Home Mortgage Foreclosures
Important Note: This is very general information about home mortgage and foreclosure rules in Maine. It is not intended to replace legal advice in your particular case.
- Where can I get help?
- What is foreclosure?
- If I fall behind on my payments, will I automatically lose my house?
- Does the mortgage company have to give me a chance to pay up before "accelerating" on the debt and filing a foreclosure case?
- What is an acceleration clause?
- What happens in a foreclosure case?
Where can I get help?
If you are facing threat of foreclosure of your home, try to get a lawyer. Here are some possible legal resources:
- Volunteer Lawyer's Project 1-800-442-4293
- Pine Tree Legal Assistance 207-400-3235
- Legal Services for the Elderly 1-800-750-5353
If you are not income eligible for these services, you can talk to a lawyer for half an hour through the Maine Lawyer Referral Service (1-800-860-1460). The fee for this service is $25.
Or get help now - from a free HUD-certified Maine Housing Counselor.
We also recommend that you review Home Foreclosure: It's always good to have a lawyer, but when is it really critical to get some legal help?
You should also consider a bankruptcy lawyer to see whether bankruptcy is an appropriate option for you. Filing for bankruptcy will stop the foreclosure at least temporarily. Depending on your financial picture, it may also help you resolve all of your debts and permit you to retain your home. Most bankruptcy attorneys will provide a free initial consult. For more information on bankruptcy see Bankruptcy: Is it the right choice for you?
Also review our page Can I Save My Home From Foreclosure? It has more information on steps you can take to save your home both before and after a foreclosure case has begun.
What is foreclosure?
If you own your home, you probably borrowed money to buy it. In return for the money you borrowed, you gave an investor a "mortgage" on your home as security. A mortgage protects the investor by giving it a legal interest in your home as collateral for your loan, just as a car provides collateral for a car loan.
If you fall behind in your house payments, and you cannot negotiate an affordable deal (or "workout") with the mortgage company, it may "foreclose" the mortgage. This allows the company to take your property and use it to pay off your loan. In doing this, the company must follow certain rules. These rules are set out in state law.
We will explain here the basic rules for home foreclosure in Maine.
If I fall behind on my payments, will I automatically lose my house?
No. First, some mortgage companies are willing to agree to a payment schedule to let you catch up and continue the mortgage. You might be able to negotiate a "workout" to avoid foreclosure. Try to make a repayment arrangement or workout plan as early as you can after falling behind. Be careful not to make an agreement you cannot keep. If you cannot afford a proposed workout, then do not agree to it and ask for a different plan. See our page Can I Save My Home from Foreclosure? for more information on steps you can take.
Second, remember that after you fall behind, the mortgage company - in most situations - must get a court order before taking your home. This "foreclosure proceeding" is a court process. In almost all situations, the company cannot just take your house without a court order.
Does the mortgage company have to give me a chance to pay up before "accelerating" on the debt and filing a foreclosure case?
Yes. The company must provide a written notice of default and right to cure your mortgage loan default (assuming that the default is for non-payment). The notice must state that you are "in default" and that you have 35 days to cure the default. Being "in default" means that you are behind in your payments or that you have not paid your taxes or your insurance. The home mortgage company cannot begin a lawsuit to foreclose the mortgage deed until after that 35 day notice expires.
During this time, you should make your late payments or call your mortgage company and try to work out a payment plan. If your payments are sent back, save them in a separate savings account and continue to make payments into that savings account each month. Especially if you are trying to keep your home, it is important to prioritize this payment above other payments you have, like credit card debt and old hospital bills.
Save Money! If you can afford a mortgage payment but not the amount you owe, save the amount you believe is affordable and set it aside. This can make all the difference when you are negotiating an affordable “workout” plan.
What is an acceleration clause?
Most loan agreements have an "acceleration clause." This means that if you don't make a payment or don't keep up on some other part of the mortgage contract, the company is allowed to say that the entire amount of the loan is due and must be paid immediately. To avoid the acceleration clause, call your mortgage company as soon as you realize that you will miss or be late on a payment. Then you may be able to work out an agreement on your payments. Make sure any agreement you make is affordable. Don’t agree to a just any payment plan.
What happens in a foreclosure case?
1. You get a Notice of Default. The company managing the loan must send you the 35 day default notice discussed above. No action can be taken until after the 35 days is gone.
2. You are served with Court papers. The mortgage company must have a copy of a summons and complaint served on you, normally by a Deputy Sheriff. The company files the same papers with the court. This begins the court foreclosure process. You have 20 days to file an Answer with the court if you wish to contest the foreclosure. Contact a lawyer immediately. If you don’t file an answer, you will most likely lose your home. You should also request "mediation." Get more details below.
3. File an Answer and Request Mediation. To avoid an immediate “default judgment,” you must file an Answer (or a letter requesting more time to file an Answer) within 20 days of getting the court complaint. If you do not file an Answer, you will lose your case. As part of the foreclosure mediation process, the Court accepts a simplified Answer and Request for Mediation form. The form should have been served with your court papers. You can also find the form here (on the Maine Courts website).
Mediation is available to “owner-occupants” of the home being foreclosed on. Sometimes, even if you are not currently living in your home, you may be out of the home only temporarily and intend to move back in. In this case, you can add an explanation to the Answer form, explaining why you want to mediate anyway. It will be up to the court to decide whether or not you will be allowed to go to mediation if you are not an “owner-occupant” of the home at this point in time.
If you do not live in the home and have no plan to live there, mediation is not an option for you. Since the Answer and Request for Mediation form (linked above) is designed only for homeowners requesting mediation, you should consult with a lawyer to try to get some help with preparing an Answer. If you can't get legal help, here is a form Answer that you can use as a model.
You "file" your Answer by mailing it to the Court or handing it to the Court Clerk. You must send a copy to the lawyer for the mortgage company at the same time. Usually that lawyer's name and address is in the bottom left corner of the Summons or on the last page of the Complaint. Keep copies of everything for your own file.
Filing Late Answer. If you missed the 20 day deadline but you have not yet been "defaulted" by the court, you can try to get the court to accept a late answer. We have attached a sample of a Request to File Late Answer. You can file this with your Answer. The Court does not have to accept a late answer but may do so if you offer a good reason for being late.
4. Mediation. If you live in the home and have requested mediation, you will have a chance to participate in mediation. You will get a notice from the court telling you when to go to mediation. Mediations are only held in certain courts. If your case is not in one of those courts, you will get a notice that your case is temporarily being transferred to another court for the mediation process. You do not have to prepare any financial forms ahead of time for your first mediation. If there are still things to discuss after your first mediation, more mediations can be scheduled. You should be given instructions about any documents the bank will need when you attend your first mediation. Get more details about Court Mediation here.
Sometimes mediation will take several sessions. In the end, if you are not able to agree to a workout with the bank during the mediation process, your case will move on to the next steps.
5. Motion for Summary Judgment. After you file your Answer, (and go through Mediation, if you asked for it), the company's lawyer may file a Motion for Summary Judgment. You will have 21 days to file an opposition to this Motion. You should try to get legal help with drafting and filing your response. This is complicated and very difficult to do without legal help. So make every effort possible to find legal help right away.
We have attached a sample Motion to Enlarge Time. If you need more time to get legal help (beyond the 21 day deadline), you may be able to avoid a "default" order by filing this motion. But move as quickly as you can. The Court needs to move cases along so will not always grant more time.
If you are not able to file a good response to the Motion for Summary Judgment, then the court will probably enter a judgment against you.
6. Trial. If the mortgage company does not file a Motion for Summary Judgment - or you raised enough valid unresolved questions in your response to their Motion - then the Court will hold a trial. Usually, a “Pre-Trial Conference" is scheduled before the actual trial is scheduled. You will probably get a "Scheduling Order" telling you where and when the conference will be held. At a Pre-Trial Conference, the judge will lead a discussion about the logistics of the upcoming trial. (Keep in mind that the purpose of the conference is to get set up for the trial, not to argue the legal issues.) For example, you might be asked how many witnesses you will be bringing to the trial and how much time you will need to argue your case. The court may want to get clarification on the issues it will be asked to decide at trial, such as:
- how much you owe,
- whether you defaulted, or
- whether the mortgage company, or another party, owes you money for violations of the law, including illegal predatory lending practices.
7. Judgment by the Court. If you fail to:
- answer the complaint,
- raise successful counterclaims or affirmative defenses,
- resolve your case through mediation,
- win the motion for summary judgment, or
- win your case in the trial phase
then the court will likely enter a judgment of foreclosure. The judgment will state what is owed to the mortgage company.
8. Redemption Period. If a judgment is entered against you, you will still have a right to the property called a "right of redemption". This means that you can keep your home by paying back the full amount of the mortgage loan, plus legal costs and fees (not just the payment arrears). The right of redemption exists for 90 days immediately following the entry of the judgment. You have the right to remain in your home during the 90 day redemption period.
IMPORTANT: You can file for bankruptcy at any time during the redemption period. In fact, you have the ability to file bankruptcy and stop the sale of your home up to the actual date of the sale of the property. However, filing for bankruptcy may or may not help you in the long run. See our page Bankruptcy: Is It the Right Choice for You?
Negotiate with the Company: During the redemption period you can still try to negotiate an affordable repayment plan or loan modification. You also have the right to sell the property during the redemption period. If you do this, you will have to pay off the mortgage and any legal fees and interest. But you will be able to keep any money left over.
If you can sell the property but only for less than what is owed, you may still be able to negotiate a "short sale" with the mortgage company's lawyer. Be careful! Many companies are jumping into the "short sales" market. Some demand a fee up front and will work to convince you that a short sale is better for everyone. A short sale is not always the best solution. Make sure you consider your goals and all your options before selling your home for less than what is owed. Also, there is no reason to pay a fee up front. Most reputable real estate brokers will help you arrange a short sale for free. They will collect their fee out of the sale price - not from you up front.
If you have tried to sell for some time but have no offers, the mortgage company might consider a Deed in Lieu of foreclosure. This allows you to give the house to the mortgage company.
In either case, the bank might be agreeing to take less money or a house of less value than what you owe. You might still owe the bank money. Often, banks will agree to waive any balance still owed, but you should be aware that there may be tax consequences if you follow these options.
If you are trying to negotiate a short sale or Deed in Lieu of foreclosure, you should ask the bank about “cash for keys” or “relocation costs.” Through some programs, there is money available to the homeowner for successful negotiation of one of these liquidation options.
CAUTION: Don't fall for a foreclosure rescue scam. And, again, don’t be pressed into a short sale until you have considered all of your options and decided which option best meets your goals. It is often around this time that you may get "foreclosure rescue" offers. People may call you or knock on your door and offer to save your home from foreclosure. Negotiating a workout or selling your home at close to fair market value is almost always a better option than a foreclosure rescue. A sale may allow you to save the equity in your home. In most cases, promises to save your home from foreclosure will put your home investment into the hands of the "rescuer," and you will end up being evicted from your home anyway, with nothing left. Read more in our pamphlet: Foreclosure Rescue Scams - Just Say "No!"
For more information about “workouts” with your mortgage company and other options see our pamphlet: Can I Save My Home from Foreclosure? Also review our Don’t Borrow Trouble! pamphlet before refinancing your mortgage.
9. Public Sale/Eviction. If you do not "redeem" the property within the 90 day redemption period, you will not own the property any more. When the redemption period ends, you can be evicted in a very short time frame (48 hours), and most likely there will be no further court hearings before this happens. The company is entitled to possession of the property regardless of how much, or how little, you still owe; the time of the year; or any other reason.
The company will hold a public sale of the property. At least 21 days before the sale, they must publish 3 notices of the sale in a local news publication. They must also notify you and all other "parties in interest." After receiving the money from the sale, the company will pay off the mortgage loan balance. Any remaining sales proceeds will be paid to any other lien holders or to you, as the court will instruct the company. If, however, the sale price is less than the amount owed to the mortgage company, the company may be able to hold you responsible for the difference. If the company holding the mortgage buys the property at the public sale, any amount you owe on the "deficiency" is set by the fair market value, not by the purchase price.
10. Report Of Sale. After the sale, the mortgage company must file with the court a "Report of Sale," explaining how the money from the sale of the property was received and how the company proposes to spend it. The company must send a copy of the "Report of Sale" to you, at your last known address. To be sure you get this report, leave a new forwarding address with the post office, the court clerk, the company's lawyer, or all three. When you receive the notice, you can object to how the money from the sale is to be distributed but not to the sale itself.
Updated March 2015; partially updated September 2015
PTLA # 671