Top 10 Ways to Avoid Foreclosure - Deed in Lieu of Foreclosure - Massachusetts

Top 10 Ways to Avoid Foreclosure

Deed in Lieu – Bristol County - Taunton, Massachusetts     

Article 2 of 10

What is a Deed in Lieu of Foreclosure -

             A ‘Deed-in-Lieu’ in Massachusetts is an exchange of real-estate whereby the deed to your property is given (signed over) back to the bank instead of the bank foreclosing. In exchange for the deed, most people negotiate debt forgiveness along with the deal whereby they do not pay a deficiency. On some occasions the bank might also make an offer and release a home owner from the mortgage by accepting the deed and a lump some cash amount in addition to cover all or some of the deficiency (which is more common). The lender will consider this option if after a cost benefit analysis they will be better off economically than taking the path and costly expense of a lengthy foreclosure. Incidentally, if represented by counsel, banks are aware that foreclosure will cost more and take much longer to accomplish (hence I would always advise you to hire an attorney if you are looking for options and to negotiate a better settlement).

1.      Died in Lieu in Massachusetts –

Most people consider this option once they’ve missed multiple payments. To initiate this process you would need only to call your lender and bargain for it. Many people have their attorney initiate the process which is ideal to achieve the best bargain and also to review the release documents which can be very extensive and complicated.  In my experience banks are more prone to attempt this option or a short sale instead of foreclosing when they know you’re represented by an attorney. Without an attorney, you are really at the mercy of the bank/lender. In any event, the bank will do a cost benefit analysis that will go over how much you’ve put into the property, how much you bought it for, how much they can sell it for, and how far behind you are on your mortgage as well as whether foreclosure proceedings have actually been initiated.

A common client scenario is as follows; you have put $200k on a $300k mortgage, but now the house is only worth $250k if you sell it. You don’t have work and there is no way to pay off the last of the mortgage.  The bank is threatening foreclosure and if they auction the house you know the might sell for even less and in turn you will owe even more. You hire an attorney to approach the bank and negotiate a deed transfer or a ‘deed-in-lieu’. The bank has your $200k, if they sell the property they can get $250k and suffer a $50k total loss. The initial offer from the lender is in exchange for the deed and $50k cash lump sum, they will let you out of the mortgage. Your lawyer counter offers for the deed and $10k. This is a scenario in which the bank might take the deed to avoid a foreclosure proceeding because it could easily cost more than $40k and face the possibility of losing even more money. The bank would have to hire an attorney to close on the property ($15k), plus all the time they don’t have the house while you are occupying it without paying them ($10k), plus auction fees ($10k), closing etc ($10-$20k), plus they will have to wait months to get it back.  This presents a winning scenario for both parties because you are out from under a property that is no longer worth paying for and the bank avoids a losing proposition by you staying in the property and a downward spiral of profitability.

Even if you are not behind on your mortgage and paid up to date, banks might still consider this option. However, if you are not in default and you go to the lender on your own, it will be more difficult for them to justify a transfer like this because right now you’re paying on time and they are making money. This is not a suggestion for you to default intentionally although many people do so. A far better option is to have a foreclosure/bankruptcy attorney write them a letter. It will get their attention immediately and your offer will be taken seriously. The other reason (and perhaps more important) is if the bank agrees, you will want someone to read the transfer documents very carefully. I had a client once who failed to hire an attorney for a deed-in-lieu exchange where he thought it was an even wash and he was free and clear. He signed over the property to the bank then a year later the bank sold it for a huge loss.  Then they slapped the client with a huge deficiency law suit based on a contingency buried in the back of the exchange agreement which the client didn’t fully understand when he signed it.

This process can take up to or around 15-120 days depending on the lender and situation. It is a viable option and I discuss it with my clients frequently.

If you’re a Massachusetts local and in need of legal representation for foreclosure or bankruptcy law matters, I would be very pleased to help. Please visit my website for my contact information. www.finlaylegal.com

DISCLAIMER – If you live outside Massachusetts, please consult an attorney admitted to the bar association in which you live. This article only applies to People living in the Commonwealth of Massachusetts. There is no one perfect or guarantee solution. Each situation is different and you should consult an attorney before applying these principals. 

Top 10 Ways to Avoid Foreclosure - Short Sale - Massachusetts

Top 10 Ways to Avoid Foreclosure

Taunton, Massachusetts – Short Sale – Bristol County       

                                                            Article 1 of 10

                                                            What is a Short Sale -

             A short sale in Massachusetts is a sale of real-estate whereby proceeds from a sold property will come short of the balance secured by liens against the property. Basically, the seller sells for less than what is owed on the mortgage, so he is ‘short’.  Then, the seller cannot afford to repay the liens' full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. It is essentially a settlement where the house owner tells the bank, “I can’t pay the mortgage anymore but I can produce a buyer where you (the bank) still make money and where I (there seller), don’t go into deficiency because you let me out of it.  Short sale agreements in Massachusetts should state specifically that they release borrowers from their obligations to repay any shortfalls on the loans, otherwise, it is not usually to their benefit.  A short sale is often used as an alternative to foreclosure because it can potentially lower additional fees and costs to both the creditor and borrower. Ultimately, the lender will go through a cost benefit analysis and then you need to hire a lawyer to make certain you are getting a fair shake. There are several alternatives to straight forward adversary proceedings and that is where specialized mediators come in. If you hire a lawyer in this field, they will know the best of these experts who work with everyone from Bank of America, to your local Trust-Bank.

1.      Short Sale Massachusetts –

This is usually the first thing people think of when trying to avoid foreclosure. There are several criteria in which you would need to go through if you are wondering if this is a good option for you. You need to decide if you want to keep your house for one thing. The other is a question of mathematics. Usually this option is only practical if you are in default without much hope of getting above water. If your home is loaded with your hard earned money and we are on a monthly with a small property turn down, you are better off waiting until the market turns up and then selling it on your own to make money.

This is an option that people use when they no longer want to keep the property. Generally speaking this is where the homeowner/ mortgagor will hire an attorney to negotiate with the lender for the sale of the house in ‘short order’. In return, the lender/bank will forgive the deficiency that might arise.  The bank will want to consider how much equity you have in the house, how much they can sell it for, how far you are behind on your mortgage, and of course,  how much they stand to gain.

For example, if you’ve already paid the bank$100k in equity on a $300k mortgage, then you fall behind and they agree to a short-sale, but now the property is only worth $200,000; the bank still gets their $300k and legally you would ordinarily have to pay a $100k deficiency but since you are so far behind and the bank would have to wait a long time to foreclose.  The alternative is a short sale where the bank essentially agrees to swallow the deficiency to get a new owner and save on foreclosure costs. This option suits both parties but make no mistake, requires very tricky negotiation. It is also appealing because you may have lived in the house for 10 years for that $100k. That is roughly what you may have paid in rent and you took tax breaks the whole time, and got the benefit of ownership. Now your property is devalued and you’re behind and you want to be out from under the mortgage – this is the right option. 

*Note – this is usually a remedy for someone who is in impending default or recent default. If you have been in default for 10 months and given the bank the run around with loan modification talk, and now they have sent your foreclosure documents, a short-sale is might not be an option.  This is because the bank has already made their investment towards foreclose. The right time to talk short-sale, is when you’ve recently fallen behind and expect to fall more behind.

When the bank has already paid the court fees and will probably get the house soon, a homeowner has little if any leverage. Also, just because a bank has agreed to work with you on a short-sale does not mean this is an end all option. They may have back channels moving toward foreclosure so you are well advised to have an attorney in your court at all times.

You will still need to find a buyer and they have to name a price that the bank agrees upon. If you don’t find either of these, you might still find yourself in foreclosure. This is why if you are approaching default or you are in default you should consult an attorney and find out what your best options are depending on your situation.

In the end – this process can take up to or around 60 or less days. It is a viable option and I discuss it with my clients frequently.

If you’re a Massachusetts local and in need of legal representation for divorce and family law matters, I would be very pleased to help. Please visit my website for my contact information. www.finlaylegal.com

DISCLAIMER – If you live outside Massachusetts, please consult an attorney admitted to the bar association in which you live. This article only applies to People living in the Commonwealth of Massachusetts. There is no one perfect or guarantee solution. Each situation is different and you should consult an attorney before applying these principals. 

Divorce - Not Showing Up to Court in Massachusetts & Default Judgment

Time and time again I have divorce and family law clients ask me, “What if I don’t show up for court?”, “Do I have to go to court?”, or “Can you get me out of going to court?”. I suppose the reason why I get the question so often is because divorce and family issues can be very emotional and facing a soon to be ex-spouse can evoke serious feelings of dread.

There is generally one instance in which you would not have to go to court and it would not be detrimental to you. If you are out of state, or country, or on family emergency and it would cause you undue hardship to attend a hearing, and your attorney says he/she could conduct the hearing without you, then (in Massachusetts) he can file a Waiver of Appearance on your behalf. Once the judge approves, your attorney would essentially speak in your stead should the judge have any direct questions.

You do not have to go to court in every instance. For example, you do not have to show up every ‘hearing’ your attorney sets up on ‘temporary orders’ but you should really consult your attorney before you decide not to go. Most motions are supported by evidence and if your evidence is clear and in black & white, your testimony will not be needed. However, while your attorney knows most of your story, something may come up where you have the crucial detail that might win the motion. Still, if you do not want to show up you should ask your lawyer about each instance and do not decide that matter for yourself.

If you were served a subpoena, then yes, you must go to court. Not going to court in this instance may result in an arrest warrant being issued. Under certain circumstances, people still do not show up but are well advised to inform their attorney in advance and send a friend or family member to court to explain your emergency absence.

If you are scheduled for trial then you will need to be in court. You will be called as a witness and it is in your absolute best interest to be there so that your side is accurately submitted to the court. Missing your own trial would most likely result in a default judgment against you. This means that the judge will call to hear you, hear nothing, and side with the other party. The moving party will still need to show proper service and to prove the facts of their case (as they would in a motion) but there would be no counter argument which means most times, a win by default. Again, you are well advised to go to court if you have any hope in winning.

Before deciding which day you decide to go to court and which day you don’t, consult your attorney. There are always factors that you may not have thought of and it is usually in your best interest to go.

If you’re a Massachusetts local and in need of legal representation for divorce and family law matters, I would be very pleased to help. Please visit my website for my contact information.

Robert Finlay – Attorney at Law

www.finlaylegal.com