What is foreclosure?
When you negotiate a loan with a loan provider, you agree to pay back what you have borrowed (this contract is called the “note”) as well as pay loan repayment installments on time (this is called the ‘mortgage’). If you do not pay installments on time, the loan provider has the right in Massachusetts to sell your home. This is what is known as foreclosure. There are conditions attached to foreclosure, so your home cannot just be sold as soon as a scheduled repayment is not made and there are various things that you can do once you have received a notice of foreclosure. This article aims to explore how foreclosure works in Massachusetts and what options you have if you face foreclosure.
Massachusetts foreclosure laws
You should make yourself aware of Massachusetts foreclosure laws if you believe you may at some point fail to pay mortgage repayments on time and therefore face the possibility of foreclosure.
- In Massachusetts, mortgage holders (banks, finance companies, trusts or any other individual who owns the mortgage) do not need to go to court to foreclose.
- If you have received a notice of foreclosure because you missed a scheduled repayment, you generally have 90 days to pay what you should have paid. This is known as your “right to cure”.
- If you cannot find a way to delay payments or cannot make the required payment within the 90 days, the lender must give you at least 14 days written notice of an auction to sell your home.
- In addition to the minimum 14 days notice of an auction, the lender must advertise the auction in a newspaper.
What to do if you receive a notice of foreclosure
The important first thing to remember is not to ignore any notice of foreclosure, phone calls, emails or any other contact from the lending institution. Avoiding contact will not help you and will only make things worse. It is unlikely that you didn’t make payment because you forgot or there was some unintentional mistake, but if this is what has happened, you should make the missing payment as soon as possible and notify the lender that you have done so. Remember you have a grace period of 90 days to rectify the failure to make the payment on time before the lender arranges to sell the home.
As soon as you can after receiving a notice of foreclosure, you can contact a HUD-certified counseling agency to help you with your mortgage payments. HUD is a federal agency and a counseling agency can provide free advice, help to negotiate with your lender, e.g..apply to modify your loan repayments and generally assist with understanding your repayment timeline. There is a state resource you can use to find a HUD-counseling agency near you.
The next step you should take as soon as possible is to contact your lender. The agency who is responsible for sending out bills and collecting payments on behalf of the mortgage holder is called the servicer. In Massachusetts, mortgage lenders must first evaluate whether there is an alternative to foreclosure before they can actually go ahead legally with selling your home. Ask for the “Loan Mitigation” department when you contact your lender.
If you are in genuine financial stress, for example because you have lost your job recently or there has been some sort of medical emergency, you may be able to apply for emergency mortgage assistance. The state’s RAFT program, for example, may provide up to $7,000 a year in assistance to help when you cannot meet a mortgage repayment.
If the 90 day period is beginning to run out and you are unsure how to proceed, or if you believe that the lender has made a mistake in the mortgage repayment agreement, you could contact a real estate attorney to help assess whether the notice of foreclosure is genuine and what other options might be available to you. One possible option if you cannot modify the payment schedule is to file for bankruptcy. A Chapter 7 bankruptcy may delay but not prevent foreclosure, while a Chapter 13 bankruptcy may give you up to 5 years to make payments. You will need to talk to your lawyer about these options and in any case, filing for bankruptcy has to be made before any foreclosure sale.
What happens if foreclosure cannot be prevented?
If you cannot make the missing payment within the 90 day “right to cure” period, or negotiate for a modification of payments with the lender, the lender will most likely proceed with the sale of your home by auction. As has already been mentioned, this cannot be done until the 90 day “right to cure” period has elapsed and then send you a written notice to sell your home. The auction cannot be arranged for a minimum of 14 days after the 90 days right to cure period and the auction date and location must be advertised in a newspaper.
Normally, the auction would not necessarily be located right at the front of your home, but may be nearby. The buyer who bids the highest is normally the one who will purchase the home. Once payment has been made, money owed to the lender will be deducted. Any deficiency in this amount will be pursued by the lender.
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