Mortgages & Foreclosures

Securing your interests when lending money for a Maine land transaction is crucial to your ability to collect on the debt in the future should the need arise. Don’t find out that you did your mortgages incorrectly when it comes time to foreclose. We are ready to help you protect your investment or foreclose to try to recoup a debt owed to you.

Mortgage law and the Law of Foreclosures go hand in hand. We are experts in drafting mortgage instruments to protect our clients. We are also experienced, foreclosure attorneys. If you need help securing your property interest or foreclosing a property, call us today to discuss your case.

Mortgages

Traditionally, a mortgage conveys real estate to another as security for the payment of a debt. If the debt is paid, the mortgage deed is discharged.

Typically, mortgages involve two documents:

  1. The mortgage deed whereby the borrower conveys an interest in the property to the mortgage holder. The borrower retains the right to possession so long as the mortgage remains paid.
  2. The promissory note creates the legal obligation to pay the money. Thus, the mortgage deed serves as a backup to the promissory note to ensure that if the promissory note is not paid, the mortgage holder could foreclose the mortgage to take possession of the property and sell it to recover its money.

mortgages

A mortgage deed is similar to a warranty deed, but it contains a “defeasance clause,” which states that the conveyance is void and of no effect, if the debt is paid. Maine is a Title Theory State which means that legal title is conveyed along with the mortgage subject only to the defeasance clause. In addition to the covenants traditionally contained in a warranty deed, mortgages also typically include a covenant by the borrower to pay the note, pay the real estate taxes, insure the property, and maintain it in good condition.

Mortgages also often contain an “acceleration clause.” This permits the mortgage holder to demand the entire amount owed under the note immediately in the event of a breach by the borrower. Mortgages might also include prepayment clauses that permit or disallow the mortgage’s early payment by the borrower.

Term mortgages call for payment over time, with interest being paid upfront and a lump sum payment of the principal at the end of the term. Amortized mortgages require both principal and interest payments over an established period, usually in monthly payments. Knowing just what type of priority your mortgage has is essential.

Some mortgages have priority over other mortgages that another party might hold. The focus of each mortgage is typically established based on the date the mortgage was recorded. Thus, the first mortgage given on property is generally the first to be paid in a foreclosure event. There are many products offered by banks today that are variations of traditional mortgages.

They have the same legal effect as the traditional mortgage. Home equity lines are nothing more than open mortgages. A person can borrow against the equity in their home for a set period and up to a set amount, after which the borrowing period closes, and a traditional mortgage remains. Some banks will permit a borrower to pay only interest during the borrowing period on a home equity line. Others will require payment on principal and interest throughout the borrowing period. 

One alternative that is sometimes used by individuals selling land is called an Installment Land Contract. Under this method, a promissory note is given. Payments are made to the seller over time, but the deed is held back by the seller and only signed over to the buyer after the entire contract has been paid.

Foreclosures

The law of foreclosure refers to the process by which a mortgage holder can claim the property to recoup the money owed to them after a homeowner defaults on the mortgage. It is a complex process. By far, it is the most active area of real estate law in Maine’s Courts today.

The term “foreclosure” can be understood through the multi-step process used in Maine to take a property through a mortgage deed. Our law’s underlying goal is to provide every opportunity for the homeowner to redeem their interest in the property while giving the mortgage holder reasonable ability to protect their interest. Most private foreclosures are begun by sending a Notice to Cure to the delinquent borrower demanding payment within a set timeframe notifying the borrower of their rights and the fact that a Court action will be brought if payment is not received.

The Notice to Cure must contain particular language, or the entire foreclosure process will be undone. Thus, you must seek an experienced attorney to help you with this process. If the default is not cured by the time stated in the Notice to Cure, the mortgage holder will typically file a civil action to foreclose the property in the Maine Courts.

The foreclosure process in Maine is governed by statute and includes many specific deadlines. Once an action is filed, the borrower’s right of redemption begins to run. This is a period during which the borrower will be permitted to stop the foreclosure by correcting the default. Once the redemption period has expired, the borrower’s interest in the property is said to be foreclosed forever.

Although Court action is often necessary, other foreclosing methods are simpler and less costly to the parties. For instance, a party may give a Deed in Lieu of Foreclosure, whereby the borrower conveys the property to the mortgage holder to prevent the process of having to go through foreclosure and to ensure that the borrower will not have to pay any deficiency between the value of the property and the amount owed.

Once a property is foreclosed, the mortgage holder holds both legal and equitable title to the property. The property is then sold at a public auction after being published in a typical circulation paper in the county in which the property is located. If the property sells for more than is owed, any excess money must be paid according to the priority set by the Court in its foreclosure judgment.

If, after all of the mortgage interests are paid, money is left over, the money is paid to the borrower. If there is insufficient money from the sale to pay the whole debt, the borrower might face a “deficiency judgment.” Whereby they are still obligated to pay the remaining amount owed after the house sale.