June 5, 2014
by Shannon Merrill
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)
On April 5, 2014, the governor of Maine signed into law L.D. 1389, “An Act to Expedite the Foreclosure Process.” There are several parts of the Act, some of which have nothing to do with expediting the foreclosure process. The effective date of the Act is August 1, 2014.
Part A – Conveyance Taxes
Under Part A, Section A-2, Maine transfer taxes will now be due on assignments of bid and assignments of judgment in addition to the transfer tax that is already due on foreclosure deeds. The person assigning the bid or assigning the judgment shall report the assignment to the register of deeds within 30 days of the assignment. A form affidavit will be furnished by the state tax assessor for this purpose. The return must be signed by both the transferor and transferee and be accompanied by payment of the tax due.
Section A-3 further clarifies the transfer tax liability associated with foreclosure deeds and deeds-in-lieu of foreclosure (DIL). In a DIL conveyance, only the mortgagor is exempt from the tax, which results in half the tax remaining due by the DIL grantee. In a foreclosure sale where a third party is the successful bidder, the grantor’s (this is usually the foreclosing plaintiff) portion of the tax on the foreclosure deed is calculated on the portion of the proceeds of the sale that exceeds the sum required to satisfy the mortgage and all other junior claimants secured by the property. The grantor’s portion of the tax must be deducted from these excess proceeds, if any. The grantee would still pay its full share of the conveyance taxes based on the purchase price. In the event of a foreclosure deed or an assignment of judgment or bid from the mortgagee or its servicer to the mortgagee or its servicer or to the owner of the mortgage debt, the mortgagee or servicer (if the servicer is the selling entity) is considered to be both the grantor and grantee for conveyance tax purposes. Therefore, under the circumstances where the conveyance is to the investor, the investor is no longer required to sign the return.
Part B – Foreclosure of Abandoned Properties
Part B of the Act concerns expediting the foreclosure of residential properties through an order of abandonment.
(I) Uncontested Foreclosure. Only an uncontested foreclosure action or an uncontested foreclosure judgment is eligible. An action or judgment is uncontested if all of the following are true: (1) The mortgagor has not appeared in the action to defend against foreclosure; (2) There has been no communication from or on behalf of mortgagor to the plaintiff for at least 90 days showing any intent of the mortgagor to continue to occupy the premises, or there is a document of conveyance or other written statement signed by the mortgagor that indicates a clear intent to abandon the premises; and (3) Either all mortgagees with interests that are junior to the interests of the plaintiff have waived any right of redemption or the plaintiff has obtained or has moved for default judgment against such junior mortgagees.
(II) Proof of Abandonment. After a foreclosure case is determined to be uncontested, abandonment still needs to be proven by clear and convincing evidence. The statute lists some items that may constitute abandonment. For example, evidence of broken or boarded-up doors and windows; rubbish, trash or debris accumulations; the lack of furnishings and personal property at the mortgaged premises; excessive deterioration so as to constitute a threat to public health or safety; and reports of vandalism or other illegal acts being committed on the mortgaged premises have been made to local law enforcement authority. Once the evidence of abandonment has been gathered, the plaintiff may at any time after the commencement of the foreclosure action file a motion with the court to determine that the mortgaged premises have been abandoned. If the court finds by clear and convincing evidence based on testimony or reliable hearsay (such as affidavits) that the mortgaged premises have been abandoned, the court may issue an order granting the motion and determining that the premises have been abandoned.
(III) Effect of Abandonment. If the court determines that the property is abandoned, the foreclosure proceedings will be affected as follows: (1) The foreclosure action may be advanced on the docket so judgment may enter more quickly; (2) The post judgment- presale redemption period may be shortened from 90 days to 45 days from the later of the issuance of the judgment of foreclosure and the order of abandonment; (3) If the mortgaged premises include dwelling units occupied by tenants as their primary residence, then the plaintiff assumes the duties of landlord upon the later of the issuance of the judgment of foreclosure and the order of abandonment; and (4) The plaintiff must notify the municipality of the abandonment and must also record the order of abandonment in the appropriate registry of deeds within 30 days from the later of the issuance of the judgment of foreclosure and the order of abandonment.
Part C – Sale Postponements and Abandoned Properties
Currently, under Maine law, a sale can be postponed for any time not exceeding seven days and from time to time until the sale is eventually made. However, if a property has been determined by the court to be abandoned, the public sale may only be adjourned once for any time not exceeding seven days, except that the court may permit one additional adjournment for good cause shown. Notwithstanding the foregoing, additional adjournments may be made as required by Dodd-Frank.
Part D – Statute of Limitations for Challenging Tax Takings
The Act now limits the time allowed to commence an action challenging a governmental taking of real estate for nonpayment of property taxes to a five-year period following the expiration of the period of redemption for those tax liens recorded after October 13, 2014. The Act also amends the time limit for tax liens recorded prior to October 13, 2014.
Part E – Repossession Companies and Property Preservation Providers Now Considered Debt Collectors under Maine Law
Repossession companies and residential real estate property preservation providers are now considered debt collectors under Maine law. The Act defines a residential real estate property preservation provider as a person who regularly provides residential real estate property preservation services, but the definition does not include a supervised financial organization, a supervised lender, or other persons licensed by certain Maine examining boards. Residential real property preservation services are defined under the Act as those undertaken at the direction of a person holding or enforcing a mortgage on residential real estate that is in default or in which the property is presumed abandoned in entering or arranging for entry into the building to perform services of winterizing the residence, changing the door locks, or removing unsecured items from the residence.
The Act also allows a residential real estate property preservation provider to enter a dwelling only if authorized by the terms of the note, contract, or mortgage. The provider may not use force or create a breach of the peace against any person. The provider shall inventory any unsecured items removed from the dwelling and immediately notify the appropriate consumer that the unsecured items will be made available in a manner convenient to the consumer. The provider shall make a permanent record of all steps taken to preserve and secure the dwelling and shall make that record and the inventory of removed unsecured items available to the consumer upon written request.
Because residential real estate property preservation providers are debt collectors, they will now have to also comply with the Maine Fair Debt Collection Practices Act and will be required to be licensed and regulated by the Maine Department of Professional and Financial Regulation, Bureau of Consumer Credit Protection.
Part F – Miscellaneous Foreclosure Mediator Requirements
The last part of the Act applies more stringent requirements on the qualifications to be a foreclosure mediator. It also requires additional information to be included in mediator’s reports.
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