Maine Mortgage Fraud Foreclosure

In Maine, lenders can use either a judicial or a non-judicial foreclosure process to foreclose on defaulted mortgages.

Judicial Foreclosure in Maine

Although Maine enables lenders to pursue foreclosure through judicial means, which entails filing a lawsuit to gain a court order to foreclose, this is only done in exceptional instances. In Maine, strict foreclosure is the most common method of foreclosure.

Non-judicial Foreclosure in Maine

The stringent foreclosure process is based on Maine’s foreclosure doctrine, which states that the lender retains property ownership until the debt is fully paid off. If the borrower breaches any of the mortgage’s terms before the loan is paid off in full, they will lose all rights to the property, and the lender will either take ownership of it or arrange for its sale.

In either situation, the borrower gets a three (3) month redemption time (post-1975 mortgages) or a twelve (12) month redemption period (pre-1975 mortgages). If the lender has taken possession of the property, they must keep it for the duration of the redemption term to complete the foreclosure process. Suppose the lender decides to sell the property without first taking control. In that case, they must first initiate a lawsuit, then wait until the redemption time has passed before selling the property using unique court processes.

The lender may seek a deficiency judgment, but it is limited to the difference between the property’s fair market value as determined by an appraisal and the outstanding sum of the defaulted loan.

Maine Attorney General William J. Schneider stated that the state had joined a historic $25 billion combined federal-state deal with the country’s five largest mortgage servicers to combat foreclosure abuses, fraud, and other unacceptable countrywide mortgage servicing practices.

The nationwide settlement was announced today in Washington, DC by US Attorney General Eric Holder, US Housing and Urban Development (HUD) Secretary Shaun Donovan, and a bipartisan group of 49 state attorney generals. Attorney General Schneider stated, “This agreement lays out the best first step to getting relief directly to eligible Maine borrowers who have been affected.” “Funding for foreclosure prevention programs, legal help to homes in foreclosure, and compensation to the state’s general fund will offset the statewide impact of these banned foreclosure practices.”

The state’s part of the settlement is estimated to be $21 million.

Borrowers in default on their mortgages in Maine will get an estimated $7 million in direct assistance, including principal reduction, short sales, and borrower transition activities, among other things. Borrowers in Maine who lost their homes to foreclosure between January 1, 2008, and December 31, 2011, are eligible for a $1.9 million cash settlement from a fund set aside for this purpose. Refinanced loans to Maine’s underwater borrowers who are current on their debts are expected to be worth $4.5 million.

Direct payment of $8.2 million will be made to the state for state foreclosure prevention programs, legal help to homeowners, and the general budget. The unprecedented joint state-federal settlement is the product of a huge civil law enforcement investigation and endeavor involving almost a dozen federal agencies, as well as state attorney generals and state banking regulators from throughout the country. The agreement holds banks accountable for previous mortgage servicing and foreclosure fraud and abuses while also providing homeowners with relief. The settlement, backed by federal court order and overseen by an independent monitor, prevents future fraud and abuse.

Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo, the five largest servicers, have agreed to a $25 billion penalty under a joint state-national settlement arrangement.

Servicers are committing a minimum of $17 billion to borrowers directly through various national homeowner relief options, including principal reduction. Because of the way the settlement is set up, services are expected to offer up to $32 billion in direct homeowner relief.

Mortgage servicers are committing $3 billion to a refinancing scheme for homeowners who are current on their payments but owe more than their home is now worth.

Servicers pay the states and the federal government a total of $5 billion ($4.25 billion to the states, $750 million to the federal government). Funding for compensation to borrowers for mortgage servicing abuse is included in the state payments.

New mortgage loan servicing and foreclosure requirements provide homeowners with comprehensive new protections.

An impartial monitor will monitor mortgage servicer compliance.

Regardless of the agreement, the government can pursue civil claims and any criminal case; borrowers and investors can seek individual, institutional, or class action cases.

The agreement does not give immunity from prosecution for criminal offenses and will have no impact on criminal proceedings. The deal does not preclude homeowners or investors from filing legal lawsuits against the five servicers on an individual, institutional, or class-action basis.

The agreement also allows state attorneys general and federal agencies to look into and prosecute other areas of the mortgage crisis, such as securities fraud.

Federal and state officials formed the Residential Mortgage-Backed Securities Working Group was formed on January 27 by federal and state officials. The working committee will look at people who were involved in the pooling and selling of residential mortgage-backed securities, which contributed to the financial crisis.

“This settlement not only provides major relief for homeowners, but it also imposes new servicing standards on these national lenders,” Will Lund of the Bureau of Consumer Credit Protection, which oversees Maine’s foreclosure diversion program, said. “By adhering to these guidelines, homeowners will have a fair chance to negotiate a loan modification and avoid losing their homes.”

The final agreement will be filed in US District Court in Washington, DC, as a consent judgment and will have the legal force of a court order.

Because of the complexities of the mortgage market and the three-year duration of this agreement, participating mortgage servicers may approach borrowers directly about loan modification possibilities in some situations. Borrowers should, however, contact their mortgage servicer for more information on specific loan modification programs and if they are eligible under the terms of the settlement. Borrowers may be approached by settlement administrators or state attorney generals about particular components of the settlement.