Massachusetts Lawyer Blog

Boston.com article, "Mass. woman kills self before home foreclosure," reports:

A 53-year-old wife and mother fatally shot herself shortly after faxing a letter to her mortgage company saying that by the time they foreclosed on her house that day, she would be dead.

According the the article, her husband did not know the foreclosure was scheduled today because his wife took care of the bills and mail.  The article also indicates the woman may have thought that life insurance proceeds could be used to pay for the home -- this isn't true.  No life insurance company that I'm aware of is going to pay any amount of an insurance policy for a suicide claim.  Let me be clear, suicide in not a solution.  This tragedy does, however, speak to the problem being faced by many -- times are financially tough and many people don't know what to do.

I'm seeing more despair and anxiety in my Weymouth law office with both new and old clients.  Often I'm meeting with distressed individuals, families, and business owners who break down in tears as they tell their story.  Many are relieved just by talking to someone or by getting their problems off their chest.  Later, when they learn alternatives to bankruptcy and foreclosure may exist for them, they ask, "Why didn't I do this sooner?"

If you are feeling overwhelmed by debt, the harassing phone calls, and threatening letters, then you need to seek help. You deserve the opportunity to explore all of your available options and to do so with an objective adviser.  There should be no guilt, or shame, or judgment associated with doing this.  Getting help is the responsible thing to do and it can often put you on the path toward a fresh start.  A new beginning without the burden and distraction of constant worry and anxiety could be right in front of you without you even knowing it.

This morning my daughter suggested we take the net (from that game where you hit the thing that looks like an empty ice cream cone) and use it to play volleyball.  I knew immediately she was talking about the net from the old badminton set because the "empty ice cream cone" was certainly the birdie we hit back and forth about a month ago.  In communication and in law context is everything -- both combined can lead to real value.

You shouldn't need to talk in legal mumbo jumbo to get your point across or to achieve the result you desire.  Find a lawyer who knows the law but also gets where you are coming from.  Seek out an attorney who will invest in building a relationship with you.  This is the foundation for providing value -- a real value that seeks to first understand and then meet your needs.  Anything else is just an empty ice cream cone...

A previous post discussed Massachusetts short sales. This post explains Massachusetts workout agreements. In Massachusetts an alternative to defaulting on a loan or entering foreclosure is to renegotiate the terms of your loan.

This may be called:

a) A workout agreement,
b) Loan restructuring,
c) Debt workout,
d) Loan modification, or
e) Other names.

Basically the lender (mortgagee) agrees with the borrower (mortgagor) to restructure the terms of a loan or the repayment period. The bank benefits by not proceeding with costly foreclosure and the borrower keeps the property but with loan terms they can handle. These arrangements may be available to residential or commercial borrowers or loans secured by residential or commercial real estate. In general, the sooner you seek a workout agreement, the better your chances of success are.

Can you sell your Massachusetts home or commercial real estate for less than you owe on it without facing foreclosure?

For some the answer is “yes.” After a committee hearing in Weymouth recently (where the topic of foreclosures and the local economy was brought up), I was asked by a board member, “What is a ‘short sale’ of real estate?”

There are times when a borrower can’t make payments on their current loan or mortgage. A short sale is an alternative method of selling a property instead of losing real estate in foreclosure. In Massachusetts a lender may agree to adjust the amount owed to sell a property. This is a “short sale” of real property (real estate). Under this type of sale, the sale’s proceeds fall “short” of what is owed on the mortgage. A lender may allow a “short sale” and forgive the remainder owed under the mortgage. Why?

Foreclosure can take time, be costly, and lead to a decline in sales price at auction (especially in a declining market). A lender may permit the sale of real property (where the fair market sale price is less than the loan balance) for many reasons. Some examples are to prevent abandonment and waste of a property or to avoid the additional costs incurred by upkeep, maintenance, accruing taxes, legal fees, auction fees…

A Massachusetts real estate lawyer can offer a borrower alternatives to consider. A short sale being one of them, and one that an attorney can negotiate with your lender and structure to best protect your interests. A “short sale” is, however, only one alternative to consider. In others instances a lender may accept a deed in lieu of foreclosure or negotiate a workout agreement. These are topics for later posts.

On April 14, 2008, the United States Bankruptcy Court District of Massachusetts announced both a red-lined version and a complete version of the new local rules and forms (effective May 1), have been made available under the Laws, Rules, Fees and Forms Section of their website.

A note states in the red-lined version states,

The amendments have been red-lined except where indicated. Red-lining has not been inserted where a) the provision is new or b) red-lining would, in the opinion of the Court, interfere with the reading of the provision.

Another available resource on local rules in the Bankruptcy Court is the, The Appellant Panel for the First Circuit’s Local Rules

A Massachusetts judge advanced a public policy argument finding it, "…unfair to approve a mortgage loan that the borrower cannot reasonably be expected repay if housing prices were to fall…”

The judge indicated loans are “presumptively unfair” under our consumer protection law (MGL Ch. 93A) when they: include an adjustable rate mortgage (ARM) which is adjustable within 3 years; carry an interest rate of at least 3 percent less than the indexed rate; involve borrowers with debt to income ratios above 50%; and have 100% loan to value ratios, or have prepayment penalties that are significant or which last longer than the initial “teaser” period.

Although the loans weren’t fraudulently induced, the judge issued a preliminary injunction and offered, “Just because we, as a society, failed earlier to recognize that loans with these ... characteristics were generally unfair does not mean that we should ignore their tragic consequences and fail now to recognize their unfairness." See Eric T. Berkman’s article in Lawyer’s Weekly, "Lender's 'subprime' foreclosures require attorney general's OK".

How does the injunction work? In this case the California lender must notify the AG’s Office before foreclosure. The AG’s office has 30-45 days to respond (depending on circumstances). If the AG objects, the lender and AG must attempt to work it out in 15 days. If it’s not worked out, the lender needs Superior Court approval to proceed.

A Suffolk Superior Court judge declared whole classes of mortgages structurally unfair under state law. It is both imprudent and unfair to approve mortgage loans that the borrowers cannot reasonably be expected to repay if housing prices were to fall, Judge Ralph Gants wrote. This is an interesting judicial approach to gain time to evaluate the system in more detail. I anticipate this may leverage lenders into finding more workout deals. What steps will be taken long term? Raises some interesting property right and freedom to contract questions. See Boston Herald Article, http://www.bostonherald.com/business/real_estate/view.bg?articleid=1076243