Foreclosure

Everyone has a story, right? I’d like to share how (and why) I—a guy with a Mechanical Engineering background—got involved in Massachusetts real estate law.

After I graduated from college back in the 80s, I moved down to Connecticut with a college roommate where we started buying investment property. We’d move in, renovate, and eventually sell the property to turn a profit. The money, and the business, were good (at first anyway). My day job in the aerospace and sales fields eventually took me back up to Massachusetts, which is where my personal and professional life took a turn I wasn’t expecting.

See, I had bought an investment property but had problems keeping tenants. Constant vacancies were affecting my bottom line. Normally, you think of investors making a boatload of money. Unfortunately that’s not always the case. As hard as I tried to turn it around and get resources to help me, I never found anything helpful for people in my situation. Why does it end up that people always talk about success and rarely talk about the taboo topic of failure?

Anyway, I ended up losing the property to a foreclosure. After I went through the foreclosure, a totally foreign topic to me, I knew I wanted to get involved in real estate. To explore all the areas I could get into, I met with a commercial agent, residential agent, appraiser, management company, and finally a real estate attorney. And the attorney made the most sense of them all and resonated with me.

I went through law school, graduated, passed the bar, and started from square 1 trying to build my practice. Since then I’ve worked with clients across the spectrum—with both landlords and tenants, home buyers and sellers. I make sure each party understands their rights and I enjoy breaking down legal topics into easily understandable concepts based on how they apply to each individual’s situation.

Because I understand the practical end of real estate (I experienced both the ups and downs) and I know the legal end, I know where my clients are coming from. This is not only my specialty, it’s what I enjoy.

If you need a Clinton or Worcester real estate lawyer, I’d love to be of assistance. Call me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

As September comes to an end, we’re wrapping up our Massachusetts foreclosure series with a very important answer to a frequently asked question: after my home is foreclosed, when do I have to move out? As a Worcester real estate and bankruptcy attorney, I think it’s important to answer questions that come up frequently from clients who are going through a foreclosure and need assistance and guidance from an attorney.

If you missed any of our other topics in this series, catch them here:

After a Foreclosure, When Do I Have to Move Out?
As we mentioned in last week’s blog post, a foreclosure auction eliminates the homeowner’s cure rights to save the house. After the auction has occurred and a written memorandum to a prospective buyer at the auction is signed, the homeowner no longer owns the property.

But that fact alone does not give the bank the right to go in and physically remove the homeowner from the property. In other words, the only way a person can be physically removed from the premises is if they voluntarily move out or if a court order is obtained to get them out.

At the conclusion of the auction, as we have mentioned in previous blogs, the bank ONLY has the right to enter a portion of your property to conduct the sale. Neither the lender nor the buyers have the right to come into your home unless you allow them to do so. (Don’t do this.) The significance of an auction is to transfer the ownership from homeowner to lender and in turn to a prospective buyer. That completes the foreclosure. The previous homeowner (now called an occupant) no longer owns the property.

How does the Bank get the occupant out of the property after a foreclosure auction?

This can legally be done one of two ways: 

1. The occupant voluntarily leaves the property:
After the foreclosure auction and before an eviction, the occupant can pack up their stuff and leave. They no longer own the house. The bank has the legal responsibility for the property.

However, there is a better way for the occupant. It’s called “Keys for Cash.” After a foreclosure auction, the bank hires a real estate agent to put the house back on the market to sell. If the occupants (former homeowners) are still in the property, the Keys for Cash program means the bank will give the homeowner $2,000-$3,000 in cash. This is used in exchange for a few things: leaving the property, taking everything out and leaving the house in a clean, broom-swept condition. It becomes a win-win for both properties as the property gets vacated and the homeowner has cash to rent an apartment.

2. The bank gets a court order to get them out:
If the occupant doesn’t move out, the bank has to file an action in housing or superior court to get the former homeowners out of their home. This takes 4-6 weeks and runs the bank $5,000 or more depending upon how many physical possessions the homeowner has when the court order is issued. The advantage to the homeowner in this case is a little more time to stay in the premises. The disadvantage is that if you’re forced to move, the bank will not give you money to leave.

Which of the two situations is better? It depends upon what the former homeowner is looking for. If the former homeowner has found an apartment and needs money to move, then option 1 is better. If the former homeowner needs more time, then having the bank go through the legal eviction process give them more time to move, option 2 is better.

If you have questions for a Worcester real estate and bankruptcy lawyercall me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you.  

This week we’re continuing to explore common Massachusetts foreclosure scenarios. As a Worcester real estate and bankruptcy attorney, I think it’s important to answer questions that come up frequently from clients who are going through a foreclosure and need assistance and guidance from an attorney.

Many times, people will come to me after their home is foreclosed and they want to know if they still owe the bank money. Many Massachusetts residents find themselves in this very unfortunate position. They’re behind on payments and their attempts at a loan modification were unsuccessful. They finally succumb to the bank’s foreclosure. Legally, this means that you, the homeowner, no longer own the property.

The difference between what the bank is owed (the full amount of the loan) and what they recover from the auction is called a deficiency. If the bank has not recovered all the money that is owed on the note from the foreclose sale, they have the right to pursue the deficiency.

Massachusetts Statute of Limitations
In Massachusetts, there’s a statute that states a lender must file a legal action within 2 years from the auction date to be able to collect on the deficiency. This is called a statute of limitations. It’s a provision that protects homeowners from lenders taking a number of years to sue them for a deficiency.

The advantage of the 2-years statute is that the lender has to act relatively quickly in filing a lawsuit against the homeowner. If the two years expires, the lender cannot sue the homeowner for the mortgage.

So how does this affect the homeowner? If two years have gone by, then you are out of the woods. If you’re within the two years, you might have to be looking over your shoulder to see if the bank is chasing you for that deficiency.

If the bank does go after you, what can you do?

1. Make arrangements to make payments or negotiate or
2. File bankruptcy and eliminate that debt.

If you have questions for a Worcester real estate and bankruptcy lawyercall me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

 

Because our foreclosure series has generated so much interest, we decided to expand on this theme for the month of September.

This week we’re going to delve into the reasoning why a bank forecloses when you get behind (or don’t pay) on your mortgage. Let’s get started.

Go back to when you first bought the home you’re living in. You sat with your closing attorney and signed a stack of papers for about an hour straight. Most of it you didn’t know what you were signing, although your attorney probably gave you a quick overview.

Two of the most important documents you signed were 1) the Note and 2) the Mortgage.

The note was your promise to pay.  You agreed to borrow a certain amount of money at a certain interest rate over a certain period of time.  The bank gave you money…you used it to purchase your home.   You have a legal obligation to repay the money you borrowed.

Banks generally don’t lend money unless the loan is secure. This is where your mortgage comes in.

In addition to your promise to pay back the loan, you’re agreeing to pledge your new home as additional collateral. The mortgage is the legal document that secures your promise to pay by legally pledging your home as collateral. When you don’t pay on the note and you default, the bank has the right to come onto your property and sell your house and use the proceeds to pay the note. The process is called foreclosure.

So what does foreclosure mean?
Well, spelled out in the mortgage document you signed is a condition that states – in the event you are behind on your mortgage payment – you have the right to “cure” such payments.

For example, if you’re behind 5 months on your mortgage, the bank can start the foreclosure process. In the cure provision of the mortgage, you have the right to pay all the money you owe, including: late fees, interest, foreclosures fees, attorney fees, etc. BEFORE a foreclosure auction date. If you do, you get to keep your house.

The bank has to accept your money, under the cure provision, if you pay the entire balance owed in full.  Partial payments are not acceptable. Once the payment is accepted by the bank, the foreclosure is stopped.  You’re back in the good graces with the bank…until…your next scheduled monthly mortgage payment.

When the bank foreclosures, what they’re legally doing, is eliminating the cure rights and taking title to the property. The bank forecloses and legally takes ownership of the property and eliminates the homeowner control over the property…even the right to cure the arrearages. The mortgage on the property is now merged with the new owner, the bank.

What can the Bank do if you owe them money?
Any money that is not paid to the Bank after the foreclosure auction is called a deficiency. Under the terms of the note,  the persons who signed the mortgage document are legally liable to pay a deficiency.   The bank has 2 years to bring a lawsuit to collect on the deficiency. If they fail to file a lawsuit within the 2 year period after the auction date, they can’t. This is called the Statute of Limitations.

Join us next week as we continue discussing foreclosure challenges you might face.

If you have questions for a Worcester real estate and bankruptcy lawyercall me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

 

Last week I shared with you a story about a past client who went through a foreclosure. Basically, this client was a husband and wife who had two small children. When the husband lost his job, their financial situation quickly crumbled.

As I do with all clients, we looked at all their assets and I asked them a very important question: what do you want to do with your house? The couple decided to keep their home (you can read the rest of the story here).

This week, I’d like to take a second to share with you a theoretical idea of what could happen in the situation if they decided NOT to keep their home and let the property go. Let’s begin…

If this couple decided to foreclose on their home, we’d have to look at the Massachusetts foreclosure timeline of what would happen and when. First, I advised them that the bank won’t wouldn’t even consider modifying the mortgage or take action unless payment hadn’t been made for at least 3 months.  After that is when the foreclosure would kick in.

So instead of paying their mortgage bills, they would put the money away so that when foreclosure came, they would have a first and last month’s security rent for an apartment. Their strategy would be to stay as long as they could before they were evicted.

Even though this is a hypothetical situation, I can tell you that dozens of my clients have gone this route. And do you know where they are today? They’re back on the road to financial recovery and have started fresh with their financial troubles behind them.

Does this sound too good to be true? It’s not. As a Worcester real estate and bankruptcy lawyer, I can attest to the fact that you have choices to resolve your financial situation.

The fear about foreclosure and bankruptcy usually has to do with “the fear of the unknown.” You don’t know what to expect or which laws affect your situation. If talking with an attorney experienced in Massachusetts real estate and bankruptcy would be the first step in moving forward to financial recovery, then please give me a call.

If you have questions for a Worcester real estate and bankruptcy lawyercall me, Attorney Jack Morrison, at 508-852-7800 for a complimentary consultation. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

 

Fear of a Foreclosure: Can A Foreclosure Work In Your Favor?

by Jack Morrison on September 13, 2011

Last month we hosted our educational blog series about Massachusetts foreclosure. In general, going through a foreclosure is devastating. But as I coach my clients in my Worcester bankruptcy and real estate practice, it’s not the end of the world. In fact, it can set you on the right path to starting over financially.

Let’s take an example from a client I had a few months ago. Due to confidentiality, I of course am keeping their names private.

This married couple with 2 kids had a first and second mortgage on their home. They were getting by living paycheck to paycheck (like many Americans out there). In the recession, one of them became unemployed and since then, their financial situation had crumbled.

Before they came to me, they were extremely devastated and did not know where to go to get trustworthy financial advice about how to move forward. I offered them two solutions dependent on what they wanted to do with their house: keep the home or let it go.

The couple decided to keep their home. So here’s what we determined next:

  • Where they would spend their money
  • What do they pay (mortgage, car loan, credit cards, etc.)

Although they tried to get a loan modification from both lenders, they couldn’t due to the rule that they have to be 3 months behind before the bank will consider them. Finally, they were successful on modifying the 1st mortgage but not the second. The couple also decided they needed a car for the one spouse who was working. So although the decision wasn’t made lightly, they decided credit cards were the area where they would stop paying.

So what happened next? They ultimately decided to file for bankruptcy. Although the decision was initially very painful, once they filed they were actually relieved. Now, they have the chance to “start over” and rebuild their financial present and future with a practical, realistic payment plan.

If you have questions for a Worcester real estate and bankruptcy lawyercall me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

 

Massachusetts Real Estate Foreclosure Series: Week 4

by Jack Morrison on August 25, 2011

Statistics show that foreclosures are on the rise. Foreclosed homes increased 42% in June 2011 in Massachusetts. So if you are a homeowner in danger of foreclosure, then check out the previous three posts in our Massachusetts real estate foreclosure series:

  1. What happens in a foreclosure?
  2. Timeline of a Massachusetts foreclosure?
  3. What happens at the foreclosure auction day?

Now, we’ll wrap up by discussing a topic that will pull it all together: what can you do after a foreclosure?

Foreclosure Series Week 4: What Happens After a Foreclosure?
The foreclosure auction eliminates all the homeowner’s interest in the property. The bank takes back the property that you pledged as collateral when you signed a mortgage. You become an occupant of the property if you stay there after the foreclosure.

The 2 ways a bank can get you out of your home after foreclosure are:  1) you voluntarily move out, or 2) the Bank gets a Court order to move you out.

Let’s discuss these 2 options:

First, they can pay you to leave. The bank wants to sell your house once they foreclose, and it’s impossible to do so if you’re still living in the property. The bank usually hires a realtor to show and market the property. The first thing the realtor has to do is to get you out of the property (unless you have already moved out). The realtor may offer you money in exchange for taking all of your stuff and leaving. The program is called “keys for cash.”  The bank knows that it will take time and money to physically have you removed from the premises. The keys for cash program gives a certain sum of money, depending upon the lender, to entice you get out of the property. It’s usually $1,500 to $2,500 or so.   When you move out and take all of your personal property and leave the premises in a clean, broom swept condition, the realtor hands you the money. Nice deal for both parties, right?  The bank get the house back, without having to evict you and you get cash to pay a first’s month rent and security deposit on a new apartment.

Second, the bank has to file an eviction proceeding in Housing or Superior Court to legally get you out of the premises (yes, another legal proceeding). The bank has to file a notice on you that you’re being legally forced to move out.  A hearing date is scheduled when you receive the notice.  It’s usually 3-4 weeks later. If you don’t appear, the Bank wins and gets a “default judgment” against you.   If you do appear, you can state your case to the mediator or Judge, or both, depending upon the outcome of mediation. It’s always better to attend the Court hearing and state your position than to miss it.   If the bank wins, they have the legal right to have you removed from the property.  A sheriff will post a notice on your door that you have 48 hours to vacate the premises or the sheriff will return with the movers and enter into your property and remove you and your belongings. That’s the court order that I was talking about.

Unfortunately, you are still legally responsible to pay the balance owed to the bank. There is a 2-year statute of limitations in Massachusetts for bringing claims of deficiency on a foreclosure.  If the bank doesn’t file a lawsuit within 2 years from the date of auction, they can’t obtain the deficiency. The only thing that would eliminate any deficiency and preventing the bank from suing you, is bankruptcy.

Thank you for following this series. Again, if you missed any of our previous foreclosure posts, check them out here.

If you have questions for a Worcester real estate and bankruptcy lawyercall me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

Massachusetts Real Estate Foreclosure Series: Week 3

by Jack Morrison on August 18, 2011

Over the past few weeks we’ve discussed the fact that foreclosures in Massachusetts are still a huge epidemic. If you’re one of the many facing a foreclosure, do you truly understand what will happen in the process? If not, rest assured. That’s why we’re here. As a Massachusetts real estate lawyer who also specializes in bankruptcy, I’m here to share with you some insider tips and knowledge. This week we’ll discuss a very important topic: what happens on the foreclosure auction day? 

Foreclosure Series Week 3: What Happens On the Foreclosure Auction Day?
On that dreaded day, if in the process of having your home foreclosed, you are experiencing a time that is one of the most devastating and humiliating in your life. Besides dealing with the emotional aspect of foreclosure, you want to know legally, what can the bank do?

On that day, the bank legally has to make an “entry” onto the property in order to foreclose the mortgage. An entry means they have to step on a portion of your land—usually your driveway—and announce and conduct the auction.

Neither the auctioneer nor any potential bidders have a legal right to enter INTO your home without your expressed consent.   They can’t do any inspection, walk through or appraisal without your authorization. Even after the auction is completed, you are the owner and still have control. The only way someone can come into your home is by you allowing them access or they get a court order (i.e. legal eviction).

Expect an auction to run anywhere from 5 minutes to 30 minutes. The auctioneer announces the sale, and all bidders have to be pre-qualified. The auctioneer begins the sale by asking for a bid to purchase the property. At the conclusion, the auctioneer announces the sale of the property to the highest bidder. Once the document is signed, you—as the homeowner—no longer legally own the property. The bank has gone through the legal process to take their property back and become the legal owner.

But, if you’re still living in the house, the bank can’t simply throw you out on the street with all your possessions. To physically remove you, the bank has to get an order from the Housing court or Superior court. This normally takes 45 to 60 days. Once the bank obtains the court order, then they have the legal right to physically remove you from the premises.

Stay tuned next week when we discuss,What can you do after a foreclosure?” 

If you have questions for a Worcester real estate and bankruptcy lawyercall me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

August Real Estate Foreclosure Series: Week 2

by Jack Morrison on August 11, 2011

This is the second week in our monthly real estate foreclosure series. Last week, we discussed a general overview of what happens in a foreclosure. Due to the sheer amount of Massachusetts residents facing finally troubling times, this is a topic that many people ask about in my Worcester bankruptcy practice.

Let’s continue on with week 2, where you’ll learn about the timeline of a Massachusetts foreclosure.

Foreclosure Series Week 2: The Timeline of a Massachusetts Foreclosure
According to the Boston Herald, foreclosures are on the rise. Foreclosed homes increased 42% to 931 in June 2011. With this grim statistic in mind, it’s important for you to understand the timeline of a foreclosure in the state of Massachusetts.

Typically, a foreclosure begins when you default on your mortgage. Every month you have a grace period of 15 days to pay your bank. In the event that the bank receives your payment on the 16th through the 30th of that month, a late fee will be assessed.  Any payment received by your bank after 30 days is considered a default.  In addition to the default, non-payment or late payment  has a negative impact on your credit score.

Recently, Massachusetts legislation enacted a law requiring lenders to give homeowners who defaulted 150 days to “work with” the lender. In most cases, the lender will try to make an arrangement to get caught up in payments. This might involve a loan modification, which we’ll discuss later in this article. Unfortunately, the reality is that most people have had either a dramatic loss of income or a job loss, which makes keeping up with house payments unrealistic and unaffordable. Then, an internal struggle ensues about whether or not to keep the house. It’s a very emotionally devastating to lose a home.

Once you are behind or in default on your mortgage, the lender may offer you a loan modification. As crazy as this may sound, to qualify, you have to be at least 3 months behind on your mortgage. Many homeowners contact their lender ahead of time, knowing they’ll be late on their payment. Unfortunately lenders won’t even talk to you about a loan modification unless you’re 3 months late.

Once the 150-day period is over, the “legal” foreclosure begins (the homeowner will be served with the Soldiers and Sailors Act notification).  There is approximately a 45-day period where you can respond to the foreclosure notice.  If you are active in the Military, you get more time to respond.  The Soldiers and Sailors Act notice is also filed at the Registry of Deeds where the property is located.   That’s why homeowners facing foreclosure are inundated by people soliciting services to “help” them resolve their finances. It’s public information.

After the expiration of the 45 days, the Bank can schedule the foreclose auction. A notice of the foreclosure must be published in a local newspaper at least 3 weeks prior to an auction date. You’ll also receive, via registered certified mail, a letter from the attorney who will be handling the foreclosure.

So the MINIMUM timeline from a mortgage default to a foreclosure auction date in Massachusetts is approximately 8 months.  Any delay by the bank in the foreclosure process will extend the time.

Thanks for tuning in. Next week, we’ll discuss what happens at an auction and give you specifics on what to expect.

If you have questions for a Worcester real estate layer, call me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you. 

August Real Estate Foreclosure Series: Week 1

by Jack Morrison on August 11, 2011

Thousands of Massachusetts residents have faced financially troubling times the last few years due to the economic recession. Foreclosure has been a common, and unfortunate, outcome. If you, or someone you know, is facing foreclosure, then it’s important to understand what to expect.

That’s why we’ve created a 4-part series, “Foreclosure: What You Need to Know.” Over the next month we’ll cover the following topics:

  1. What happens in a foreclosure?
  2. The timeline of a Massachusetts foreclosure
  3. What happens at the foreclosure auction day?
  4. What can you do after foreclosure?

Now, let’s get started with Week 1.

Foreclosure Series Week 1: What Happens in a Foreclosure?
Remember when you initially bought your home? At closing, you had a heaping stack of documents to sign and initial. Although you may not have known it at the time, two important documents you signed were 1) the note and 2) the mortgage.

The note is basically your written promise and legal obligation to pay back the bank. The second important document, the mortgage, tells the world you’re putting your house down as additional collateral to pay on the note.

In the event you can’t pay the note, the bank can go after your house and foreclose. The money the bank gets at the foreclosure auction is then subtracted from the balance you owe on your mortgage. If you still owe money to the bank, that balance, or deficiency, is what the bank can legally collect from you. The bank has a two-year statute of limitations to go after you and collect that money.

Now that you have a good overview on foreclosure, join us next week as we discuss a typical Massachusetts foreclosure timeline.

If you have questions for a Worcester real estate layer, call me, Attorney Jack Morrison, at 508-852-7800. Or, reach out via our contact form. Thank you and I look forward to hearing from you.