Real Estate: Lack of Physical Possession Does Not Invalidate Foreclosure

A Land Court Judge held a mortgage lender established possession of property despite inactivity on the premises for almost 20 years.  The court found the lender, a now fee simple owner of property, had established possession by entering for the purpose of foreclosure, recording a certificate pursuant to Massachusetts’ statutory requirements, and maintaining peaceful possession for three years.

Judge Keith Long Stated, “After making peaceful entry following the breach of a mortgage condition, and recording his certificate, [the defendant] did “all that is necessary to affect a foreclosure.”

Currently, there are two methods of foreclosing property in Massachusetts — power of sale and foreclosure by entry.

Power of sale

Power of sale is the most common and quickest method of foreclosure in Massachusetts. Usually held at foreclosure auctions, power of sale requires that sales be made pursuant to the power of sale clause in the mortgage.  In Massachusetts, notice of the foreclosure must be published and mailed to the borrower. There is no requirement for the borrower to actually receive the notice, merely for the lender to make a diligent effort to locate the borrower.  The actual sale must be conducted at the date, time, and place specified in the notice.  A proper sale prevents the borrower from exercising any right to reclaim the property through redemption.

Foreclosure by entry

A less common method of foreclosure, foreclosure by entry, allows lenders to foreclose by lawfully taking possession of a premise for a statutory required 3 years. After which, the title will have the lenders name.  Lawful recovery of possession can be done in 3 ways:

  1. Lender may file a lawsuit and obtain a court order granting possession
  2. Lender may enter peaceably and take possession or
  3. Lender may obtain borrower’s proper consent to entry.

The statutory language of Massachusetts’ foreclosure by entry statute, G.L.c. 244 §1 allows recovery of possession “by an open and peaceable entry thereon, if not opposed by the mortgagor or other person claiming it … and possession so obtained, if continued peaceable for three years from the date of recording of the memorandum or certificate as provided … shall forever foreclose the right to redemption.

Judge Long concluded that though it was conceded that the defendant never had physical control over the property, under G.L.c. 244 §1 it wasn’t required.   Further in interpreting past court decisions, Long notes that courts “have long held that a mortgagee who has made peaceful entry on the property and duly recorded a certificate of entry need not do anything further to establish possession.”

“Long added, that once possession has been “acquired by peaceable entry and the recording of the certificate in the registry of deeds, that possession continues until the mortgagor takes some act that is adverse to the mortgagee’s possession.  Absent proof of some act done to defeat or interrupt the mortgagee’s possession, the mortgagor is treated as a tenant at will of the mortgagee, and ‘they are assumed to hold under him, and their possessions are his, during the three years, until the completion of the foreclosure.’”

Here, Plaintiff failed to establish an adverse possession claim or to prove that defendant’s possession was interrupted.  As a result, the court held that Defendant did all that was required to establish foreclosure proceedings despite inactivity on the premise.

 The Case is:HS Land Trust v. Gonzalez, Lawyers Weekly No.14-077-12

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Three things MA homeowners should know about the new Foreclosure Prevention Bill

By Adetola Olatunji

Massachusetts takes the initiative to address the nationwide foreclosure crisis by passing a new foreclosure prevention bill for the state.

Earlier this month, Governor Deval Patrick signed “An Act Preventing Unlawful and Unnecessary Foreclosures”, a law that provides additional protection for homeowners and third party buyers of foreclosed properties, and addresses the controversy around suspicious foreclosure cases that have recently garnered attention in the Greater Boston area. This new law provides additional protections for homeowners that are “unparalleled in other states” according to Governor Patrick. In his statement, Patrick also went on to note that the provisions made by the bill guarantee that “borrowers will be given every reasonable opportunity to remain in their homes.”

Wondering how exactly this bill goes about making sure homeowners can remain in their homes? Here are three main aspects of the bill that Massachusetts homeowners can be excited about:

It flips normal protocol for foreclosure on its head – now loan modifications are the first option, and foreclosure as the last option.

Under this new law, creditors are required to check whether the net value of changing an existing loan might be more than what lenders can expect to recover from foreclosure. If the net value of changing a loan is found to be higher than the value of foreclosing, creditors are required to modify the loan instead. This would be huge for homeowners who have fallen behind on payments but were still making payments, as this will officially no longer a reason to be forced into foreclosure proceedings.

It establishes a rigorous checking system for lenders.

Once this law becomes effective, lenders will be required to go through a lengthy documentation process to prove ownership of the loan. The entire chain of mortgage assignments must be recorded before a foreclosure process may proceed, which helps to avoid the possibility of “robo-signers” misrepresenting the cases of individuals and families.

It doesn’t stop with a new law; it also starts the process for a new task force that will study the foreclosure issue in Massachusetts, and seek solutions.

A task force has been assigned to explore all possible methods for foreclosure mediation and promote awareness of the multiple options that homeowners have. Led by Massachusetts Attorney General Martha Coakley, the new group will include legislators, representatives of the Massachusetts Bankers Association, and three individuals to be appointed by Governor Patrick.

Summary

Overall, this new bill puts Massachusetts in an excellent position to begin the recovery process from the foreclosure crisis. Massachusetts has set the tone by making a conscious effort to keep families in this state in their homes, and hopefully other states will follow suit in the near future.

Disclaimer: These materials have been prepared by Dhar Law, LLP for informational purposes only and are not legal advice.  The material in this post is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.  If your home is in danger of being foreclosed on, please call (617) 880–6155 or email wassem@dharlawllp.com for more information.