Foreclosure

Section: Foreclosure Estimated study time: 45 minutes Content: Foreclosure is the legal process by which a lender terminates a borrower's rights in mortgaged property following default. Massachusetts uses non-judicial foreclosure (also called foreclosure by advertisement or statutory power of sale) as the primary foreclosure method. Most Massachusetts residential mortgages contain a clause granting the lender the statutory power of sale — the right to sell the property at public auction after following specified legal procedures, without going to court. The statutory power of sale process requires: (1) the lender send the borrower a notice of default and notice of intent to foreclose; (2) publication of the foreclosure sale notice in a local newspaper once per week for three consecutive weeks; and (3) a 150-day right-to-cure period for certain residential mortgages under M.G.L. Chapter 244, Section 35A, during which the borrower may cure the default by paying all arrears. The 150-day right to cure was enacted in 2012 and applies to most residential mortgages on owner-occupied principal residences. The lender must send a written notice of the right to cure to the borrower, which starts the 150-day period. During this period, the borrower may cure by paying the total amount overdue including fees and costs. A borrower may only exercise this right to cure once in any five-year period for the same mortgage. If the borrower does not cure during the 150-day period, the lender may proceed with the foreclosure sale. At the foreclosure auction, any person may bid; the lender typically submits a credit bid equal to the outstanding loan balance. The highest bidder receives a foreclosure deed (often a quitclaim deed or a statutory foreclosure deed). Judicial foreclosure…