Monday, September 11, 2017

Sept 2017 edition of Merrimack Valley Housing Report

The September 2017 edition of the Merrimack Valley Housing Report was just delivered to subscribers by email. This monthly electronic newsletter about housing and real estate in the Merrimack Valley is produced jointly by UMass Lowell and the Middlesex North Registry of Deeds. For a free subscription, email David Turcotte at

This month, I wrote about distressed sales. Here is my article:

Distressed Sales
By Richard P Howe Jr

Foreclosure activity in August at the Middlesex North Registry of Deeds district was down considerably from a year ago. Foreclosure deeds dropped from 51 to 13, and orders of notice dropped from 41 to 20. By any measure, that is a positive development. However, there are also indicators that lenders are increasingly turning to deeds in lieu of foreclosure and short sales as alternatives to traditional foreclosures.

To understand how deeds in lieu of foreclosure and short sales work, it is best to first review the elements of a mortgage. What most people call a mortgage in Massachusetts is really two different documents. First is the promissory note. That is a contract between the borrower and the lender that establishes the debt and sets out the terms of repayment. The promissory note does not get recorded at the registry of deeds.

The second document is the mortgage. In Massachusetts, a mortgage is a type of deed. When you sign a mortgage, you convey to the lender an interest in the property. That interest is the right to foreclose on the mortgage if the borrower defaults on the repayment of the note. Foreclosure means the lender can auction off the property and use the proceeds from the auction sale to pay off or pay down the debt owed on the promissory note and thereby cut off the borrower/owner’s right to the property.

A deed in lieu of foreclosure is also used when the borrower faces foreclosure. Instead of proceeding to foreclosure, the borrower/owner, with the consent of the lender, conveys the property directly to the lender which then releases the mortgage and sells the property to a third party. This may be attractive to the lender because in most foreclosures, the lender ends up owning the property anyway, so a deed in lieu early in the process saves time and money. However, a deed in lieu of foreclosure is not appropriate when there are junior liens such as a second mortgage or a court execution that would survive a deed in lieu but would be extinguished by a foreclosure.

The other non-foreclosure option, a short sale, involves a borrower/owner who owes more on the note than the mortgaged house is worth. Since the proceeds of a sale would be insufficient to pay the amount owed, the borrower/owner must get the lender to agree to allow a sale to a third party and still release its mortgage despite being paid less than is owed on the note. If the lender is convinced that the proposed sales price reflects the true value of the property and that the value is unlikely to rapidly appreciate, then the lender may be willing to take the money and release the mortgage rather than proceed to foreclosure.

Both deeds in lieu and short sales are useful tools that can benefit both lenders and distressed borrowers. The community in which the property is located also benefits, because properties that otherwise would face a long foreclosure process are put in the hands of new owners who are better able to afford and care for them.

Friday, September 08, 2017

June sales: Price to debt ratios

A Boston Globe op-ed this morning speculated that when Congress takes up tax reform this fall, one of the deductions that may be eliminated or curtailed in order to offset a corporate tax cut will be the home mortgage interest deduction. Currently, the interest paid on indebtedness of up to $1 million on one or more homes may be deducted from gross income by those who itemize their deductions.

Whether or not this has a chance of being enacted and its relative fairness as part of our tax code are topics for another day. Still, the article got me wondering about the size of mortgage being used to purchase homes in the Middlesex North Registry of Deeds district.

To study this, I looked at deeds that transferred property in Chelmsford, Dracut and Tewksbury during June 2017, and compared the purchase price on each deed to the mortgage amount, if any. To get a more accurate picture, I limited the selection to deeds with a purchase price greater than $50,000 and less than $999,999.

Two hundred twenty-six deeds fell within this range for the three towns. The median price on these deeds was $327,450. One hundred eighty-nine of the deeds were accompanied by mortgages; 37 were cash purchases with no mortgages. The median amount borrowed on the 189 mortgages was $296,818, which was 89% of the median purchase price. So on average, those purchasing real estate put down 11% and financed the rest.

Chelmsford had 92 deeds, 72 of them with mortgages and 20 without. The median deed price was $346,500 and the median mortgage price was $307,000, meaning that 89% of the purchase price was borrowed.

Dracut had 72 deeds, 64 of them with mortgages and 8 without. The median deed price was $302,900 and the median mortgage price was $271,355, meaning that 90% of the purchase price was borrowed.

Tewksbury had 62 deeds, 52 of them with mortgages and 10 without. The median deed price was $350,00 and the median mortgage price was $287,050, meaning that 82% of the purchase price was borrowed. 

Wednesday, September 06, 2017

Lowell Real Estate Report: August 2017

Each month I prepare and distribute by email the Lowell Real Estate Report. This document shows all property sales in Lowell during the previous month. Along with the address, date and sales price is included the mortgage amount, if any, the year of the previous sale of the property and the price paid in that previous sale. The report is organized by neighborhood.

The report also includes foreclosure activity, also organized by neighborhood. By foreclosure activity, I mean any foreclosure deeds or orders of notice recorded for that month. For each foreclosure, the report shows the date and amount paid for the foreclosure deed, the year of the mortgage being foreclosed, and the original principal amount of that mortgage.

Here are the number of property sales and foreclosures in Lowell during August, sorted by neighborhood:

Acre - 10 sales, 1 foreclosure
Belvidere - 29 sales, 1 foreclosure
Centralville - 19 sales, 1 foreclosure
Downtown - 6 sales, 1 foreclosure
Highlands - 33 sales, 6 foreclosures
Pawtucketville - 27 sales, 3 foreclosures
South Lowell - 24 sales, 1 foreclosure

Anyone can receive this report (which is free). Just send an email to and you'll be added to the distribution list.

Tuesday, September 05, 2017

August sales reports now online

Each month at the Middlesex North Registry of Deeds, we post a sales report for each of the ten towns in the district. Sorted by property address, each line of the report shows the address of the property sold, the date of sale, the book and page number of the deed, and the price paid. This information is presented for the month but also in "year to date" form.

Also included on the web page is a "foreclosure report" which shows the address of all properties for which an order of notice was recorded during the month. (The Order of Notice is the first step in the foreclosure process).

We just posted our sales and foreclosure reports for August 2017. They can be found at this link:

Friday, September 01, 2017

August recording stats

Here are the numbers of major document types recorded at the Middlesex North Registry of Deeds in August 2017 compared to August 2016, first for the entire registry district, then just for Lowell.

Entire Registry District

Deeds recorded in August 2017 - 704
Deeds recorded in August 2016 - 823
decrease of 14%

Mortgages recorded in Aug 2017 - 1066
Mortgages recorded in Aug 2016 - 1304
decrease of 18%

Foreclosure deeds recorded in Aug 2017 - 13
Foreclosure deeds recorded in Aug 2016 - 51
decrease of 75% (it's good to have a decrease for these)

Total docs recorded in Aug 2017 - 5498
Total docs recorded in Aug 2016 - 6669
decrease of 18%

For Lowell only

Deeds recorded in August 2017 - 193
Deeds recorded in August 2016 -194
no change

Mortgages recorded in Aug 2017 - 244
Mortgages recorded in Aug 2016 -273
decrease of 11%

Foreclosure deeds recorded in Aug 2017 - 11
Foreclosure deeds recorded in Aug 2016 -23
decrease of 52%

Total docs recorded in Aug 2017 -1317
Total docs recorded in Aug 2016 -1471
decrease of 10%

Thursday, August 31, 2017

Do promissory notes get recorded?

Overnight I received an email asking if a promissory note is recorded where land is used as collateral. Here's how I responded:

Promissory notes are not recorded. A promissory note is a contract between the lender and borrower that establishes the debt and the terms of repayment. If real estate is used as collateral to secure the repayment of the debt the borrower must execute a mortgage. While the term “mortgage” is used very broadly in everyday life, it has a very clear legal meaning. In Massachusetts, a mortgage is a type of deed in which the borrower conveys to the lender an interest in real estate owned by the borrower. The interest conveyed is the right to sell the property at auction and use the proceeds of that sale to pay down the debt established by the promissory note (commonly called a foreclosure). 

After executing a mortgage, the borrower/land owner retains an interest in the property which is called the "equity of redemption." That means that when the debt is paid in accordance with the terms of the promissory note, the lender will release its interest in the property. The document that does that is commonly called a discharge of mortgage. When the mortgage is discharged, the borrower/property owner has "redeemed" the property. The term "foreclosure" means that when the lender exercises the power of sale granted to it in the mortgage, the borrower/land owner's right to redeem the property has been cut off or foreclosed.

To be recorded at the registry of deeds, a mortgage must meet all the criteria of a deed (such as clearly describe the property, have borrower/land owner’s signature notarized, etc. The recording fee for a mortgage is $175.

A common misunderstanding in this area is that the deed to the property is held as security pending the repayment of the mortgage. People often come to the registry of deeds and announce, "I just paid off my mortgage, I want my deed back." Well the deed is returned to the homeowner (or more accurately, to his lawyer) the day he bought the property, it's just that people either lose track of the deed among all the other paperwork from the closing, or may not even get it back from the lawyer. In any case, not having your deed is not a problem. You can always obtain a copy of it from the registry of deeds, and the copy is just as good as the original. 

Wednesday, August 30, 2017

Homestead exemption amounts thru the years

Since 2011, homeowners in Massachusetts have an automatic homestead that protects up to $125,000 in the equity of the family residence. If the homeowner files a Declaration of Homestead at the registry of deeds, the exemption amount rises to $500,000.

The exemption amount wasn't always that high. Prior to 1939, it was $800. Here is how it has risen through the years:

  • 1939 - increased to $4,000
  • 1970 - increased to $10,000
  • 1973 - increased to $20,000
  • 1974 - increased to $24,000
  • 1975 - increased to $30,000
  • 1979 - increased to $50,000
  • 1983 - increased to $60,000
  • 1985 - increased to $100,000
  • 2000 - increased to $300,000
  • 2004 - increased to $500,000
These are the amounts for the "regular" homestead. At some point, a separate homestead for the "elderly or disabled" was created. Through the years, the "elderly" homestead has either had a higher exemption amount or has been applied more favorably to the homeowner.

For information about the Declaration of Homestead, check out Massachusetts General Laws chapter 188