Drummond Woodsum Attorneys at Law

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July 8, 2014

Below is a summary of recent developments in Maine residential foreclosure law. While the Legislature has enacted a law to expedite the process under certain circumstances, recent court decisions highlight some of the challenges facing lenders in foreclosure actions.

"An Act to Expedite the Foreclosure Process, Public Law"

The Maine Legislature recently enacted amendments to expedite the foreclosure process when the borrower does not contest the foreclosure and the subject property has been abandoned. The new law lists several conditions that would support a finding of "abandonment," including (1) boarded up, broken or unlocked windows and doors; (2) trash or debris on the property; (3) the absence of furnishings or other personal property; (4) deteriorating conditions that pose a threat to public health or safety; (5) reports of trespassers, vandalism or other illegal acts; and (6) "other reasonable indicia of abandonment."

If the lender believes that the mortgaged property has been abandoned, lender's counsel may file a motion with the court outlining as many of the statutory conditions as possible. Upon a finding by "clear and convincing evidence" that the property has been abandoned, the redemption period will be reduced from 90 to 45 days. The court may also advance the foreclosure action on the docket and assign it priority over other cases "as the interests of justice require."

The new law goes into effect August 1, 2014. Some lenders have expressed skepticism that it will actually speed up the foreclosure process, since a motion will have to be filed and courts have been vigilant in protecting borrowers' rights. Junior lienholders that have appeared in the foreclosure proceeding would also have to consent to the waiver of the redemption period. However, in the case of abandoned property that poses a nuisance to neighbors or a safety threat, it is likely that a court will determine the property has been abandoned and advance the foreclosure action on its docket.

Two recent decisions of the Maine Supreme Judicial Court

In a case decided a few months ago, the Maine Supreme Judicial Court found the lender's summary judgment pleadings defective and ordered that the case be remanded to the trial court for further proceedings. In that case, the lender filed two pleadings and one exhibit that were consistent with one another, but which showed different amounts owed. In the lender's summary of facts, the total amount owed included principal, interest and attorneys' fees. In the loan officer's supporting affidavit, however, the total amount owed included only the principal and interest, but not attorneys' fees. The bank's payoff statement (attached as an exhibit to the loan officer's affidavit) added a $16 recording fee. Presumably because all of the numbers did add up, the trial court entered summary judgment for the lender.

The Maine Supreme Judicial Court vacated the decision on appeal. As the Court reasoned, "Applying the rules of summary judgment strictly as we must in residential foreclosures, the Bank did not set forth a properly supported statement of fact regarding the amount due on the note, and it remains an unresolved issue of material fact." As a result, the case was remanded to the lower court for further proceedings.

In the wake of this and other decisions from our highest court, some lenders have abandoned the traditional practice of filing for summary judgment in foreclosure actions and have instead opted for a trial. Foreclosure trials are typically less than 30 minutes and oftentimes the borrower does not appear, making for a seamless presentation by the lender. The major downside to that approach is delay. More often than not, a summary judgment motion is granted before a trial is scheduled.

In a case decided just a few weeks ago, Maine's highest court upheld the trial court's dismissal of a foreclosure action where the lender failed to act in good faith during the mediation process. There, the lender and borrowers participated in four mediation sessions. At each mediation, the lender repeatedly asked for documents that the borrowers had already provided. More egregious was the lender's repeated failure to respond to the borrowers' request for a loan modification. On appeal the lender argued that the sanction of dismissing the case was excessive and created a windfall for the borrowers. The Maine Supreme Judicial Court rejected this argument, holding that a dismissal is an appropriate sanction when the lender engages in "dilatory practices during the foreclosure mediation process." While the facts of this case are unusual, the decision highlights the need for the foreclosing lender to participate in good faith. That means coming to the mediation prepared and ready to respond to a request for a loan modification.

If you have questions about these recent decisions or the amendments to the foreclosure law, please contact the attorneys in our Bankruptcy and Debtor/Creditor Litigation Group. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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