Maine has the 2nd highest rate of home ownership in the country. At 70%, it is fair to say the Pine Tree state is doing a good job. Some people in Maine are looking at what are called "hard money" loans to help with purchasing or renovating an investment property or to find special financing options beyond the standard mortgage loan. They might need to move faster than a typical loan can with a big bank, or they might want less paperwork to deal with. Hard money loans offer speed and a lot less paperwork than most loans. That's because hard money loans are mostly based on a property owner's use of their home or other real estate as collateral. People looking for alternatives to a standard mortgage loan in the state of Maine can often find funding with hard money loans.
State Foreclosure Laws in Maine
Maine is a judicial foreclosure state. Foreclosures in Maine are managed by the courts. A mortgage company or lender that decides to foreclose on a property must file a law suit and a court must issue a final judgment of foreclosure in order to take the property. There are clear steps in place to assure that a borrower is properly notified and that they have a chance to respond. But, if a final judgment of foreclosure is issued in Maine, then the property is usually sold as part of a public noticed sale. A sheriff or judge within the county where the property is located will conduct the sale.
Property Redemption after Foreclosure Sale
In some states, borrowers have a standard period of time where it is possible to get their property back after a foreclosure sale has taken place. In Maine, most borrowers have no rights of redemption after the sale is final. In some cases, the lender might allow a borrower to redeem the home with special fees and payment, but it must happen before the public sale of the property. (Me. Rev. Stat. Ann. Tit. 14 § 6323). This option to redeem is at the sole discretion of the lender and is not required by law in Maine. Further, in order to redeem, you must pay the total amount due on the mortgage, plus interest, fees, and costs. This means that you need to find another source of financing and pay the lender the full amount you owe, not just the payment arrears. It is highly recommended that borrowers seek legal counsel.
In cases where a foreclosure property is sold in Maine, but it does not bring in enough money to cover the debt, a borrower can be held responsible for any additional monies owed with what is called a deficiency judgment. If a borrower is assigned a deficiency judgment, they will have to make additional payments to the lender to take care of that remaining debt.
Foreclosure Mediation Program
In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. If you are a homeowner facing foreclosure in Maine, you may be eligible to participate in the state's Foreclosure Diversion Program, which provides court-sponsored mediation.
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between the borrowers, their lender and an impartial third-party (the mediator). They discuss ways to work together to help the homeowner to keep their home or to release the property back to the lender in order to avoid a foreclosure and judgment. This can result in a loan modification, forbearance agreement, a short sale or a deed in lieu of foreclosure.
Deed in Lieu of Foreclosure
A Deed in Lieu of Foreclosure is one option that Maine property owners have to remedy a defaulted loan. They do not keep the property, but they can avoid a foreclosure judgment. This is an agreement between the borrower and the lender that turns the property over to the lender and eliminates the potential of a deficiency judgment as well. If both parties agree, then the borrower simply gives the property deed to the lender, terminating the borrower's ownership in the property. If the lender accepts the deed, they sometimes will not try to get a deficiency judgment against the borrower for additional monies owed. However, this is not guaranteed by Maine foreclosure law. It is still possible for a borrower to have a deficiency judgment, even with a deed in lieu of foreclosure.
Common Law Strict Foreclosure
In Maine, Common Law Strict Foreclosure was repealed in 2007. Only a few U.S. states allow strict foreclosures. Maine used to be one of them but it was repealed in 2007. Strict foreclosure is called "common law" because it is a method of foreclosure that has been used for many years but is not clearly written out in state laws. Strict foreclosure is an arrangement that is set when a loan is funded, not at the time of foreclosure. With strict foreclosure, the lender actually owns the property in question throughout the duration of the loan. The borrower makes payments on the loan and only after the total amount has been paid in full, ownership transfers to the borrower. In this kind of arrangement, if the borrower fails to pay, the lender has the right and ability to reclaim their property. The strict foreclosure process is much faster for the lender. They are able to sell the property more easily, because they actually own it in the first place. In Maine, the courts must be involved because it is a judiciary foreclosure state. Because strict foreclosure no longer exists in Maine, there are protections and processes in place that can help a borrower get more time, in order to save their home.
Foreclosure Notice Requirements in Maine
In Maine, a lender seeking to foreclosure must provide three separate notices: a notice of right to cure, a complaint and summons, and a notice of sale. Borrowers will also get a notice from the Bureau of Consumer Credit Protection.
- Notice of right to cure provides at least 35 days to make up missed payments before the foreclosure process officially starts. (Me. Rev. Stat. titl. 14, § 6111). This is sometimes called a grace period notice in other states. It is intended to provide borrowers with a chance to catch up on payments before foreclosure begins.
- Notice from Bureau of Consumer Credit Protection will summarize the borrower's rights and resources, including information about the state's foreclosure mediation process.
- Summons and complaint notice officially begins the foreclosure process. The lender files a lawsuit because Maine is a judicial foreclosure state and the borrower will be served.
- Notice of Sale the lender notifies all parties of the pending sale with at least 30 days' notice. Me. Rev. Stat. tit 14, § 6323
Protection for Military Service Members
Certain military service members (including state military forces on active state service) may have an opportunity to postpone court proceedings for a foreclosure. Me. Rev. Stat. tit 37-B, § 389-A. In addition, federal law, the Service Members Civil Relief Act, provides protections to military service members who are facing foreclosure. Borrowers wanting to leverage this protection should consult a qualified attorney.
Protections Regarding High-Cost Home Loans
Maine's law imposes certain restrictions when it comes to high-cost home loans. For example, the creditor cannot charge a prepayment penalty and cannot engage in flipping (that is, the making of a high-cost home loan to a borrower that refinances an existing home loan when the new loan results in little or no economic benefit to the borrower). If the creditor violates the law, the borrower can get damages. Me. Rev. Stat. tit 9-A, § 8-506. Borrowers seeking relief with this legal protection should consult a qualified attorney.
Do You Have a Mortgage or a Deed of Trust?
Maine allows both. The differences between a mortgage and a deed of trust affects homeowners only when foreclosure becomes an issue. The primary difference is that a mortgage foreclosure must go through the courts. A deed of trust does not. However, because Maine is a judiciary state, all foreclosure proceedings must go through the courts so the difference here is small. However, it is important to note that some lenders prefer deed of trust agreements versus a mortgage because foreclosure is often faster and easier from their side of the process. If you are unsure about which one you have, look at your loan documents, contact your mortgage servicer or go to your local land records office to find out. In Maine, foreclosure will have to go through the courts, regardless of which type of loan agreement you have in place.
Additional State Laws
The maximum legal interest rate on a personal loan in Maine is 6%. However, consumers often unknowingly agree to waive the limit and pay higher rates by clicking "I agree" online or by signing a contract that outlines a higher interest rate than is outlined by the law. While most states, including Maine, have usury laws on the books that are meant to prevent unfair interest rates, most courts will defer to contract law over these simple statutes. That means that in Maine, if you agree to a contract that has a higher interest rate, or additional points or fees to be paid, you are accepting that rate regardless of the state's current usury law. It is not illegal to charge a borrower fees, points or higher interest rates, if they agree to the terms of the contract in writing.
This means that property owners can file their primary residence as a homestead and will enjoy some protections designed for homeowners to keep them from losing their house or property as a result of economic hardship. The homestead exemption applies to real and personal property used as your residence, including a house, mobile home, co-op or condominium. The exemption also includes burial plots. The homestead exemption also applies to the proceeds from the sale of any of this property for six months after you receive the proceeds. In some cases, this will keep their home off limits to creditors. They are still subject to possible foreclosure.
- In Maine, homeowners may exempt up to $47,500 of real or personal property used as a homestead, including a cooperative.
- If the debtor has minor dependents, that amount is raised to $95,000.
- If the debtor is over the age of 60 or is physically or mentally disabled, the exemption amount is raised to $95,000.
- Married couples can exempt up to $95,000 total or $190,000 if they have minor dependents or are over 60 or disabled.
Lender Licensing Requirements
Maine law requires licensing and bonding for loan brokers formerly known as "credit services organizations." In order for any loan broker or credit repair service to do business in this State, license application and bond forms must be completed and filed on or before January 31 of each year. Details are available here: http://www.maine.gov/pfr/consumercredit/licensing/loan_broker/licensing.htm.