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American College of Mortgage Attorneys — Partner with the Best®

Formed in 1974, the American College of Mortgage Attorneys (ACMA) is comprised of over 500 lawyers in North America who are experts in mortgage law.

United States

Massachusetts

The security instrument is a Mortgage Deed, commonly known as a mortgage, which is a deed conveying the fee but with mortgage covenants and statutory conditions that provide for redemption. (c.&nbsp;183, &sect;&sect;&nbsp;18, 19 and 20). C.&nbsp;183, &sect;&nbsp;21 contains a statutory power of sale, which, if exercised in accordance with c. 244, will extinguish the mortgagor's right of redemption. Massachusetts does not use a deed of trust. Every mortgage and assignment must include the property's street address as well as the post office address of the mortgagee or assignee, or the Registry of Deeds will not accept it for recording. Additionally, there must be a title reference or a reference to a previously recorded plan and a street address of the property included in the mortgage. c.&nbsp;183, &sect;&sect;&nbsp;6(A), 6(B) and 6(C). Statutory forms of mortgage conditions, assignment, discharge, etc. are contained in the Appendix to c.&nbsp;183. Every mortgage and assignment of mortgage secured by residential property in which a mortgage broker is involved shall contain or have endorsed upon it the name, post office address, and license number of the mortgage broker and, if applicable, the mortgage loan originator responsible for placing the mortgage loan; which endorsement or notation shall be recorded as part of the mortgage or assignment of mortgage. c.&nbsp;183, &sect;&nbsp;6(D).

Security Instrument Used

Massachusetts has 2 recording systems. By far the most common is recording in the various county Registries of Deeds. In this system the Registry accepts any instrument that is in proper form without making any judgment as to its effect on the real estate. For a smaller number of cases, Massachusetts has a land registration system. That system (governed by c.&nbsp;185) provides for an initial judgment by the Land Court as to the status of title and then a subsequent judgment each time an instrument is filed. The initial judgment is by decree, while subsequent judgments come as issuances of and endorsements to a Certificate of Title. The districts for registered land are the same as for unregistered land, but certain filing fees and other details differ. To be recorded or filed, a mortgage must contain an appropriate acknowledgment. c.&nbsp;183, &sect;&nbsp;29; see 183, &sect;&nbsp;30 (detailing the proper method of acknowledgment); Appendix to c.&nbsp;183 (providing the relevant forms). Witnesses are not required.

Recording Requirements

STATUTES TO BE WAIVED

On 1-4-family residential properties, or on a residential condominium unit occupied or to be occupied by the mortgagor, prepayment premiums are limited to the balance of the first year's interest, or 3 months' interest, whichever is less, except that if prepayment is made within 36 months from the date of the promissory note, a prepayment premium not in excess of 3 months' interest may be charged. c.&nbsp;183, &sect;&nbsp;56. No prepayment premium or other penalty shall be payable if a promissory note is paid in full after the 36th month of the date of the promissory note.

Prepayment Premiums

On 1-4-family residential properties, or on a residential condominium unit occupied or to be occupied by the mortgagor, late charges may not be assessed (a)&nbsp;unless specifically authorized in the loan documents; (b)&nbsp;for any payment made within 15 days of the due date, or in the case of a bi-weekly mortgage payment, made within 10 days of the due date; (c)&nbsp;in excess of 3% of the principal and interest overdue (exclusive of any estimated tax payments required by the loan documents); and (d)&nbsp;more than once on a single late payment. Other restrictions on late payments may also be found in c.&nbsp;183, &sect;&nbsp;59.

Late Charges

On 1-4-family residential properties, or on a residential condominium unit occupied or to be occupied by the mortgagor, interest is required to be paid on tax escrows at least once per year although no rate is specified. Mortgagees must file reports with the commissioner of banks showing interest paid and calculation of net profit or loss from the investment of escrows. Mortgagees showing a loss from such investments may seek an exemption from the requirement to pay interest. c.&nbsp;183, &sect;&nbsp;61.

Interest on Tax Escrows

If the mortgagee requires prepayment of taxes, it must pay all of the amounts it has received to the city or town wherein the property is located on or before the due date of the taxes. c.&nbsp;183, &sect;&nbsp;62.

Payment of Real Estate Taxes by Mortgagee

A mortgagee may accept a written memorandum from a duly licensed agent, broker or insurance company as evidence of insurance, so long as an insurance policy for at least 1 year is issued within 30 days of the date of the binder. c.&nbsp;183, &sect;&nbsp;65.

Evidence of Insurance Contracts

Mortgagees may not require that the mortgagor purchase casualty insurance in excess of the replacement cost of the buildings on the premises. c.&nbsp;183, &sect;&nbsp;66.

Limiting the Amount of Fire Insurance

Creditors, as defined under c. 244, &sect;&nbsp;35B, cannot require owners or purchasers of residential properties with 1 to 4 units to purchase flood insurance that (i)&nbsp;covers an amount that exceeds the outstanding principal mortgage balance at the beginning of the year for which the policy shall be in effect; (ii)&nbsp;includes coverage for contents; or (iii)&nbsp;includes a deductible of less than $5,000. c. 183, &sect;&nbsp;69.

Limiting the Amount of FLOOD Insurance

Massachusetts has its own truth in lending statute, and an exemption from federal law. c.&nbsp;140D. Regulations issued by the commissioner of banks follow Regulation Z and are set forth in 209 Code of Massachusetts Regulations 32. Typically, practitioners follow the federal rules on compliance issues.

Truth in Lending

For residential loans, when the payment on a promissory note will not amortize the principal by the maturity of the promissory note and the term of the mortgage securing the promissory note is for a period longer than that of the promissory note, the promissory note and its disposition at maturity shall be subject to automatic renewal or extension at the option of the mortgagor and such conditions and restrictions imposed by the commissioner of banks. c.&nbsp;183, &sect;&nbsp;60. Certain lenders making 5 or fewer mortgage loans in a calendar year are exempt from the foregoing provisions. c.&nbsp;183, &sect;&nbsp;60.

Short-Term or Balloon Mortgage Loans

Open-end loans of a consumer nature, such as consumer lines of credit, or home equity loans, are permitted by c.&nbsp;183, &sect;&nbsp;28B. An open-end loan is one that provides that the sum lent may increase or decrease from time to time. Such mortgages will have priority over any junior encumbrance up to the maximum principal sum specified in the mortgage together with interest and charges.

Securing Future Advances

Additional advances for repairs, improvements, lead paint removal, or replacements to, or fuel for, or for taxes or other municipal liens or charges or assessments or condominium common expense assessment, including legal fees on, the mortgaged premises are permitted by the provisions of c.&nbsp;183, &sect;&nbsp;28A, and as such will be added to the original principal indebtedness and fully and equally secured with and have the same priority as the original indebtedness, up to the original amount of the mortgage.

Securing Additional Advances To Protect The Collateral, Including Payment Of Taxes And Insurance

Trustee Under Deed Of Trust

There are 3 methods of foreclosure: action, entry, and sale. Very few mortgages are foreclosed by action. The more common practice is to foreclose by making an entry pursuant to c.&nbsp;244, &sect;&nbsp;1, and then (usually at the same time) conducting an auction sale pursuant to power of sale and c.&nbsp;244, &sect;&sect;&nbsp;14 and 15. Entry made pursuant to c.&nbsp;244, &sect; 1 will fully extinguish any rights of redemption at the expiration of 3 years from its date. An auction sale properly conducted in accordance with the terms of &sect;&nbsp;14 will, immediately upon completion, foreclose the right of redemption existing with mortgagor. c.&nbsp;244, &sect;&nbsp;18. The mortgagee may bid in at that auction. c. 183, &sect;&nbsp;25. From the proceeds of the sale, the mortgagee may retain all sums secured by the mortgage, interest, and costs, and shall render any surplus to the mortgagor or its successors or assigns. c.&nbsp;183, &sect;&nbsp;27. The holder of a mortgage of real estate, or its representatives, shall provide to the mortgagor or the mortgagor's heirs, successors, or assigns a written notice containing an itemized accounting of the disposition of the proceeds arising from a sale under the power of sale, including the sale price, legal fees, auctioneer fees, publication costs and other fees, and any surplus due to the mortgagor, within 60 days after the receipt of such funds. If such sale is subject to further legal proceedings, such accounting shall be stayed until the conclusion of such proceedings. c.&nbsp;183, &sect;&nbsp;27. Before the entry and foreclosure sale may occur the provisions of the federal Servicemembers' Civil Relief Act and the Massachusetts implementing statute in Chapter 57 of the Acts of 1943, as amended, should be satisfied. To do so, a complaint must be filed, typically in the Land Court, seeking a judgment that no person is entitled to the benefit of the Act. The judgment is conclusive evidence of compliance. Certain mortgagors, such as limited liability companies, limited partnerships and corporations, are exempt from the provisions of the Act. The mortgagee will then proceed with the foreclosure sale pursuant to the power of sale. Prior to first publication of the notice of sale, the mortgagee must execute an affidavit confirming that (i)&nbsp;the mortgagee is either the note holder or authorized to conduct foreclosure on behalf of the note holder, and (ii)&nbsp;the loan (A)&nbsp;was not made to a natural person, if applicable, and (B)&nbsp;was not made for personal, family, or household purposes, making the provisions of c. 244, &sect;&sect;&nbsp;35A-C inapplicable. This affidavit must be recorded. It is often recorded prior to the first publication of the notice of sale, but it may be recorded after the foreclosure. c. 244, &sect;&nbsp;35C. To effect the foreclosure by power of sale, the mortgagee must mail notices to interested parties and publish of the notice of sale in an appropriate newspaper once each week for 3 consecutive weeks. The notice to the mortgagor and junior lienholders must be given no less than 14 days before the sale date. c. 244, &sect;&nbsp;14. The first publication must be no less than 21 days before the sale date. c.&nbsp;244, &sect;&nbsp;14. The foreclosure sale must be held on or near the mortgaged property. c. 183, &sect;&nbsp;21. If the mortgagee holds a mortgage pursuant to an assignment, (i)&nbsp;the assignment must be executed and delivered, and should be recorded, by the time the notice is mailed, and (ii)&nbsp;the notice of sale must reference the recording information for all recorded assignments of the mortgage. Additionally, if a mortgage holder within the chain of assignment either changed its name or merged into another entity when it held the mortgage, the notice of sale must recite the fact of a merger or other change to the mortgage holder's name when it held the mortgage. c. 183, &sect; 55(i). Mortgagees must make a good faith effort to avoid foreclosure of a “certain mortgage loan” (defined as one that is made to a natural person “primarily for personal, family or household purposes secured wholly or partially by a mortgage on an owner-occupied residential property” that has one or more of the additional features listed in the statute) and notice of sale may not be published before reasonable steps have been taken to assess whether a modified mortgage loan or other reasonable loss mitigations would be in the best interest of all investors or holders of beneficial interests of the mortgage loan. c. 244, &sect;&nbsp;35B. Any mortgagor of residential real property consisting of a dwelling house with accommodations for 4 or fewer separate households and occupied in whole or in part by the mortgagor shall have a 90-day right to cure a default of a required payment by full payment of all amounts that are due without acceleration of the maturity of the unpaid balance of such mortgage. c. 244, &sect;&nbsp;35A(a). The right to cure a default of a required payment shall be granted once during any 5-year period. Id. The mortgagor shall pay late fees as allowed pursuant to Section 59 of Chapter 183 and per-diem interest to cure such default. c.&nbsp;244, &sect;&nbsp;35A(d). For certain mortgage loans, the mortgagee shall send notice, concurrently with the Right to Cure Notice required by Section 35A<a href="#_ftn4" name="_ftnref4">[4]</a>, of the borrower's rights to pursue a modified mortgage loan. C. 244, &sect;&nbsp;35B(c). After notice of the Right to Request a Modified Mortgage is delivered, the mortgagor of a certain mortgage loan has 30 days to notify the mortgagee of either: (i) the mortgagor's intent to pursue a modified mortgage loan; (ii) the mortgagor's intent to pursue an alternative to foreclosure, including a short sale or deed-in-lieu of foreclosure; (iii) the mortgagor's intent not to pursue a modified mortgage loan and pursue the right to cure period described in Section 35A(a); or (iv) the mortgagor's intent to waive any right to cure period and proceed to foreclosure. Id. A mortgagor who elects to pursue a mortgage loan modification begins the process of determining whether a modified mortgage loan is offered, which shall take no longer than 150 days. Id. A mortgagor, who holds a certain mortgage loan and fails to respond to the mortgagee within 30 days of the Right to Request a Modified Mortgage Notice being delivered, shall be considered to have forfeited the 150-day mortgage loan modification period set out in Section 35B(c) and the 90-day right to cure period set out in Section 35A(a), however, the mortgagor shall still be subject to a right to cure period of the same 90 days. Id. In the case of mortgage loans and foreclosures by federally chartered banks, certain Massachusetts requirements may be preempted by federal law. See Sovereign Bank v. Sturgis, 863 F. Supp. 2d 75 (D. Mass. 2012); see also Foley v. Wells Fargo Bank, N.A., 109 F. Supp. 3d 317, 325 (D. Mass. 2015) (citing Foley v. Wells Fargo Bank, N.A., No. 13-12107-FDS, 2013 WL 6489976 (D. Mass. Dec. 9, 2013)), aff'd, 741 F. App'x 819 (1st Cir. 2018).

Brief Description Of Procedure

The time necessary to accomplish a sale pursuant to the power of sale should be no longer than 4 to 6 weeks. In recent experience, the time necessary for the Servicemembers' procedure should be no more than 10 to 12 weeks, depending on the court's schedule. Thus, the entire foreclosure process could be completed within 14 to 20 weeks, although it generally takes a bit longer. If it is not necessary to obtain a judgment under the Servicemembers' Act, e.g., a corporate mortgagor, the foreclosure could be accomplished in 4 to 6 weeks.

Typical Length Of Procedure

The mortgagee may recover any deficiency arising from the foreclosure sale from the mortgagor by action in the appropriate trial court so long as (i)&nbsp;notice of intention to charge for deficiency (such notice on the statutorily-prescribed form) has been mailed to the mortgagor at least 21 days before the sale; (ii)&nbsp;an affidavit of such notice has been signed and sworn to by the mortgagee within 30 days after the sale; and (iii)&nbsp;the action is commenced within 2 years of the later of (a)&nbsp;the foreclosure sale date, and (b)&nbsp;if the principal of the promissory note is not due until after the foreclosure sale, the date on which the cause of action for the principal accrues. c.&nbsp;244, &sect;&sect;&nbsp;17A and 17B. The deficiency is the difference between the amount due on the promissory note (including interest, late fees, and costs) and the proceeds from the foreclosure sale, assuming no bad faith or improper conduct. See FDIC v. Precision Molding Co. (U.S.D.C. Civ. A. No. 91-10365-Z, 1994 WL 51625 (D. Mass. Jan. 5, 1994)).

Deficiency Claims

A right to redeem exists until the consummation of the sale pursuant to the statutory power of sale. Once the mortgage is accelerated, the price to redeem is the accelerated amount with accruals, charges, costs, and expenses.

Redemption Period And Price

A lease for a term longer than 7 years, or a notice of such lease, must be recorded with the applicable Registry of Deeds to be effective against third parties without actual knowledge of the lease. c.&nbsp;183, &sect;&nbsp;4. An assignment of leases and rents must similarly be recorded. The order of priority between a mortgage and a lease will be determined by the time of recordation and/or execution of the lease. (Often a mortgagee will require that a prior recorded lease be subordinated to the mortgage and at the same time provide the tenant with a non-disturbance agreement). Leases executed (if for a term of 7 years or fewer) or recorded (if for a term of more than 7 years) after the recording of a mortgage will be subordinate to the mortgage and will be terminated by operation of law upon a foreclosure sale, absent a written agreement between the tenant and the mortgagee to the contrary or the lender's subordination of the mortgage to the lease. A lender might also avoid this result by exercising its rights under an assignment of leases and rents, rather than under its mortgage. Upon a foreclosure of residential real property pursuant to c. 244, a tenant occupying a dwelling unit under an unexpired term for years or a lease in effect at the time of the foreclosure by sale shall be deemed a tenant at will. Foreclosure shall not affect the tenancy agreement of a tenant whose rental payment is subsidized under state or federal law and the foreclosing entity shall assume the lease and rental subsidy contract with the rental subsidy administrator. c.&nbsp;186, &sect;&nbsp;13A.

Effect Of Foreclosure Upon Leases

In response to developments in recent case law invalidating mortgage foreclosures for not strictly complying with the foreclosure statutes, the Massachusetts Legislature amended c. 244, &sect; 15 to provide that foreclosure affidavits filed under Section 15 shall become “conclusive evidence” to an “arm's length third-party purchaser for value” that a mortgagee complied with the foreclosure statute 3 years after the affidavit is recorded. The statute applies to all foreclosure affidavits and is intended to be a title clearing device for foreclosed properties where the validity of the foreclosure is doubtful. The affidavit will not become effective if a judicial action challenging the validity of the foreclosure is initiated before the 3-year deadline. A material misrepresentation in a foreclosure affidavit shall constitute a violation of Massachusetts' Consumer Protection Act, c. 93A.

FORECLOSURE AFFIDAVITS

In U.S. Bank National Association v. Ibanez (Land Court MISC 08-384283, October 14, 2009), the court invalidated 2 foreclosures of adjustable-rate, subprime home loans that had been transferred into securitization trusts on the ground that the foreclosing lenders failed to prove ownership of the subject mortgage loans at the time of foreclosure. Ibanez held that foreclosure sales are invalid where they fail to name “the &lsquo;present holder of the mortgage' at the time of the notice and sale (i.e., that post-sale mortgage assignments to the successful bidder, even if backdated, do not suffice) . . . .” On appeal, Massachusetts' highest state court upheld the ruling below, holding: “[w]e agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure. As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties, and their requests for a declaration of clear title were properly denied.” 458 Mass. 637 (2011). In Bevilacqua v. Rodriguez, 460 Mass. 762 (2011), a purchaser at a foreclosure sale petitioned the Massachusetts Land Court to rule on whether the original owner retained any interest in the subject property following a foreclosure sale by a mortgagee who did not hold a valid assignment of the mortgage at the time of foreclosure. The Land Court ruled that the purchaser's title was void because it derived from a foreclosure sale that was invalid on Ibanez grounds. The Massachusetts Supreme Judicial Court affirmed the Land Court's ruling that the third-party purchaser of the foreclosed property did not hold record title because the foreclosing entity was not the holder of the mortgage at the time of the foreclosure sale. The Supreme Judicial Court further held that such third-party purchaser lacks standing to bring an action to try title under c. 240, &sect;&sect;&nbsp;1-5. In Eaton v. Federal National Mortgage Ass'n, 462 Mass. 569 (2012), the Massachusetts Supreme Judicial Court ruled that the foreclosing entity must be both the mortgagee and the note holder, or authorized to act for the note holder, in order to conduct a valid foreclosure under c. 244, &sect;&nbsp;14. After Eaton was decided, the Massachusetts legislature enacted c. 244, &sect; 35C (effective November&nbsp;1, 2012), which requires that, prior to publishing a notice of sale, the mortgagee record an affidavit attesting that it is either the note holder or authorized to act by the note holder.<a href="#_ftn5" name="_ftnref5">[5]</a> Most title companies will also require that after the foreclosure, the mortgagee record an affidavit attesting that at the time of the foreclosure, it was either the note holder or authorized to act by the note holder, which is referred to as an “Eaton Affidavit”. Contemporaneously, the Massachusetts legislature enacted c. 244, &sect;&nbsp;35B, which requires mortgagees to make a good faith effort to avoid foreclosure of “certain mortgage loans,” as defined in &sect;&nbsp;35B, and prohibits publication of a notice of sale before reasonable steps have been taken to assess whether a modified mortgage loan or other reasonable loss mitigations would be in the best interest of all investors or holders of beneficial interests of the mortgage loan. For “certain mortgage loans,” notice of right to pursue a modified mortgage loan must be mailed concurrently with the notice of sale. c. 244, &sect;&nbsp;35B. In U.S. Bank National Ass'n v. Schumacher, 467 Mass. 421 (2014), the Massachusetts Supreme Judicial Court ruled that notice to cure letters under c. 244, &sect;&nbsp;35A are not part of the formal foreclosure proceedings under Chapter 244. Instead, Section 35A was intended “to give a mortgagor a fair opportunity to cure a default before the debt is accelerated and before the foreclosure process is commenced through invocation of the power of sale.” Accordingly, mortgagors may not challenge the validity of a foreclosure due to defects in a Section 35A letter. But just a year later, in Pinti v. Emigrant Mortgage Co., 472 Mass. 226 (2015), a divided Supreme Judicial Court concluded that a mortgagee needed to conduct a foreclosure sale in strict compliance with a notice provision included in the mortgage that was substantially similar to Section 35A. While the majority concluded that a defect in such a notice rendered the foreclosure void, the dissent would have allowed the foreclosure to stand because, in its view, there was no sound basis for distinguishing between each type of notice. The Court gave Pinti prospective effect only. In Federal National Mortgage Association v. Marroquin, 477 Mass. 82 (2017), the Court extended the application of the Pinti rule to cases pending in the trial court where the Pinti issue was timely and fairly raised before the date the Pinti decision was issued.<a href="#_ftn6" name="_ftnref6">[6]</a> The Supreme Judicial Court has since synthesized its analysis in Ibanez, Eaton, Schumacher and Pinti in Turra v. Deutsche Bank Trust Company Americas, 476 Mass. 1020 (2017). In Turra, the Court concluded that “strict compliance” with the foreclosure statutes does not mean strict compliance with every provision of c. 244, &sect;&sect;&nbsp;11-17C. Rather, the intent of the Court's prior cases was to make sure that mortgagees strictly comply with those provisions involving pre-foreclosure requirements and that may potentially harm a mortgagor. Accordingly, the Court did not void the foreclosure of a mortgage where the mortgagee did not comply with the foreclosure statutes' obligation to send post-foreclosure notices to various municipal authorities under c. 244, &sect; 15A. In 2020, the Supreme Judicial Court re-affirmed that, although non-judicial foreclosure must be exercised with careful regard to the interest of the mortgagor, “the regime of strict compliance does not require a mortgagee to &lsquo;demonstrate punctilious performance of every single mortgage term.'” Thompson v. JPMorgan Chase Bank, N.A., 486 Mass. 286, 291-92 (2020) (quoting Pinti, 472 Mass. At 235) (citing Pryor v. Baker, 133 Mass. 459, 460 (1882)). Instead, strict compliance is required with the actual terms of the power of sale in the mortgage and any conditions precedent to exercising that power. Id. at 292. Conditions precedent are “(1) terms directly concerned with the foreclosure sale authorized by the power of sale in the mortgage, and (2) those prescribing actions the mortgagee must take in connection with the foreclosure sale - whether before or after the sale takes place.” Id. (internal citations omitted). In Thompson, the Court clarified that it is continuing to elucidate the above definitions and “delineate which aspects of the regulatory scheme require strict compliance before a valid foreclosure can take place.” Id. (citing Turra, 476 Mass. at 1022 (failure strictly to comply with post-foreclosure requirements of G. L. c. 244, &sect; 15A, did not render sale void); Pinti, 472 Mass. at 227, 239-240 (failure strictly to comply with notice requirements of GSE Uniform Mortgage paragraph 22 renders foreclosure void); Schumacher, 467 Mass. at 422 (failure strictly to comply with notice requirements of G. L. c. 244, &sect; 35A, does not render foreclosure void because G. L. c. 244, &sect; 35A, is not part of foreclosure process); Eaton, 462 Mass. at 571, 580-581 (failure strictly to comply with requirements of G. L. c. 244, &sect; 14, renders foreclosure void)).

Recent developments

Massachusetts has a criminal usury statute that limits interest to 20%. However, the provisions of the section do not apply to any loan on which the rate of interest is regulated by any other provision of law or that is made by any lender subject to control, regulation, or examination by state or federal regulatory agencies. c.&nbsp;271, &sect;&nbsp;49.

Usury Ceiling

Any person who notifies the attorney general of his intent to engage in a transaction that would be proscribed by this section will be exempted. Such notification is valid for a 2-year period. c.&nbsp;271, &sect;&nbsp;49.

Usury Exemptions

Massachusetts adopted the national revisions to the UCC. Under those provisions, in order to perfect a security interest in fixtures, or goods to become fixtures, the filing must be made in the Registry of Deeds where a mortgage would be recorded, or if the land is registered, in the appropriate Registry District of the Land Court. Filers must therefore determine the type of land before filing. All other Massachusetts filings must be made in the Secretary of State's Office located in Boston. A mortgage and security agreement which complies with c. 106, &sect; 9-502(c) can be filed as a fixture filing in lieu of a financing statement.

FINANCING STATEMENTS

Unusual Provisions Or Requirements

Statutes To Be Waived

Special Problems In Enforcement Of Guaranty

. Please see paragraph, supra, entitled “Deficiency Claims”.

ISSUES AND GUIDELINES RELATING TO DEFICIENCY JUDGMENTS

Massachusetts General Laws, Chapters 183 through 189, govern title to real property; c.&nbsp;183 deals with alienation of land, and c.&nbsp;184 contains most mortgage provisions. Statutes specifically regulating mortgage lending by Massachusetts state chartered banks and credit unions are contained in c.&nbsp;167 through 170; see c.&nbsp;167E for lending provisions. Remedies relating to real property are contained in c.&nbsp;237 through 247; foreclosures are governed and controlled by c.&nbsp;244.

Applicable Statutes

The typical statute of limitation for a contract is 6 years; if a contract (other than those governed by Article 3 of the UCC) is executed under seal or witnessed, the statute of limitations is extended to 20 years. Actions for recovery of land must be commenced within 20 years after the right of action first accrues. c.&nbsp;260, &sect;&nbsp;21. There is also a 35-year statute of limitation on mortgage foreclosures. The 35 years begin to run from the date of recording and may be extended by an additional 5 years by filing an appropriate acknowledgment or affidavit. c.&nbsp;260, &sect;&nbsp;33. Note, however, that if the mortgage recites the maturity date of either the mortgage or the underlying debt, the statute of limitations is reduced to 5 years, subject to being extended. c.&nbsp;260, &sect;&nbsp;33. Therefore, it is better to omit a reference to any maturity date in the mortgage.

Statute Of Limitation Period

A mortgage is discharged by a deed of release or written acknowledgment, or payment or satisfaction of debt appropriately signed, executed and recorded. c.&nbsp;183, &sect;&sect;&nbsp;54, 54B and 54C. The mortgagee is obligated to provide a payoff statement within 5 business days of receipt of written request. c.&nbsp;183, &sect;&nbsp;54D. Upon a mortgagee's failure to provide a timely payoff statement as required by statute, the mortgagee shall be liable to the mortgagor for the greater of $500 or the mortgagor's actual damages (plus reasonable attorney's fees). c.&nbsp;183, &sect;&nbsp;54D. If the mortgagee after full payment and satisfaction of the condition of the mortgage fails to record, or provide to the closing attorney, settlement agent or other person transmitting the payoff, a duly executed and acknowledged discharge of the mortgage as required by the statute within 45 days, it is liable for the greater of $2,500 or the mortgagor's actual damages (plus reasonable attorney's fees). Similarly, if the closing attorney, settlement agent or other person who has received a discharge fails to record the discharge within 45 days, it is liable for the greater of $2,500 or the mortgagor's actual damages (plus reasonable attorney's fees). There are also provisions permitting a mortgage servicer, a note holder, or an attorney, on behalf of the mortgagor, to execute and record an affidavit setting forth certain factual assertions of payment, and when recorded, such affidavit becomes a discharge. c.&nbsp;183, &sect;&nbsp;55.

Requirements For Release Of Lien

By statute that took effect in March 2011 and amended existing homestead law, all homeowners automatically receive a homestead exemption in the amount of $125,000 for their primary residences; no filing of a homestead declaration is necessary. c.&nbsp;188, &sect;&sect;&nbsp;1, 4. For homeowners who file a declaration with the applicable Registry of Deeds, a homestead exemption in the maximum amount of $500,000 is available. c.&nbsp;188, &sect;&sect; 1,&nbsp;5. The calculation of the declared homestead exemption will depend upon whether the property is owned (a)&nbsp;by a person 62 years old or older or a disabled person, or (b)&nbsp;by 1 or more persons in a trust or as tenants in common, joint tenants or tenants by the entirety. See c. 188. Manufactured homes and multifamily homes (containing up to 4 units) are eligible for homestead protection under the amended law. c.&nbsp;188, &sect;&nbsp;1. The statutory amendments also provide homestead protection for (A)&nbsp;the proceeds of a home sale until the earlier to occur of (i)&nbsp;the homeowner's acquisition of a new principal residence and (ii)&nbsp;1 year after the home sale, and (B)&nbsp;insurance proceeds relating to damage to a home until the earliest of (i)&nbsp;reconstruction of the home, (ii)&nbsp;the homeowner's acquisition of a new principal residence, and (iii)&nbsp;2 years after the insurance payout. c.&nbsp;188, &sect;&sect;&nbsp;1, 11. Closing attorneys in Massachusetts mortgage transactions must provide mortgagors with notice of the right to declare a homestead and obtain from mortgagors a written confirmation of receipt. c.&nbsp;188, &sect;&nbsp;14. The homestead can be released by deed, instrument of release, death, subsequent homestead declaration on another property or abandonment of the home as a principal residence. c.&nbsp;188, &sect;&nbsp;10. Lenders are prohibited from requiring a mortgagor to release or waive a declaration of homestead in connection with a mortgage transaction. c.&nbsp;188, &sect;&nbsp;9. However, homestead estates are subordinate to mortgages executed by all of the owners of the home. c.&nbsp;188, &sect;&nbsp;9. Homestead declarations filed under the pre-amendment homestead law remain valid and are given the benefits of the statutory amendments. St. 2010, c. 395.

Homestead Issues

COMMUNITY PROPERTY

Mortgage Tax

Massachusetts imposes on the seller a tax of $4.56 per $1,000 upon the amount of consideration shown in a deed. c. 64D, &sect; 1. There is no tax on the mortgage. In Barnstable County, the fee is $6.12 per $1,000 due to the addition of a county tax. Nantucket County and Dukes County collect an additional land bank fee upon the transfer of real property equal to two percent of the purchase price.

Documentary Stamp/Transfer Tax

Massachusetts law generally supports the proposition that parties to a contract may stipulate the law which governs their contract unless (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state and is the state whose law would apply in the absence of an effective choice of law by the parties. Steranko v. Inforex, Inc., 5 Mass. App. Ct. 253, 260 (1977); see Hodas v. Morin, 442 Mass. 544, 549-50 (2004) (“Massachusetts courts will uphold the parties' choice as long as the result is not contrary to public policy.”); Jacobson v. Mailboxes Etc. U.S.A., Inc., 419 Mass. 572, 575 (1995) (applying law of State designated in contract “in the absence of any substantial Massachusetts public policy reason to the contrary”); Morris v. Watsco, Inc., 385 Mass. 672, 674 (1982) (“Massachusetts law has recognized, within reason, the right of the parties to a transaction to select the law governing their relationship”); Oxford Global Resources, LLC v. Hernandez, 480 Mass. 462 (2018).

Enforceability Of Agreement Of Borrower And Lender As To Choice Of Law Provisions

Massachusetts does not have a specific statute authorizing the appointment of a receiver for real property.

Receiver Available

For properties using septic tanks or other onsite sewage systems, an inspection is required whenever there will be a transfer of title (including by foreclosure). If the inspection finds that the system does not meet appropriate regulations, the system must be upgraded. Lenders will require a certificate of compliance. 310 CMR 15.

Sewerage Disposal System Inspections

Chapter 21E, the Massachusetts Oil and Hazardous Material Release Prevention Act, requires remediation of oil and other hazardous waste. A mortgagee normally will not be responsible for such remediation, absent the exercise of control over the property. c.&nbsp;21E, &sect;&nbsp;2(c). The practice is to require an environmental site inspection on commercial transactions.

Hazardous Waste

Superlien Laws. Massachusetts law creates a superlien in the contaminated property, real and personal, and gives the state a lien with lesser priority in all other real and personal property owned by a responsible person, such as a current or former owner or operator or a generator or transporter. It is not clear whether residential property is excepted from the lien altogether or whether it is merely excepted from the superlien provision of the section. Environmental liens on residential real property are either not given super priority or are not permitted at all. Liability under the state's hazardous waste laws is a debt that becomes a lien when a statement of claim is recorded or filed against the responsible person. To be valid against real property, the statement must be recorded in the registry of deeds for the county or district in which the real property lies.<a href="#_ftn7" name="_ftnref7">[7]</a> To be valid against personal property, the statement must be filed in the office where Article 9 financing statements are filed.<a href="#_ftn8" name="_ftnref8">[8]</a> The state is given priority in the contaminated property, real and personal, over any encumbrance previously recorded, but its lien is subject to existing recorded liens in all other property. <a href="#_ftn9" name="_ftnref9">[9]</a> Once filed, the lien secures all past and future costs incurred by the state and is subject to interest at 12% per annum from the date such debt becomes due.<a href="#_ftn10" name="_ftnref10">[10]</a> When conducting due diligence on a property, it is advisable to ascertain whether the Commonwealth undertook response actions at site and may have incurred costs for which notice has or has not yet been given or where a statement of claim has yet to be recorded. The Court of Appeals for the First Circuit held that the Commonwealth of Massachusetts was not stayed from perfecting post-petition a superlien under its superlien law because perfection fell within the exception to the automatic stay provided by 11 U.S.C. &sect;&nbsp;362(b)(3) in In re 229 Main Street Ltd. Partnership.<a href="#_ftn11" name="_ftnref11">[11]</a> In Massachusetts the state's lien in any uncontaminated property, real and personal, is subject to existing recorded liens. The state's lien thus takes priority from the time it is filed. That is, the lien is prospective in nature.

Environmental lien law issues

Mortgage lenders generally require a due authority and enforceability opinion from mortgagor's counsel in connection with a commercial real estate financing. Such opinions typically cover the due authority of the mortgagor and any guarantors to enter into the loan arrangement and the enforceability of the mortgage and other loan documents executed as part of the transaction. The Real Estate Bar Association of Massachusetts has a standard form of opinion available for guidance. In connection with loans secured by new construction of commercial properties, mortgage lenders may also require a zoning and land use opinion from mortgagor's counsel (in addition to, or in substitution for, a zoning endorsement to the title policy). Such opinions typically cover compliance of the property with local zoning by-laws or ordinances (as to both use and dimensions) and compliance with significant land use permits affecting the property, including those with respect to wetlands, historic preservation laws, environmental impact reviews, water and sewer permits, traffic-related permits and similar matters. Such opinions do not typically address hazardous waste issues and practitioners rely heavily on certifications from developers, surveyors and engineers for the factual basis for the opinions.

LEGAL OPINIONS

Applications for residential mortgages must have a statement describing the responsibility of the attorney for the mortgagee and the mortgagor's right to obtain counsel. c.&nbsp;184, &sect;&nbsp;17B.

Applications

There is no statutory limitation on the amount of loan fee, finder's fee, or points or similar fees that may be charged, although they may affect whether a loan is deemed usurious.

Points

A mortgagee may not discriminate in the granting of a mortgage based upon the location of the property. If a mortgage application is denied, the mortgagor must be given the reasons for the denial. c.&nbsp;183, &sect;&nbsp;64.

Discrimination

Residential mortgage lenders and brokers must be licensed pursuant to the provisions of Chapter&nbsp;255E and 209 CMR 42. A bank or insurance company making a real estate loan or purchase for its own account is exempt for registration. c.&nbsp;112, &sect;&nbsp;87QQ. The commissioner shall inspect a licensee's relevant records and evidence of compliance with the provisions of Chapter 255E or any rule or regulation issued thereunder. During the course of such inspection, a mortgage lender that has made 50 or more home mortgage loans in the last calendar year shall be examined for its compliance with fair lending laws. Upon the completion of such examination, the commissioner shall prepare a written evaluation of such lender's record of performance, which shall be open to public inspection upon request. Based upon such examination, the mortgage lender shall be assigned 1 of 5 possible descriptive ratings. In considering an application for a renewal of a license, the commissioner shall consider the lender's record of performance in accordance with this section. c.&nbsp;255E, &sect;&nbsp;8.

Licenses

If a child under 6 resides in the premises, any lead paint must be removed. Most lenders for residential property accept a certificate of indemnification from the borrower. For commercial and residential transactions, either an inspection and de-leading program or escrows and indemnity are typically required. Mortgagees may not discriminate in the financing of residential premises because of lead paint. c.&nbsp;167, &sect;&nbsp;48; c.&nbsp;111, &sect;&sect;&nbsp;127B, 127B&frac12;. 189A, 190, 192, 192A, 192B, 193, 194, 197, 197A, 197B, 197C, 197D, 197E, 198, 199, 199A, and 199B.

Lead Paint

Before an attorney for a mortgagee may deliver a mortgage for recording, the attorney must have received “good funds” from the mortgagee. Good funds include certified check, bank treasurers' check, cashier's check, transfer between accounts within the same bank, wire transfers through the Federal Reserve Bank or an automated clearing house. c.&nbsp;183, &sect;&nbsp;63B.

Good Funds

Chapter 157 of the Acts of 1996, inserted in the General Laws as c.&nbsp;109A, adopts the Uniform Fraudulent Transfer Act.

Fraudulent Transfers

No mortgagee who makes a loan to a first-time home loan borrower, to be secured by a mortgage on owner-occupied 1-4-family residential property, shall make a subprime loan at a variable or adjustable rate of interest unless the mortgagor affirmatively opts in writing for the variable or adjustable rate subprime loan and receives certification from a counselor with a third-party nonprofit organization that the mortgagor has received counseling in person on the advisability of the loan. c.&nbsp;184, &sect;&nbsp;17B &frac12;.

Conditions to Residential Variable Rate and Subprime LoaNS

Labor and material lien claims are created and governed by Chapter 254 of the General Laws. The statute provides for 4 types of liens: (a)&nbsp; Liens for “personal labor” performed in the erection, alteration, repair or removal of a building or structure. c.&nbsp;254, &sect;&nbsp;1. (b)&nbsp; General contractor liens arising out of a written contract for the construction, or alteration of improvements on land. c.&nbsp;254, &sect;&nbsp;2. (c)&nbsp; Liens in favor of a party who has performed or furnished labor or material pursuant to a contract with a contractor, i.e. a subcontractor or materialman. c.&nbsp;254, &sect;&nbsp;4. (d)&nbsp; Liens in favor of “design professionals”-including architects, landscape architects, professional engineers, surveyors and licensed site professionals-holding written contracts with the owner relating to the proposed or actual erection, alteration, repair or removal of a building, structure or other improvement to real property. c.&nbsp;254, &sect;&nbsp;2A.

General

Liens for personal labor cover a maximum of 30 days of labor performed during the 90 days prior to filing of a statement of account. The lien is inchoate and will relate back from the time of recording of the statement of account to take priority over intervening matters, i.e., mortgages, deeds etc. Moreover, the lien applies to any interest in real property owned by the person authorizing or consenting to the work, e.g., a lessee. In order to achieve some protection against this lien for lenders, title insurance companies have been deleting the standard exception therefor upon receipt of an affidavit from the seller or owner to the effect that no work or materials have been supplied to the premises within the preceding 90 days.

Personal Labor Liens

These liens are not created and will not affect the record title until a notice of contract has been recorded or filed in the Registry District of the Land Court or in the Registry of Deeds. Such notice may be filed any time after the execution of a written contract whether or not the date for performance has passed or the work completed so long as it is filed or recorded not later than the earliest of: (i)&nbsp;&nbsp; 60 days after recording or filing a notice of substantial completion, (ii)&nbsp; 90 days after recording or filing a notice of termination, (iii) 90 days after the last performance under the contract. If a notice of contract is duly filed, a construction lender may withhold funding only until it receives a valid partial waiver and subordination of lien form. c.&nbsp;254, &sect;&nbsp;33; see c. 254, &sect;&nbsp;32 (providing the relevant forms). Thereafter, the funds advanced will only be subordinate to retainage.

General Contractor Liens

A subcontractor (including a subcontractor to a design professional) or supplier may record a notice of contract at any time after execution but no later than the earliest of: (i)&nbsp;&nbsp;&nbsp; 60 days after the filing or recording of the notice of substantial completion, (ii)&nbsp;&nbsp; 90 days after filing or recording of notice of termination, (iii)&nbsp; 90 days after the last day a general contractor performed or furnished labor or materials. In order to protect subcontractors and suppliers, the statute provides that those contractors who do not have a direct relationship with the general contractor or the owner, may send a “notice of identification” to the general contractor. The general contractor is thereafter obligated to provide a copy of the notice of substantial completion or notice of termination to all subcontractors and suppliers who have given such notice of identification. Failure to provide such notice will not affect the rights of third parties who rely on the status of the record. Once a notice of contract for a subcontractor or supplier is recorded, funds advanced thereafter are junior in priority. There is no provision for forced funding upon the filing of a partial waiver and subordination form if the loan documents authorize the lender to withhold funding.

Subcontractors and suppliers

A design professional may record a notice of contract at any time after execution but no later than the earliest of: (i)&nbsp;&nbsp;&nbsp; 60 days after the filing or recording of the notice of substantial completion, (ii)&nbsp;&nbsp; 90 days after filing or recording of notice of termination, (iii)&nbsp; 90 days after the last day such design professional performed professional services. If a property subject to multiple mechanics' liens is not of sufficient value to satisfy all such liens, the design professionals' claims are subordinated to the claims of parties holding traditional mechanics' liens. c.&nbsp;254, &sect;&nbsp;21.

design professionals

Liens under c.&nbsp;254, &sect;&nbsp;2 or c.&nbsp;254, &sect;&nbsp;4 will be dissolved unless the party claiming the lien files or records a statement of account not later than the earliest of: (i)&nbsp;&nbsp;&nbsp; 90 days after filing or recording of notice of completion, (ii)&nbsp;&nbsp; 120 days after filing or recording notice of termination, (iii)&nbsp; 120 days after the last day the claimant performed or furnished labor or material. c.&nbsp;254, &sect;&nbsp;8. Moreover, the lien will be dissolved unless a complaint is filed within 90 days after recording of the statement of account. c.&nbsp;254, &sect;&nbsp;11. An attested copy of the complaint must be recorded within 30 days of the commencement of the action. The statute provides for the recording of statutory lien bonds, which will prevent the attachment of any claim under c.&nbsp;254. c.&nbsp;254 &sect;&nbsp;12. Massachusetts practice is to obtain an affidavit from the owner or seller with respect to Section&nbsp;1 liens and title companies will insure over those liens for the lender only on receipt of such affidavit. With respect to c.&nbsp;254, &sect;&nbsp;2 and c.&nbsp;254, &sect;&nbsp;4 liens, it is the practice of lenders to obtain a rundown prior to further advances on a construction loan. Title insurance companies use a revised pending disbursements clause to take into account the statutory provisions.

Perfection and enforcement of liens

The Massachusetts Prompt Pay Act, c. 149, &sect; 29E, regulates contractual payment terms for construction contracts totaling $3 million or more, except for residential projects containing 1 to 4 dwelling units. The statute sets mandatory maximum time periods for periodic progress payments, as well as change order requests. In addition, the statute makes conditional payment provisions unenforceable in Massachusetts unless they fall into 2 specific exceptions that must be expressly stated in the construction contract. The first exception allows nonpayment due to nonperformance of a third party, while the second exception addresses nonpayment due to the insolvency of a third party. Massachusetts has also limited retainage of progress payments made prior to substantial completion to 5% for construction contracts totaling $3,000,000 or more, except for residential projects containing 1 to 4 dwelling units. c. 149, &sect;&nbsp;29F. The statute imposes a schedule for establishing substantial completion and initiating payment disputes between a contractor and an owner.

Construction Contracts

Virtually all lenders require title insurance for loans secured by mortgages on real estate in Massachusetts. Title insurance rates are not set by the Massachusetts Insurance Commissioner and are therefore often negotiable, particularly on large commercial transactions. Most policies are still written by attorneys who are acting as agents for the various title insurance companies.

Most residential and commercial loan policies are written on the current ALTA form. The form contains 3 general exceptions: <ol>
 <li>Rights of tenants or others in possession,</li>
 <li>Labor and Material lien claims,</li>
 <li>Discrepancies that would be shown by an accurate survey.</li>
</ol> General exceptions 1 and 2 may be deleted upon the execution of an appropriate affidavit by the borrower or seller and the survey exception may be deleted upon the receipt of a survey or plot plan (for residential loans). The policy also takes an exception for real estate taxes and assessments, which may be modified by obtaining and recording a certificate of municipal liens from the City or Town showing the status of taxes. For construction and other loans not fully disbursed at closing a “Pending Disbursements Clause,” requiring title rundowns pending any disbursement, is required in order to include the disbursement in the coverage afforded by the policy.

Form Usually Required By Lender

. The following endorsements are usually required by residential lenders:

Endorsements - Residential Property

insuring a validly created condominium.

Condominium endorsement (ALTA Form 4)

insuring against loss of priority due to the variable rate clauses.

Variable rate mortgage endorsement (ALTA Form 6)

insures against environmental liens of record.

Environmental Lien endorsement (ALTA Form 8.1)

typically insures those matters required in secondary market transactions, including easements, real estate taxes, and restrictive covenants.

Secondary mortgage market endorsement

. In addition to those noted above, the following endorsements are usually required by commercial lenders:

Endorsements - Commercial Property

insures that the premises comply with applicable zoning regulations. Typically this endorsement, and several of the others listed below, will not be issued without a report of a zoning service and/or architect's/engineer's certificate or an attorney's zoning opinion and payment of an additional fee.

Zoning endorsement (ALTA 3.0 or 3.1)

insures that certain matters of record will not divest, subordinate or extinguish the mortgage.

Comprehensive endorsement (ALTA 9-06)

insures that the insured premises are the same as the premises described in the plans.

Survey endorsement

insures that the premises have a legal right of access to the abutting street.

Access endorsement

removes the exclusion for unenforceability created by failure of the insured to be doing business in the state in which the land is situated.

Doing Business endorsement

insures that the insured premises are a lawfully created parcel under Massachusetts subdivision control law.

Subdivision Control Act endorsement

insures that the insured premises do not include any land other than that included within the tax parcel.

Tax Parcel endorsement

insures that the mortgage will not be invalidated by a violation of the Massachusetts Usury Statute.

Usury endorsement

insures additional or collateral mortgages to the amount set forth in the principal policy.

Tie In endorsement

Environmental Lien endorsement (ALTA Form 8.2)

insures against loss in the event the parcels insured are not contiguous to each other.

Contiguity endorsement

insures a right of access to the utilities specified in the endorsement. &nbsp; &nbsp;

Massachusetts

Mortgage Law Summary

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Mortgage Law Summary for Massachusetts

Massachusetts

Mortgage Law Summary

Continue reading theMortgage Law Summary for Massachusetts

Continue reading the
Mortgage Law Summary for Massachusetts