EFFECT OF SENIOR RECORDED HOMESTEAD PURSUANT TO G.L. C. 188 § 1
TO FORECLOSURE OF A JUNIOR RECORDED MORTGAGE

A homestead may be declared either by a single person or by one spouse for the marriage. The second spouse needn’t sign the declaration, and case law holds a second signature is ignored as superfluous. The one signature protects and vests a homestead estate in both spouses.

A homestead is subordinated to a later recorded mortgage by a single subordination document signed by all vested with the homestead estate. The single document could be the mortgage or a separate subordination document. The statute does not require or prefer one over the other. The statute also does not require specific subordination language, and therefore the generic homestead waiver language in a FNMA mortgage creates a subordination of homestead.

There are no subordination issues when title is owned by a single person or when both spouses are in title, as their execution of the FNMA style mortgage creates a subordination of the full homestead estate.

However, if only one spouse is in title, the non-title spouse must execute the same subordination document as the in-title spouse. This could be either a countersignature on the mortgage or both spouses together signing a separate subordination document. Although there is no case law on point, the industry consensus is the subordination will fail if the two spouses sign two different subordination documents, even if the two documents are signed simultaneously and together evidence an intent to subordinate the homestead. This follows a literal interpretation of §§ 6 and 7 which define subordinations and releases in “a mortgage”, “a deed” or “a release” but not in separate documents by each party vested with a homestead estate. Different subordination rules apply for a § 1A Elderly or Disabled Homestead, which are not discussed herein.

Subordination problems also occur if title is vested in only one person whose marital status is not stated. Foreclosure counsel must determine if that person was married at the time of mortgage execution by either consulting with initial closing counsel or requesting a copy of the original mortgage application which will include the borrower’s marital status. There is no subordination problem if a sole title owner subsequently married, as the later marriage is junior in time to the mortgage.

The only foreclosure practice point for a foreclosure involving an in-title and non-title spouse who have properly subordinated the homestead, is the non-title spouse must be maintained on the foreclosure notice list as that person is vested with a junior homestead estate. This also applies if the mortgage was executed by a single person who subsequently married, providing the new spouse is known to foreclosure counsel either from the records at the Registry of Deeds or listed in the lender’s records. (See G.L. C. 244 § 14).

Not all mortgages use the FNMA form or otherwise contain homestead subordination or waiver language. This issue is governed by the combined effects of Chapter 188 §§ 6 and 7 discussed in Atlantic Savings Bank v. Metropolitan Bank and Trust Company, 9 Mass.App.Ct. 286, 400 N.E.2d 1290 (1980), and In Re Melber, 315 B.R. 181 (2004).

Section 6 requires the mortgage “contain[e] a release” of homestead. Section 7 provides a homestead may be terminated by a deed signed by the homestead declarant and spouse, if any, which does not reserve the homestead estate.

A Massachusetts mortgage is a deed, subject to the rights of redemption. Therefore, a mortgage which does not contain a homestead waiver or subordination executed by either a single person or by both spouses vested in homestead will effectively terminate the homestead estate.

However, most title insurance underwriters prefer treating these facts as creating a subordination. This does not alter the foreclosure procedure, other than maintaining the non-title spouse on the notice list. However, this will create an issue if the sale generates a proceeds overage and there are other junior creditors, as the order of payment priorities differ if the homestead was subordinated or terminated. It is therefore recommended foreclosing counsel not decide between subordination or termination and either pay all proceed into Court and file an Interpleader Action or otherwise obtain a court order as to priorities before paying the proceeds overage.

The only fact pattern where the homestead retains senior priority is a mortgage signed only by an in-title spouse without a separate recorded document of subordination signed by both the in-title and non-title spouses. Foreclosing counsel should file a claim both on the title insurer of the mortgage to be foreclosed and/or on initial closing counsel. The policy should be reviewed whether the homestead is listed as senior title encumbrance. The title company may deny the claim if the homestead is so listed, but the denial should not be accepted, as the title company would have issued a closing insurance protection letter which indemnifies the lender in the event the closing attorney does not follow all closing instructions, which usually includes closing the mortgage in first priority position.

The unsubordinated homestead automatically dissolves without the need for a recorded termination if the in-title and non-title spouses and their minor children move from the premises, as homestead remains valid only for so long as the property is the primary family dwelling. See §§ 3 and 4 which provide the homestead remains in effect if the parents have moved or are deceased providing their minor children otherwise remain in the home.

An unsubordinated prior senior homestead followed by a completed mortgage foreclosure and a family remaining in possession would be a case of first impression and undoubtedly spark litigation, study and debate for years.