a right to bring a suit for redemption within one year after
recovery under such a judgment. Redemption The basic rule in Massachusetts is that the
foreclosure under a properly conducted power of sale clause cuts off the
borrower's right to redeem. The sale must be conducted in good faith and the
lender must use due diligence to comply with the statutory requirements for a
power of sale foreclosure, as previously outlined. Interestingly, however, the borrower may use the
right of redemption as a vehicle for slowing down a foreclosure sale, even
though the lender is attempting to foreclose under a power of sale clause,
which normally cuts off the right of redemption. A borrower may bring a suit
to redeem the property before the first notice of sale is published. Such a
suit will delay the foreclosure sale. The court must determine the amount due
under the mortgage on which conditions remain unperformed such that if the
amount is paid or the conditions are performed, the borrower will have a
right to redeem. The court can specify a time period and manner for payment
or performance, and if the borrower complies with the court's specified
conditions, the borrower will have a right to discharge the mortgage and
receive a decree regaining possession- If the borrower fails to perform by
the time and in the manner specified by the court, the lender can proceed to
mail and publish the foreclosure notices (14 days and 21 days, respectively)
and then hold the foreclosure sale. The Massachusetts Uniform Fraudulent Conveyance
Act and Bankruptcy The Massachusetts bankruptcy courts have shown a
particular willingness to invalidate foreclosure sales. Because of this
propensity, numerous additional steps should be taken if a lender forecloses
in Massachusetts. The U.S. bankruptcy courts for Massachusetts have ruled
that all the statutory procedures outlined above may be insufficient to guard
against invalidation of the foreclosure sale if the borrower files bankruptcy
after the foreclosure. If the sale took place for less than market value, it
may be ruled to be a fraudulent conveyance, under section 548 of the
Bankruptcy Code, which commands that reasonably equivalent value must be
obtained before the foreclosure sale will be left undisturbed by the
bankruptcy court. Reasonably equivalent value is market value. The invalidation of a foreclosure at less than
market value can also be accomplished through the application of the
Massachusetts Uniform Fraudulent Conveyance Act. Therefore the lender should
take further precautions by appraising the property at the time of
foreclosure, by advertising it in the real estate section of the newspapers,
by mailing a notice of the sale to anyone who expressed an interest in buying
the property, and by notifying real estate brokers in the immediate vicinity
that the property is for sale. All of these steps should be taken if the
lender wants to be sure to avoid future trouble from the borrower's
bankruptcy petition after the sale, or a suit to set the sale aside under the
Massachusetts Uniform Fraudulent Conveyance Act. |
HOME HELP CONTACT US FAQs
©Immediate Foreclosure Solutions®