Definitions are provided in connection with Massachusetts State Laws and for the understanding of those potentially involved with Foreclosure Mediation Programs.
Fair Market Rent
Fair Market Value
FHA – Federal Housing Administration
Foreclosure Sale Purchaser
MassHousing Refinance Loans
M.G.L. Chapter 93A
MERS – Mortgage Electronic Registration System
Modified Mortgage Loan
Mortgage Loan Assumption
Mortgagor or Homeowner
Affordable Monthly Payment: Monthly payments on a mortgage loan, which, taking into account the borrower’s current circumstances, including verifiable income, debts, assets, and obligations enable a borrower to make the payments.
Bankruptcy: A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor’s assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.
Borrower’s Representative: An employee or contractor of a non-profit organization certified by Housing and Urban Development, an employee or contractor of a foreclosure education center pursuant to section 16 of chapter 206 of the acts of 2007 or an employee or contractor of a counseling agency receiving a Collaborative Seal of Approval from the Massachusetts Homeownership Collaborative administered by the Citizens’ Housing and Planning Association.
Certain Mortgage Loan: A loan to a natural person made primarily for personal, family, or household purposes secured wholly or partially by a mortgage on an owner-occupied residential property with one or more of the following loan features: (i) an introductory interest rate granted for a period of three years or less and such introductory rate is at least 2% lower than the fully indexed rate; (ii) interest-only payments for any period of time, except in the case where the mortgage loan is an open-end home equity line of credit or is a construction loan; (iii) a payment option feature, where any one of the payment options is less than principal and interest fully amortized over the life of the loan; (iv) the loan did not require full documentation of income or assets; (v) prepayment penalties that exceed section 56 of chapter 183 or applicable federal law; (vi) the loan was underwritten with a loan-to-value ratio at or above 90% and the ratio of the borrower’s debt, including all housing-related and recurring monthly debt, to the borrower’s income exceeded 38%; or (vii) the loan was underwritten as a component of a loan transaction, in which the combined loan-to-value ratio exceeded 95%; provided, however, that a loan shall be a certain mortgage loan if, after the performance of reasonable due diligence, a creditor is unable to determine whether the loan has one or more of the loan features in clauses (i) to (vii), inclusive, and provided, further, that loans financed by the Massachusetts Housing Finance Agency, established in chapter 708 of the acts of 1966 and loans originated through programs administered by the Massachusetts Housing Partnership Fund board established in section 35 of chapter 405 of the acts of 1985 shall not be certain mortgage loans.
Creditor: A person or entity that holds or controls, partially, wholly, indirectly, directly, or in a nominee capacity, a mortgage loan securing a residential property, including, without limitation, an originator, holder, invesetor, assignee, successor, trust, trustee, nominee holder, Mortgage Electronic Registration System or mortgage servicer, including the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. “Creditor” shall also include any servant, employee or agent of a creditor.
Deed in Lieu of Foreclosure: With a deed in lieu of foreclosure, you voluntarily execute a deed conveying your property to the lender in exchange for the lender canceling, in full or partial satisfaction, the debt owed on the loan. The lender often will agree to forgive any deficiency (the amount of the loan that isn’t covered by the sale proceeds) that remains after the house is sold. The lender will also agree not to initiate foreclosure proceedings or to terminate any initiated foreclosure action.
Dodd-Frank Wall Street Reform and Consumer Protection Act: Requires that every servicer participating in HAMP that denies a homeowner’s loan modification request on the basis of net present value (NPV) analysis provide that homeowner with the data used to make its calculation.
DU Refi Plus: For existing MassHousing Borrowers: DU Refi Plus is a Fannie Mae, no-cash-out refinance program offering reduced verification and documentation. MassHousing is making DU Refi Plus available to existing MassHousing borrowers who have a conventional first mortgage sold to and owned by Fannie Mae on or before June 1, 2009.Borrowers must meet income limits, which vary by community.
Eviction: Any action, without limitation, by a Foreclosure Sale Purchaser of Residential Property which is intended to compel an occupant to vacate or to be constructively evicted from such Residential Property.
Fair Market Rent: An amount equal to that established by the most recent United States Census Bureau American Community Survey which shall be fair market value only, for a unit of comparable size in the area in which the Residential Property is located.
FHA – Federal Housing Administration: Established in 1934 to advance homeownership opportunities to all Americans. Lenders who make FHA loans are covered by mortgage insurance, which protects them from most losses when a borrower defaults. Lenders are more likely to make FHA loans to borrowers who might not qualify for conventional mortgages since the liability for default has been dramatically reduced. Became a part of HUD when HUD was created in 1965.
Forbearance Agreement: Forbearance agreements are plans that allow borrowers to repay a loan delinquency over time. Regular monthly payments are made according to your loan agreement, and an additional monthly payment is made each month that is applied to the delinquent amount. Once the delinquent amount is paid in full, the normal payment amount resumes. It fully reinstates the loan. A forbearance plan may include one or more of the following features: (a) suspension or reduction of payments for a period sufficient to allow the borrower to recover from the cause of default; (b) a period during which the borrower is only required to make his/her regular monthly mortgage payment before beginning to repay the arrearage; (c) a repayment period of at least six months and (d) allow reasonable foreclosure costs and late fees accrued prior to the execution of the forbearance agreement to be included as part of the repayment schedule. However, they frequently may only be collected after the loan has been reinstated through payment of all principal, interest and escrow advances.
Foreclosing Property: A property on which the Mortgagee or its agent has filed a Complaint with the Land Court or Superior Court pursuant to the Massachusetts Soldiers’ and Sailors’ Civil Relief Act (St. 1943, c. 57 (1943), as amended through St. 1988, c. 142) until such time as a Foreclosure Deed has been recorded in the Southern Essex Registry of Deeds.
Foreclosure Sale Purchaser: A Foreclosing Owner as defined below, or a person or entity who purchases Residential Property from a Foreclosing Owner and not intending to reside or have a family member reside in such Residential Property as the primary residence.
- Held or owned a Mortgage Loan in the Property at any point prior to the foreclosure of the Property or is the subsidiary, parent, or agent of, or otherwise is related to any entity which held or owned the Mortgage in the Property at any time prior to the foreclosure of the Property; and
- Holds title to this Property that it acquired at a foreclosure sale or by any other method of foreclosure and holds a security interest in three or more Mortgage Loans.
For purpose of this definition, the phrase ‘holds title’ shall include an entity which holds title in any capacity, directly or indirectly, without limitation, whether in its own name, as trustee, or as beneficiary.
Good Faith Effort: Each party to the mediation is present, has decision making authority to negotiate and agree upon a commercially reasonable alternative to foreclosure, provides required documentation, and actively participates in the mediation process.
Eligibility Requirements (Learn More at MakingHomeAffordable.gov) – You may be eligible for HAMP if you meet all of the following criteria:
- You obtained your mortgage on or before January 1, 2009.
- You owe up to $729,750 on your primary residence or single unit rental property
- You owe up to $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property
- The property has not been condemned
- You have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify).
- You have sufficient, documented income to support a modified payment.
- You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
Home Affordable Foreclosure Alternatives: Unlike conventional short sales, a HAFA short sale completely releases you from your mortgage debt after selling the property. This means you will no longer be responsible for the amount that falls “short” of the amount you still owe. The deficiency is guaranteed to be waived by the servicer. In a HAFA short sale, your mortgage company works with you to determine an acceptable sale price. HAFA has a less negative effect on your credit score than foreclosure or conventional short sales. When you close, HAFA may provide $3,000 in relocation assistance.
Eligibility Requirements (Learn more at MakingHomeAffordable.gov) –
- You have a documented financial hardship.
- You have not purchased a new house within the last 12 months.
- Your first mortgage is less than $729,750.
- You obtained your mortgage on or before January 1, 2009.
- You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
Homeowner or Mortgagor: A natural person or residential trust who received a Mortgage Loan secured by a Residential Property located in the City, and for whom such Residential Property is his/her principal residence.
Eligibility Requirements (Learn more at FHA.com) –
- Mortgage must be dated on or before 1/1/2008
- Homeowner did not default on the original loan intentionally
- Homeowner not invested in multiple home loans
- All information on the original mortgage is true
- Homeowner has not been convicted of fraud and requires equity sharing with government.
Judicial Foreclosure: Massachusetts is not a judicial foreclosure jurisdiction. A judicial foreclosure is a court proceeding that is initiated when a lender files a complaint and records a notice announcing a claim on the property. Judicial foreclosure involves the sale of the mortgaged property under the supervision of a court with the proceeds going first to satisfy the mortgage, then to other lien holders and, finally, to the borrower if any proceeds remain. All parties involved must be notified of the foreclosure proceedings by mail, direct service or publication of the notice. The borrower is permitted to dispute the claims made by the lender (though most do not because they are currently in default) and must respond within 30 days. After judgment, the sheriff conducts a “Sheriff’s Sale,” which is a public auction sale of the property to satisfy the judgment after notice to the public.
If a Sheriff’s Sale is conducted, the foreclosed homeowner does have the “Right of Redemption,” which is the right of the homeowner to buy back the home from the person who bought it at foreclosure. If the homeowner is able to buy back the property, he or she must pay off the loan plus any accrued interests and associated costs. Though the borrower loses possession of the home during the redemption period, they retain the title to the home.
Loan Guarantee Partial Claim: If your mortgage is insured, your lender might help you with a one-time interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan.
Loan Modification: An agreement that permanently changes one or more terms of your mortgage. For example, (1) extend amortization (i.e., extending the number of years you have to repay the loan, such as, converting a 30-year loan to a 40-year loan), (2) converting a sub-prime 2-, 3- 5-, 7-year ARM loan into a fixed rate loan, (3) reducing the mortgage interest rate, (4) adding missed payments to the existing loan balance.
MassHousing Refinance Loans: Benefits are 30 year terms, fixed interest rates (meaning your payment will always remain the same), mortgage insurance with MI Plus mortgage payment protection, loans serviced by MassHousing.
- Whose training complies with the qualification standards for neutrals specified in the guidelines for training mediators adopted by the Supreme Judicial Court of Massachusetts pursuant to Rule 8 of the Uniform Rules for Dispute Resolution; and
- Who has completed training on foreclosure mediation; and
- Who has a working knowledge of all federal, state, and city programs available to help homeowners retain their homes.
MERS – Mortgage Electronic Registration System: Does not typically qualify as the “real party in interest”. MERS is not an assignee. If MERS is not named in your note and the loan has not been properly assigned to them, they are not legally able to bring foreclosure action. MERS operates as a nominal party; a lender may register (transfer) a defaulted loan to this entity. Currently many consumers who are in default may find MERS shown as the party bringing the foreclosure action.
M.G.L. Chapter 93A: (Consumer Protection) This law prohibits businesses in Massachusetts from employing “unfair and deceptive practices” in their interactions with consumers. Some common examples include: fraud, deception and unfair methods of competition, harassment, defamation, and invasion of privacy. A business such as a bank may violate this law by charging consumers higher rates than the marked, published or advertised price.
Modified Mortgage Loan: A mortgage modified from its original terms including, but not limited to, a loan modified pursuant to one of the following: (i) the Home Affordable Modification Program; (ii) the Federal Deposit Insurance Corporation’s Loan Modification Program; (iii) any modification program that a lender uses which is based on accepted principles and the safety and soundness of the institution and recognized by the National Credit Union Administration, the Division of Banks or any other instrumentality of the commonwealth; (iv) the Federal Housing Agency; or (v) a similar federal refinance plan.
Mortgage Documents: The Promissory Note, including any allonges, additional pages, and other evidence of all endoresements; mortgage; loan agreement; assignments (recorded and unrecorded); powers of attorney granted by the Mortgagee or Homeowner to entities acting on its behalf; and any other documents evidencing or securing a Mortgage loan.
Mortgage Loan: A loan, in the form of a promissory note, to one or more natural persons, or to a nominee trust or residential trust on behalf of one or more natural persons, made for non-commercial purposes and secured wholly or partially by a mortgage on residential property which is the principal residence of one or more borrowers of the loan or their family members, or in the case of a nominee trust, one or more of the beneficiaries of the trust.
Mortgage Loan Assumption: Most mortgage loans include a “due on transfer” provision. If this provision is waived by the lender, it allows a qualified individual or entity to assume the loan’s payment obligations. This is often used to facilitate the sale of the property to a third party. The original lender may or may not release you from personal liability on the note if the individual or entity assuming the loan’s payment obligation defaults.
Mortgagor or Homeowner: A natural person or residential trust who received a Mortgage Loan secured by a Residential Property located in the City, and for whom such Residential Property is his/her principal residence.
Mortgage Servicer: An entity which administers or services or at any point administered or serviced the Mortgage Loan; provided, however, that such administrator or servicing shall include, but not be limited to, calculating principal and interest due on the mortgage loan, assessing fees and costs onto a mortgagor’s loan account, collecting regular payments from the mortgagor, acting as escrow agent for the owner of the Mortgage Loan or foreclosing on a Mortgage Loan in the event of a default.
Net Present Value: The present net value of a residential property based on a calculation using one of the following: (i) the federal Home Affordable Modification Program Base Net Present Value Model, (ii) the Federal Deposit Insurance Corporation’s Loan Modification Program; or (iii) for the Massachusetts Housing Finance Agency’s loan program used solely by the agency to compare the expected economic outcome of a loan with or without a loan modification.
- Delinquency, interest, and/or fees incurred by the date of foreclosure sale based on average length of Massachusetts foreclosure process;
- Costs of all legally required actions to foreclose and percentage loss from foreclosure sale;
- Meeting all sanitary code requirements;
- Property maintenance;
- Eviction; and
- Other ownership costs until projected sale or re-sale to third party purchaser.
Non-judicial Foreclosure: Massachusetts is a non-judicial foreclosure jurisdiction. Also known as a title theory jurisdiction where the property remains “in trust” until payment in full occurs for the underlying loan. Non-judicial foreclosure involves no court intervention. The trustee of the trust deed forecloses on the lien, not the beneficiary of the trust deed. Such a foreclosure is also referred to as a “trustee’s sale.” The trustee initiating the non-judicial foreclosure must strictly follow all of the states’ foreclosure laws.
Similar to the “Right of Redemption” for a judicial foreclosure, the homeowner has the “Right of Cure” for non-judicial foreclosure. The grantor must pay the amount due on the loan plus any associated costs.
Pooling and Servicing Agreement: Legal document usually filed with the Securities and Exchange Commission, which defines the rights and obligations of the parties involved. It defines the proper procedure and what should have occurred to the promissory note. Many advocates for Homeowners argue at foreclosures that this agreement is not properly followed.
Principal Forbearance: Forbearance of the repayment of part of the principal interest-free. The actual principal amount due and payable at maturity of the loan (or sale of the property) is the original unmodified principal amount, less any and all periodic principal payments that you make until maturity or sale. The loan payments only partially, not fully, amortize the loan. Contrast with Principal Reduction.
Principal Reduction: Loan principal is reduced. This may be possible if you have a negative amortization loan (you are paying less than is necessary to fully amortize (payoff) the loan during the loan’s term) and the lender is willing to reduce principal to the original loan amount. A principal reduction program may be agreed upon in exchange for a shared appreciation mortgage (SAM). A SAM is a fixed rate, fixed term loan. In exchange for a lower interest rate, you agree to give up a portion of the home’s future value — the difference between what it is worth now and what it will be worth in the future.
Promissory Note: A legal instrument in which one party promises in writing to pay a predetermined sum of money to the other. The promissory note includes the terms of repayment, such as the interest rate, maturity date, and the monthly payment.
Property: Any real property that is either a single-family dwelling or a structure containing not more than four residential units, and shall also include a residential condominium unit or a residential co-op unit.
Reinstatement: Your lender agrees that all amounts required to bring your loan current can be paid (including late fees, attorney fees, taxes, insurance, et cetera) and once these amounts are paid, the foreclosure will be dismissed and you will be back on your regular payment plan.
Repayment Plan: An agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up (i.e., the lender raises the monthly payment for a set period of time until the arrears amount is caught up).
Residential Property: Real property located in the commonwealth having thereon a dwelling house with accommodations for 4 or less separate households and occupied, or to be occupied, in whole or in part by the obligor on the mortgage debt; provided, however, that residential property shall be limited to the principal residence of a person; provided further, that residential property shall not include an investment property or residence other than a primary residence; and provided further, that residential property shall not include residential property taken in whole or in part as a collateral for a commercial loan.
- Has care, charge or control of Property, including but not limited to any dwelling, dwelling unit, mobile dwelling unit or parcel of land, vacant or otherwise, including a mobile home park, or any administrator, executor, trustee or guardian of the estate of the holder of legal title; or
- Is a Mortgagee of any such Property who has filed a complaint with the Land Court or Superior Court pursuant to the Massachusetts Soldiers’ and Sailors’ Civil Relief Act (St. 1943, c. 57 (1943), as amended through St. 1988, c. 142), including its successors or assigns; or
- Is an agent, trustee or other Person appointed by the courts and vested with possession or control of any such Property;
- Is a Mortgagee who has made entry on any such Property, pursuant to the terms of the Mortgage, in order to make repairs upon Mortgagors failure to do so.
Reverse Mortgage: Reverse mortgages, or home equity conversion mortgage (HECM) loans, are commonly used to help senior citizens tap into their home equity for retirement. As a foreclosure prevention device, you generally need to be age 62 or older and have adequate accumulated home equity.
Right to Cure: The Right to Cure Regulations are designed to assist commencement of foreclosure provisions found in Chapter 244, Section 35A of the Massachusetts General Laws, which requires the sending of a right to cure notice prior to the commencement of foreclosure proceedings for certain principal residence properties. Section 35A provides for a 150-day right to cure, or in the alternative, a 90-day Right To Cure Notice may be sent provided the mortgagee can demonstrate that it has negotiated in good faith with the borrower; the mortgagee certifies that it has negotiated to reach an alternative to foreclosure in good faith with the borrower; at least one meeting has taken place between the mortgagee and the borrower; the mortgagee provided loss mitigation information to the borrower before the meeting; and that after the meeting, the creditor is able to demonstrate that the mortgagee and the borrower were not able to reach a resolution (other than foreclosure). A 90-day right to cure notice would also be acceptable if the mortgagee can demonstrate that the borrower failed to respond within 30 days to the mortgagee’s offer to negotiate.
Shared Appreciation Mortgage (SAM): A SAM is a fixed rate, fixed term loan. In exchange for a lower interest rate, you agree to give up a portion of the home’s future value — the difference between what it is worth now and what it will be worth in the future.
Security Instrument: Gives the lender a lien on the property. The borrower retains full ownership of the property. The security instrument secures repayment of the promissory note and is more specifically described as a mortgage or a trust deed.
Shadow Inventory: Generally, in a healthy economy, the foreclosure rate is around 1% of total loans, during past few years the foreclosure rate has been around 7-8% of total loans. This term means in the past few years, banks may have not foreclosed on all properties that they typically would have. This is because of the fear that more foreclosures or an increase in the rate would alarm consumers and negatively impact the economy. Therefore, there are likely many foreclosures in the pipeline that are being processed slowly.
Short sale: A sale for less than what you owe on the mortgage loan. Lenders may allow a home to be sold at a loss (consequently, the term short sale), because a short sale is nonetheless preferable to foreclosure. Foreclosure exposes lenders to potential substantial loss for litigation costs, carrying costs, including real estate taxes and insurance, and low forced sale bids or low resale prices. A short sale may be beneficial when a lender agrees to relieve you of liability for any deficiency (waive suing for a deficiency).
Subprime Lending: (also known as near-prime, non-prime, and second chance lending) means making loans to people who may have difficulty maintaining the repayment schedule. These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.
Voluntary Surrender/ Cash for Keys: Lenders may offer homeowners money to leave the home voluntarily without a post-foreclosure judgment eviction, if the house is in relatively good condition and undamaged.