If you default on your mortgage payments in Maine, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. Maine law specifies how foreclosures work, and both federal and state laws give you rights and protections throughout the process.
If you get a loan to buy residential real estate in Maine, you'll likely sign two documents: a promissory note and a mortgage. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The mortgage is the document that gives the lender a security interest in the property. If you fail to make the payments, the mortgage provides the lender with the right to sell the home at a foreclosure sale to recoup the money it loaned you.
If you miss a payment, the servicer can usually charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days, for example, before you’ll incur late charges. To find out the grace period in your situation and the amount of the late fee, review the promissory note or your monthly billing statement.
If you miss a few mortgage payments, the servicer will probably send letters and call you to try to collect. In most cases, federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives—called "loss mitigation" options—no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available, and assign personnel to help you. Some exceptions to a few of these requirements exist, like if you file for bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39).
Many Maine mortgages have a provision that requires the lender to send a breach letter if you fall behind in payments. This notice tells you that the loan is in default. If you don’t cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. But in a few situations, like if you violate a due-on-sale clause or if the servicer is joining the foreclosure action of a superior or subordinate lienholder, the foreclosure can begin sooner. (12 C.F.R. § 1024.41).
If the property is your (the borrower’s) primary residence, the lender has to send you a notice of your right to cure before officially starting a foreclosure. The notice has to give you at least 35 days to cure the default (make up the missed payments) and reinstate the loan. As of September 19, 2019, the lender has to send this notice by both certified mail, return receipt requested, and first-class mail. (Me. Rev. Stat. tit. 14, § 6111).
After the lender sends the notice of right to cure, it files a statement with the Bureau of Consumer Credit Protection. The Bureau then sends a notification to you, laying out a summary of your rights and available resources, including information about Maine’s foreclosure mediation program. (Me. Rev. Stat. tit. 14, § 6111).
Approximately half of the states, including Maine, require the lender to file a lawsuit in court to foreclose. The lender gives notice of the suit by serving you a summons and complaint. The lender must attach a form to the complaint that you may use to answer the complaint and request mediation. (Me. Rev. Stat. tit. 14, § 6321-A).
Maine’s foreclosure diversion (mediation) program gives homeowners the opportunity to meet with the lender and an impartial mediator to try to work out a way to keep the home or, as an alternative, give up the home without going through foreclosure. This program is available to owner-occupied residential real properties of no more than four units. So, if you don’t live at the property, you’re not eligible. (Me. Rev. Stat. tit. 14, § 6321-A).
If you can't work out a way to avoid foreclosure in the foreclosure diversion program, and you fail to answer the court action, the lender can get a default judgment from the court. The judgment will give the lender permission to hold a foreclosure sale.
If you respond to the lawsuit, however, the case will go through the litigation process. The lender might then request the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because there’s no dispute about the case’s critical aspects. If the court grants summary judgment for the lender—or you lose at trial—the judge will order the home sold at a foreclosure sale.
After the redemption period (see below) expires, the lender publishes a notice of sale in a newspaper for three weeks. No less than 30 calendar days before the sale, the lender mails a notice of sale to all parties who appeared in the foreclosure action. (Me. Rev. Stat. tit 14, § 6323).
The process ends with a foreclosure sale. The lender usually makes a bid on the property using a "credit bid" rather than bidding cash. With a credit bid, the lender gets a credit up to the amount of the borrower’s debt. The highest bidder at the sale becomes the new owner of the property.
As noted earlier, Maine law gives you the right to cure the default and reinstate the mortgage within 35 days after the lender gives the notice of the right to cure. (Me. Rev. Stat. tit 14, § 6111). Also, you and the lender may enter into an agreement to bring the mortgage current at any time prior to the sale. The foreclosure will then be stayed so long as you don't default again. (Me. Rev. Stat. tit 14, §§ 6321, 6323).
Sometimes, a foreclosure sale doesn’t bring in enough money to pay off the full amount owed on the loan. The difference between the sale price and the total debt is called a "deficiency balance." Many states, including Maine, allow the lender to get a personal judgment, called a "deficiency judgment," for this amount against the borrower.
Under Maine law, the foreclosing lender can get a deficiency judgment in the same action as the foreclosure. But the court will limit the judgment to the amount established as of the sale date. (Maine Rev. Stat. tit. 14, § 6323). If the lender buys the home at the foreclosure sale, the deficiency is further limited to the difference between the property’s fair market value at the time of the sale and the total outstanding debt. (Maine Rev. Stat. tit. 14, § 6324).
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. But in Maine, the redemption period takes place before the sale. After the court issues a foreclosure judgment, the redemption period is 90 days from the judgment date. (Me. Rev. Stat. tit. 14 § 6322). The lender then provides notice of the sale.
You might be able to redeem the home after the redemption period expires, but before the sale takes place, if the lender allows it. (Me. Rev. Stat. tit. 14 § 6323).
Foreclosure laws are complicated. Servicers and lenders sometimes make errors or forget steps. If you think your servicer or lender failed to complete a required step, made a mistake, or violated state or federal foreclosure laws, you might have a defense that could force a restart to the foreclosure, or you might have leverage to work out an alternative. Consider talking to a local foreclosure attorney or legal aid office to learn about your rights. A lawyer can also tell you about different ways to avoid foreclosure. Likewise, a HUD-approved housing counselor can provide helpful information (at no cost) about various alternatives to foreclosure.