The 411 on MA Short Sales & Foreclosures [Part 1 – Overview]

How does the short sale and foreclosure process work in MA? Are these options for you? What are the side effects and consequences of the different solutions that might be available to you?

Despite the nation’s housing market experiencing a turnaround many are still struggling with mortgage payments, are deep underwater, and are having trouble figuring out how to sell homes in Massachusetts without having to come up with more money to escape the burden.

Keep reading as JS2 Homes LLC takes a look at what short sales are and how the foreclosure process works in MA…

Foreclosure House For Sale Sign in Front of Beautiful Home.Foreclosures In Massachusetts

Owing more on your mortgage than your home is worth or being behind on mortgage payments, with interest and penalties mounting is not a fun position to be in. It’s stressful and frustrating.

Knowledge is power. Being educated on the process, your options and the potential outcomes can help make your situation a lot less daunting and allow you to find a graceful exit. This won’t just enable you to sleep at night again, but could provide you with the financial assistance you need to relocate. Best of all; successfully navigating this bump in the road can clear the slate and help you get on the fast track to rebuilding your credit and to financial freedom.

The Mass Alliance Against Predatory Lending (MAAPL), a coalition focused on the foreclosure crisis in Massachusetts, put out a white paper outlining the foreclosure process in Massachusetts.  This is a one of the most accurate and straightforward papers on the process that we have come across.  Here is an excerpt of the paper. 

THE TYPICAL FORECLOSURE PROCESS IN MASSACHUSETTS 

1. The homeowner misses a mortgage payment(s).

2. The mortgage lender sends the homeowner a 90-day right to cure. During the 90-day period, the lender is prohibited from piling up excessive fees and penalties. The lender also has a duty to work with the homeowner to cure the default.

3. If the homeowner and the lender cannot resolve the problem, then the lender makes a demand for payment in full and accelerates the note. The homeowner now owes the full balance, plus interest and fees.

4. Next, the lender sends the homeowner, via certified mail, a notice of intent to foreclose. This notice must be sent at least 21 days before the scheduled auction sale. At this point, the house is officially in “foreclosure” status.

5. Around the time that the foreclosure notice is sent, the lender will also start a court action in Massachusetts Land Court. Normally, the homeowner has no involvement in this court action. Essentially, what happens is the lender files a complaint in Land Court to verify that the homeowner is not protected under the Service Members’ Civil Relief Act of 2003. Only homeowners actively serving in the military have the ability to take advantage of this Act.

6. The Land Court will then issue a judgment in favor of the lender, who can then proceed with the foreclosure without further involvement with the courts.

7. Once the judgment is issues, the lender does not need to take the homeowner to court to take the house. If you believe that you have been the victim of fraud, or the seller, mortgage broker, or lender committed some other bad act, then you should seek legal advice to determine how you can raise those claims against the lender AS SOON AS POSSIBLE. Because if you don’t seek legal assistance, you won’t be able to raise those claims, since the foreclosure process does not occur through the courts.

8. The Lender will then serve a notice of sale upon the homeowner, by registered mail, at least 14 days before the property is sold. The notice of sale indicates the date on which the property is to be sold at auction. The notice must also be published in the newspaper for three consecutive weeks.  This is usually the Eagle Tribune for properties in the Merrimack Valley.

9. On the auction date, the homeowner’s house is sold to the highest bidder.

10. It is common for 6 months or more to pass from the date of the first missed payment until the date the house is sold.

11. Once the house is sold, the homeowner becomes a tenant in the home.  He no longer has the right to live in the house and will be evicted by the new homeowner.

12. If there is not enough money gained from the sale to fully cover the amount of the loan, the lender will usually put a deficiency judgment against the homeowner is liable for the difference.

To learn more about the foreclosure process, The Massachusetts Real Estate Law Blog is a great source of additional information. 

Home floating on a life preserver.What Is A Short Sale?

A short sale is one of the alternatives available to Massachusetts homeowners looking for a way to sell homes even though they owe more than their homes are worth.

The simple answer is that a short sale happens when a borrower’s lender allows them to sell the home and accepts less than the outstanding balance as payment.

This can be an incredible appealing option for underwater Massachusetts homeowners. Some may even be able to receive substantial cash payouts to assist them with relocating. However, there is no obligation for the mortgage lender to accept a short sale proposal, and the property owner still must find someone to buy the home.

Lenders will typically look at a number of factors to determine if a homeowner qualifies for a short sale.  Some of these include:

  • An underwater home (a home that is worth less than the loan balance)
  • A mortgage near default status (i.e., missed payments or late payments)
  • A seller who has undergone a hardship (i.e., divorce, job loss, health issues, death of wage earner, bankruptcy)
  • A seller has no other assets

Look out for Part 2 of this post on Short Sales & Foreclosures in Massachusetts to discover more options for avoiding losing your home and the worst consequences of having a home repossessed by the bank.

Have more questions about the foreclosure process in MA or do you want to know if a short sale is the best way to sell your home? Contact JS2 Homes LLC today at (978) 295-9850.