If you default on your loan payments in Massachusetts, your mortgage servicer (on behalf of the loan owner, called the “lender” in this article) will eventually begin the foreclosure process. The procedure will most likely be nonjudicial (out of court), although judicial foreclosures are also allowed. Massachusetts law specifies how nonjudicial foreclosure procedures 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 Massachusetts, 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 and will probably include a power of sale clause. If you fail to make the payments, the power of sale clause gives the lender the right to sell the home nonjudicially so it can recoup the money it loaned you.
If you miss a payment, the servicer can charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days before you’ll incur late charges. To find out the grace period in your situation and the amount of the monthly 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. 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 bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39).
Many mortgages in Massachusetts 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.
If your home is an owner-occupied dwelling with four or fewer units, you get 90 days to cure the default under Massachusestts state law. You get this right to cure under state law only once during any five years. The lender has to personally deliver or mail a notice of default and right to cure to you. (Mass. Gen. Laws ch. 244, § 35A).
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. However, 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).
Again, most Massachusetts foreclosures are nonjudicial. But even in the nonjudicial process, a court might have a minor role.
If the lender wants to get a deficiency judgment (see below), it must mail you a “Notice of Intent to Foreclose and of Deficiency After Foreclosure of Mortgage” not less than 21 days before the sale date. (Mass. Gen. Laws ch. 244 § 17B).
Often, the foreclosing lender will choose to file a complaint (lawsuit) called a “servicemembers case,” which asks a court to determine whether you’re entitled to protections under the federal Servicemembers Civil Relief Act (SCRA). The SCRA prohibits a foreclosure against a servicemember during active military service and for some time afterward. You’ll get a copy of the complaint, and you may file an answer stating whether you’re in the military.
Getting a court declaration about the borrower's military status isn’t a required step in a Massachusetts nonjudicial foreclosure. But by taking this step, the lender protects itself against a later claim that the foreclosure was invalid because of an SCRA violation.
The lender publishes a notice of sale once a week for three weeks and mails a copy to you at least 14 days before the sale. (Mass. Gen. Laws ch. 244 § 14). The sale is an auction.
A residential foreclosure in Massachusetts will likely take many months. (To get an idea of how long the process will take in your particular circumstances, talk to a local foreclosure lawyer.)
If your home is sold at a foreclosure sale, but the sale doesn’t bring in enough money to pay off the full amount you owe on the loan, the difference between the sale price and the total debt is called a “deficiency balance.” Many states allow the lender to get a personal judgment, which is called a “deficiency judgment,” for this amount against the borrower.
To get a deficiency judgment in Massachusetts, the lender has to send you a notice no less than 21 days before the sale and file a lawsuit seeking the judgment within two years of the foreclosure sale. (Mass. Gen. Laws ch. 244 § 17A, § 17B).
Some states have a law that gives the foreclosed homeowner time after the foreclosure sale to redeem the property. Massachusetts, however, doesn’t have this kind of law when it comes to nonjudicial foreclosures. (Mass. Gen. Laws ch. 244 § 18).
To evict you after the foreclosure sale, the new owner (typically the foreclosing bank) has to give you a notice to quit (leave). Then, it can begin eviction proceedings by filing a complaint in the appropriate court.
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 immediately 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.