Facing foreclosure in Massachusetts can be a nerve-wracking proposition; however, there are some helpful strategies you can use to improve your odds of keeping your home and good credit:
Talk to Your Lender and Attorney
The first thing to do if you know you’re going to be late on a payment, are already past due, or you’ve received a Notice of Default (NOD), is to call your lender and let them know about your situation. Most lenders and loan servicers are very willing to work with you to find the best solution that will help you either keep your home or move on safely.
Additionally, make it a priority to consult your attorney, financial advisor, and CPA to determine the economic and tax consequences of accepting any deals with your mortgage holder.
If you qualify for VA, FHA, or other government-backed home loan programs, your lender may be able to offer you modified terms and late payment forbearance to help lower your monthly housing costs and bring your mortgage current.
My bank closed or changed its name. How do I find out whom to contact?
The best place to start looking is your mortgage statement. In many cases, home loans are sold off by the bank or lender that initially made the loan to wholesale mortgage investors.
Research the Foreclosure Laws in Massachusetts
After you’ve gotten the initial feedback from your lender and legal/financial advisors, know what actions to take immediately, and received information on the process, it’s a prudent idea to do your own research on the foreclosure laws in our State of Massachusetts.
Fortunately, in MA, we have a non-judicial foreclosure process; meaning, you won’t necessarily have to go to court during the process – though it’s a possibility depending on how your legal council advises you to proceed and whether the lender pursues damages.
Here’s a brief rundown of the foreclosure process and timing in Massachusetts:
- The loan servicer must give you 120 days after non-payment before officially starting the foreclosure process.
- This period allows you to research your options and consult with your legal and financial team.
- The lender will then issue the Notice of Default (NOD), which will give you 90 days to cure the debt, followed by the Notice of Intent to Foreclose at least 21 days before the sale date.
There are a great many more details that accompany these basic guidelines. Before you take any action, speak to a legal professional and seek guidance from a foreclosure counselor. You can find no-cost counseling provided by HUD.
Apply for Loan Modification, Forbearance, or Repayment
Fortunately, your lender may offer several options to help to stay in your home and bring the loan current. Depending on your situation, you may qualify for a loan modification, forbearance, or repayment plan.
A loan modification may offer the opportunity to lower your interest rate, extend loan terms, and change from an adjustable to fixed-rate note. Forbearance gives you a brief break from payments to catch up and sort things out. Finally, the repayment plan lets you pay back the past due amount over a fixed period.
For each of these options, you’ll need to submit financial information and a statement demonstrating your financial hardship and how you plan to get back on track and continue making on-time payments.
Taking a Graceful Exit if it Comes to It
If you try every option and face the reality of having to move out of your home, several options can make the transition more pleasant.
Rather than go through the process of foreclosure and eviction, you can ask your lender (if they don’t offer it first) if they will accept a ‘deed-in-lieu of foreclosure.’
This legal strategy involves surrendering the deed and possession of the property to the lender. In exchange, the lender will not pursue formal foreclosure proceedings and may not sue for damages.
After the trustee sale, the bank or new owner will likely offer you ‘cash for keys.’ In other words, they provide you with a fixed sum in exchange for you willingly moving out.
These funds will help you arrange for a moving truck/helpers and find new housing. It’s best to accept a cash-for-keys offer rather than wait for a sheriff to arrive and forcibly remove you and your belongings.
Alternatively, if you have enough equity in your home, you can sell your property before you receive the Notice of Intent. Listing your home on the market through the conventional selling approach can take many months to close and resolve the past due payments.
The ideal option for sellers in this situation is a cash sale. A cash sale involves no conventional debt and lets you close in less than a month with no buyer loan or repair issues – and you may be able to walk with cash and less damage to your credit.
Weigh Your Options and Make the Best Decision
Choosing a strategy to bypass, overcome, or deal with the consequences of foreclosure is an important decision. The first and most crucial step to take is to get advice from legal and financial experts, including your attorney and accountant, or a qualified foreclosure counselor. Educate yourself on all the options available and make a confident decision that will help you make the best of a tough situation.