Property Mortgage Holder Rights in Foreclosure in the State of Maine
The mortgage holder is usually the lender or other entity that owns the mortgage loan. In a foreclosure situation, the mortgage holder's rights are backed by the security document signed when the mortgage loan was obtained. Maine state law requires the mortgage holder to proceed with the property foreclosure process through the judicial system and a mediation program.
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Mortgage Loan
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Before a mortgage loan funds, the borrowers are required to sign a series of loan documents, including the security instrument. Maine practices the lien theory in real estate law. A mortgage document acts as the security instrument to place a lien on the property in favor of the mortgage holder until the loan is paid in full. Additionally, the mortgage explains and defines all the terms and conditions associated with the loan. The borrower is informed of the lender's definition of default and what action the lender will take if default occurs. Under the lien theory in Maine, the lender is required to file a formal complaint against the borrower in court before it can sell the property at a foreclosure auction.
Default
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The mortgage holder exercises the right to enforce the conditions of the loan as described in the mortgage. The primary reason for property foreclosure is loan default. Generally, a loan is considered in default when payment is 30 days past due. At this point, Maine law requires the mortgage holder to send the borrowers a notice of default. If the borrowers do not pay the amount owed within 30 days, the mortgage holder can take the claim to court and begin the foreclosure process. The actual time frame of default may vary by lender.
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Judicial Foreclosure Mediation
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After the mortgage lender files the foreclosure complaint against the borrowers, it must notify them of the foreclosure action. In 2010, Maine implemented a new law that requires the lender to inform the borrowers in the notice that if they fail to submit an answer to the court regarding the complaint, their property will be foreclosed on. If they do fail to enter an answer, the court can rule in favor of the lender to foreclose. However, if the borrowers enter an answer, a mediation program begins. During this mediation program, the borrowers are able to speak face-to-face with real estate attorneys and the mortgage holder. During a series of discussions, the borrower and mortgage holder must try to reach an agreement to avoid foreclosure. Some methods to avoid foreclosure include loan modifications or short sales. The mortgage holder, or its representative, is required to actively participate in the mediation program.
Deficiency Judgment
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If foreclosure does result despite the mediation program, or the borrowers fail to answer the compliant, the property will be sold through an auction. The auction can be held at the county courthouse or at an attorney's office. If the property does not sell for what is owed on the mortgage loan, Maine allows for the mortgage holder to sue the borrower for a deficiency judgment. The amount requested is the difference between the unpaid loan balance and the sales price from the property auction.
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