No one wants to lose their home, and while Maine is forty-second in the nation in foreclosure rates, those facing that possibility are making every effort to stop foreclosure. There are many avenues for doing so; however, Maine law can make it difficult in some instances where the foreclosure process has already begun. Maine is a lien theory state, and a person’s property is considered security for the mortgage. However, it is also a state that often relies on strict foreclosure, which means that the lender can step in and claim the borrower’s property when they break the terms of the loan, generally by failing to make their mortgage payments. Judicial foreclosure is also available, depending on the terms of the mortgage agreement. A judicial foreclosure often takes between 180 and 200 days, and a strict foreclosure cannot be completed until the redemption period ends.
The good news is that Maine law allows homeowners the right of redemption, preventing the lender from selling the property for up to twelve months for pre-1975 mortgages and for up to three months for post-1975 mortgages, allowing the homeowner to seek alternate financing to redeem their property. Lenders also have a right to seek deficiency judgments, although they are based on the fair market, or appraised, value of the home, not the remaining mortgage balance.
Lender Options
Because of the difficulty of some Maine foreclosure processes, it is more important than ever to work with lenders to avoid foreclosure. Many are willing to do so today because of the backlog of foreclosures they already face. In light of that, it is more important than ever to work with a lender to seek alternatives.
- Forbearance is the process by which a lender has confidence that a borrower’s financial difficulty is temporary and allows them to miss a few payments or make a few partial payments until they get back on their feet. This process usually includes a specific schedule of when those payments will be made up, often at the end of the mortgage schedule.
- Loan modification occurs when a lender believes a homeowner will be able to maintain their loan payments if they are modified or adjusted. By lowering interest rates, changing from adjustable to fixed rates, or extending the length of the loan the borrower may be able to return to and stay current.
- Loan reinstatement takes place when a borrower shows that they will be receiving some additional income to catch up on missed or partial payments. If so, the lender may agree to reinstate the loan and label it as current.
Government Assistance Options
Federal and state governments have established programs providing incentives to lenders to help struggling homeowners save their property. A counselor from the U.S. Department of Housing and Urban Development (HUD) can help lenders determine if one of these programs works for them. Those programs include:
- The Hope for Homeowners Act, whereby lenders are encouraged to refinance loans with high interest rates or variable rates to terms that a lender may be able to sustain. This program also encourages lenders to lower principal amounts and waive early payment or late payment fees.
- The Homeowner Affordability and Stability Plan, which is program that encourages lenders to refinance or adjust the terms of troubled mortgages.
- The federal Mortgage Forgiveness Debt Relief Act of 2007 protects homeowners from having erased or forgiven debts taxed as income by the IRS.
Bankruptcy Options
Borrowers in deeper financial trouble may have to choose the bankruptcy option. It does long-term damage to a person’s credit rating, but it may put them in a position to begin rebuilding it sooner. One of the first benefits is the automatic stay put on collection efforts and foreclosure actions by lenders, giving homeowners time to consider their options.
- Qualified borrowers may be able to have most of their consumer debt discharged, or erased, although they may have to liquidate some of their personal property in the process of filing Chapter 7 bankruptcy. However, in Maine, they can take advantage of a homestead exemption of between $47,500 and $90,000 to save their primary residence.
- Others may choose Chapter 13 bankruptcy to reorganize their finances and their debts with the help of their attorney and their bankruptcy trustee. If their new repayment plan is accepted by the court and they maintain the required payments, they may clear their debts and save their home.
Home Sale Options
In some cases, none of the options to keep their home will work and the only hope is to dispose of their home before their lender forecloses. If they can find a buyer willing to pay their asking price, they may be able to pay off their mortgage and have additional income to relocate and dispose of other bills. Many cannot do so in today’s market, but they may have other options:
- Short sale – asking their lender to accept a sale price to satisfy their mortgage even if it is less than the remaining balance. Homeowners must be sure to get this agreement in writing to avoid a deficiency judgment from their lender for the difference between the appraised price and the sale price
- Deed in lieu of foreclosure – asking their lender to accept the deed to the home to satisfy the balance of the mortgage owed. Again, it is important to get this agreement in writing to avoid deficiency suits.
Getting Legal Help Stopping Foreclosure in Maine
One of the most important elements Maine homeowners can enlist to help them stop foreclosure is an attorney who is committed to helping them each step of the way. They generally know the laws and the options for government help, and they can help borrowers avoid scams and con artists who are taking advantage of unwary homeowners in these difficult economic times.
