The lingering effects of the Great Recession, and the fact that many homes are still underwater, are driving the foreclosure rate in Massachusetts back up.
Some observers contend that the continued rise really is a backlog of cases. Three times in the last ten years, Massachusetts lawmakers enacted foreclosure relief measures, such as giving homeowners more time to catch up on delinquent mortgage payments. As a result, many inherited real property foreclosures have been in the pipeline for months or even years. However, consumer advocates lament that the state is doing little or nothing to assist distressed homeowners. In fact, the Massachusetts Alliance Against Predatory Lending says the current crisis is worse than the Great Depression of the 1930s.
Foreclosure Rate Rising
After peaking at 5,000 foreclosure petitions filed in the second quarter of 2012, the quarterly foreclosure rate dropped to 820 a year later. In June 2016, the foreclosure rate rose again, for the 28th straight month, to 1,002 petitions.
Older properties, like inherited real estate, typically have lower mortgage loan balances and more stable property values, so they are at a lower risk for foreclosure. But that is certainly not always the case. Moreover, although it is illegal to do so and banks consistently deny that they conduct business in this way, there is some evidence that houses in certain neighborhoods are targeted for expedited foreclosure.
Many heirs erroneously assume that banks cannot foreclose during probate, but there is no automatic stay in probate court like there is in bankruptcy court. Further complicating matters, the estate’s cash is sometimes tied up in court, so there is no money for the monthly installment payments.
Homeowners have several non-transfer options to avoid foreclosure, including:
- Loan Modification: This plan is really a forbearance. The bank may agree to put the past-due amount back into the unpaid principal balance and allow it to be paid out over time. The major drawback is that the eligibility rate is quite low and the approval rate is even lower.
- Refinance: If the property has equity and is in good condition, and the borrower has good credit, a refinance is an option. But the chances are that, if all three of these conditions existed, the property would not be in foreclosure in the first place.
If these techniques either fail or are unavailable, and they often are, a realtor can help arrange a short sale. To sell the house quickly, it’s listed for less than its market value, and the bank agrees to accept the sale price as payment in full on the note, even if there is not enough money to completely pay it off. Since these sales are tricky to perform and require an extra step (the mortgage company’s approval), not all realtors are qualified to handle them.
Contact us to avoid foreclosure on inherited real property.