When someone purchases a residential or commercial property, they generally have aspirations for their business or their family. Unfortunately, foreclosure can jeopardize that vision.
Massachusetts lenders usually offer loans in exchange for a mortgage when businesses purchase commercial properties through financing. The loan agreement typically includes a provision known as “Statutory Power of Sale,” which allows a lender to foreclose on the property without court oversight or authorization. The mortgage protects the lender’s investment if the borrower does not make their mortgage payments and can enable them to enforce a mortgage foreclosure in Massachusetts.
Get Foreclosure Assistance Now
Business owners in Boston and across Massachusetts have to be especially cautious since there are very specific Massachusetts foreclosure laws. In Massachusetts, “legal” title to the property is held by the lender until the note is paid off. Moreover, compared to other states, the legal notice required before foreclosure in Massachusetts is very short.
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What Business Owners Need to Know About Foreclosure Law
Foreclosure is a serious financial issue for many commercial property owners. In addition to causing businesses to lose their properties, foreclosure can affect the companies’ credit rating and can subject them to an action by the lender to collect any deficiency after the property is sold at the foreclosure auction. Due to the negative credit implications of foreclosure, businesses that have lost property by foreclosure may have a more difficult time qualifying for a mortgage loan.
To defend against foreclosure, companies must understand their rights and options for retaining the property. Lenders often do not want to foreclose unless doing so is absolutely necessary because it can be difficult for a lender to sell a property and recover their investment.
Indeed, many foreclosed properties stay empty for years, meaning lenders are not making any money — they are losing money in the form of paying property taxes and other costs associated with property ownership. It can be advantageous to the lender as well as the borrower to allow the business owner to remain on the property and to make different arrangements to pay down the mortgage loan.
Is Your Commercial Foreclosure Legal?
Lenders must follow Massachusetts foreclosure law strictly to properly effectuate a foreclosure sale, even for those involving commercial properties. The lender must provide the borrower with proper notice of the sale and also identify the current holder of their mortgage and note. In Massachusetts, only the lender that holds the mortgage and the note or one acting for the lawful note holder can foreclose.
If you are being threatened with foreclosure, contact the experienced real estate foreclosure attorneys at Calabrese Law Associates in Boston, Massachusetts. Our real estate attorneys can review your mortgage, note, and related paperwork to identify whether you have a lawful basis for challenging the foreclosure.
What Are Your Legal Rights in a Foreclosure?
You have legal rights and protections in a foreclosure under federal and state law and through your mortgage contract. In a foreclosure, your rights may include:
1. The Right to Loss Mitigation
When you miss your first payment, the loan servicer may contact you to discuss loss mitigation or loan modification. The process entails working with the lender to reach more favorable, feasible loan terms so your business can avoid foreclosure. The loan servicer may also provide loss mitigation alternatives in writing and add a referral for assistance.
Under federal rules, a mortgage servicer typically cannot initiate a foreclosure before you are delinquent on your mortgage payment by 120 days or more. If you submit a loss mitigation application within that timeframe, you can often avoid foreclosure. However, there are some exceptions, and it is important to connect with an attorney specializing in this area to be sure what rules and timelines apply to your circumstance.
2. The Right to File for Bankruptcy
Businesses may file for bankruptcy if it makes financial sense. Generally, filing for bankruptcy puts an automatic pause or stay on a foreclosure. In some instances, filing for bankruptcy can stop a foreclosure entirely. The lender may petition the court to permit the foreclosure to move forward, or they may wait out the bankruptcy proceedings. Regardless, filing for bankruptcy will delay foreclosure on the property.
3. The Right to Challenge the Foreclosure
The law requires lenders to follow strict procedures when foreclosing a property, with the primary aim of protecting borrowers. When lenders breach a procedure, the borrower may challenge the foreclosure as defective. For example, the borrower could halt a foreclosure by asserting that the lender failed to serve a required notice of foreclosure, wasn’t timely in a particular step, or breached a clause in the loan agreement.
4. The Right to Receive a Foreclosure Notice
Borrowers are entitled to receive notice of foreclosure or a breach letter. A breach letter is typically backed by the contract between parties, while a notice of foreclosure is a statutory requirement.
Massachusetts is a nonjudicial foreclosure state, but judicial foreclosures are still allowed. The notices for each type vary, but every borrower should receive a notice when a loan is in default before the foreclosure process moves forward.
Nonjudicial foreclosures may come with two notices:
- Notice of defaults: In Massachusetts, the formal nonjudicial foreclosure process starts with an order of notice or a complaint. This notice typically explains that the borrower has defaulted on loan payment according to the terms of the agreement and contains information about the borrower, lender, trustee, property, action needed to cure the default, and a deadline for when the borrower should cure the default.
- Notice of sale: The lender may mail the notice of sale to the borrower, publish it in the local newspapers, post it on the property, or add it to the county’s land records. It notifies the borrower that the property will be sold by a public auction and provides information about the property and the sale.
5. The Right to Participate in Foreclosure Mediation
Some counties have foreclosure mediation programs designed to give the borrower the right to participate in discussions with the mortgage servicer or lender and a neutral third-party mediator to determine the fate of the property. This helps the parties find alternate solutions to foreclosure. Once this process starts, the foreclosure process usually pauses.
6. The Right to Request Information
Federal law allows the borrower to request information regarding the mortgage loan account. Businesses can do so by sending a written request to the mortgage servicer. This is called a “qualified written request.” The borrower may also request information to help them determine whether they want to commence an action in court, such as payment history, communication log, and correspondence between the parties. Such information may be used as evidence in court.
You may also be entitled to other rights, including the right to receive any surplus after a sale, the right to reinstate your loan, and the right to redeem the property or pay off your debt. Your specific rights may vary depending on your location and contract.
What Can a Boston Foreclosure Attorney Do?
If you are facing a foreclosure, you may want to hire a foreclosure lawyer who can help you navigate the legal aspects of the process. When you hire a lawyer, they can do the following for you:
- Give you options: A foreclosure lawyer understands the foreclosure process and your legal rights. With their experience, a lawyer can help you increase your odds of saving your property and help you avoid pitfalls and wasting time. A lawyer can help you choose from the options available to you, which may include loan modification, loss mitigation, filing for bankruptcy, or taking your case to court.
- Assist you in obtaining a mortgage loan modification: With a loan modification, you may be able to afford your new payments by changing your loan terms. You need to present key information about your finances, and an experienced lawyer can best present this information to help you get a loan modification.
- Represent you during settlement conferences: If your state requires settlement conferences, your foreclosure lawyer can attend them on your behalf and negotiate with the bank to save your home. During a conference, the parties involved have an opportunity to come to an alternate resolution and bypass a foreclosure.
- Bring up defenses in court: A lawyer can identify any defenses for you in court, such as if the bank made a mistake in foreclosing on your property. For instance, a lender may violate state foreclosure laws or breach the loan contract, or you may not be the mortgage debt’s rightful owner. If your lawyer is successful, you may be given the option to settle, or your lawsuit may be dismissed.
- Assist you in pursuing loss mitigation: Certain mortgage loans offer loss mitigation options so you can remain current on your mortgage payments. However, a lender may withhold this option, and without a lawyer, you may have no idea that you can pursue this option. An experienced lawyer can inform you about whether this option is available for you and help you decide between the many ways you can approach loss mitigation.
- Help you file for bankruptcy: If no other options are available to you, your lawyer can help you file for bankruptcy. If you are approved, you can take a few years to catch up on payments and keep your property.
When it comes to the defense of your property, you deserve an experienced lawyer who can help you find and fight for the best available solutions.
Our Massachusetts Foreclosure Defense Attorneys Are Here to Help
The property foreclosure attorneys at Calabrese Law Associates have helped many homeowners and property owners save their commercial and residential properties from foreclosure. We review every mortgage agreement closely and negotiate with the lenders in an effort to find the best possible solution for our clients.
If your commercial property is subject to foreclosure anywhere in Massachusetts, contact our team of real estate foreclosure attorneys at Calabrese Law Associates as soon as possible. The longer you wait, the fewer legal options you may have.
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*This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.