Foreclosures

Massachusetts Court Evaluates Evidence of Authorized Agent in Foreclosure Case

Published on: January 25, 2016 | by Pulgini & Norton, LLP

In a recent opinion, the Appeals Court of Massachusetts considered how a mortgagee may show that it is acting as the authorized agent of the note holder for the purpose of surviving a motion for summary judgment. In Khalsa v. Sovereign Bank, N.A. (Mass. App. Ct. Jan. 11, 2016), the borrowers filed a complaint seeking to enjoin a foreclosure sale and a declaration that the mortgagee was not entitled to foreclose. The parties filed cross summary judgment motions, and the lower court found in favor of the homeowners. The court declared that the foreclosure sale of the plaintiff’s residence was void because the defendant failed to show that it was acting as the authorized agent of the note holder (Freddie Mac). The defendant appealed that decision.

In Khalsa, the homeowners executed a promissory note to purchase their home in 2008, and they granted the defendant a mortgage on the property to secure the loan. Freddie Mac subsequently purchased the note from the defendant, although the defendant remained the servicer of the note and mortgage. In 2011, the defendant notified the homeowners that they were in default on their loan and held a foreclosure sale. At the time of the sale, Freddie Mac had physical possession of the note. The contested issue between the parties was whether the defendant, which was the holder of the mortgage but not the note, acted with Freddie Mac’s authority to conduct the foreclosure sale.

Massachusetts Governor Signs Act Clearing Title To Foreclosed Properties

Published on: January 4, 2016 | by Pulgini & Norton, LLP

Massachusetts Governor Charlie Baker recently signed into law “An Act Clearing Titles to Foreclosed Properties.” The Act, which went into effect on December 31, 2015 and is retroactive, limits the statutory time period that former owners will have to challenge a foreclosure sale of their homes. The purpose of the Act is to clear legal title for those Massachusetts homeowners who purchased their homes through foreclosure sales, many of whose titles became clouded after a 2011 case decided by the Massachusetts Supreme Judicial Court.

In U.S. Bank Nat’l Assoc. v. Ibanez, 458 Mass. 637, 648 (2011), the Supreme Judicial Court held that the entity foreclosing on a property must be the assignee of the mortgage at both the time of the notice of sale as well as the time of the subsequent foreclosure sale. The holding went against industry custom and widespread practice, and it had the effect of potentially invalidating thousands of previous foreclosures. Many of these title-holders were Massachusetts individuals who had purchased properties in foreclosure sales in an effort to fix them up and resell them, live in them, or rent them. However, with a clouded title, many were left with houses that could not be sold.

Massachusetts Court Voids Foreclosure for Failure to Comply with Mortgage Provision

Published on: December 22, 2015 | by Pulgini & Norton, LLP

In a recent decision, the Appeals Court of Massachusetts addressed the issue of whether Pinti v. Emigrant Mort. Co., which held that the failure to comply strictly with mortgage provisions renders a foreclosure sale void, is extended to cases pending on appeal when that claim was raised and preserved. Resolving the question in favor of the homeowner, the court held that since the homeowner in Aurora Loan Services, LLC v. Murphy specifically preserved and raised the issue on appeal, an exception to the prospective-only rule should be made.

In Aurora Loan Services, LLC, the plaintiff provided notice to the homeowner that his loan was in default and that it would accelerate the loan unless he paid the overdue balance and cured the default within 150 days. After the period passed, the lender formally assigned the mortgage to the plaintiff, which commenced foreclosure proceedings against the homeowner. The homeowner argued in the summary process proceeding that the plaintiff failed to prove its right to possession because it did not strictly comply with the terms of the mortgage, it was not the assignee of the mortgage at the time it sent notice to the homeowner of his right to cure, and the notice itself failed to comply with the mortgage or G.L. c. 244 § 35A.

Massachusetts Appeals Court Addresses Litigation Privilege in Foreclosure Case

Published on: December 8, 2015 | by Pulgini & Norton, LLP

In a recent opinion, the Appeals Court of Massachusetts considered whether the law firm and auction company of a lender were immune from civil liability in an action brought by the borrower for violations of consumer protection statutes and the Massachusetts Civil Rights Act.

In Mack v. Wells Fargo Bank, N.A. (Mass. App. Ct. Dec. 1, 2015), the plaintiff alleged that the defendants continued to advertise and schedule foreclosure actions of her property in violation of a temporary restraining order and a preliminary injunction prohibiting them from doing so. The plaintiff also alleged that the defendants communicated with her with knowledge that she was represented by an attorney and engaged in conduct intending to harass, oppress, or abuse the plaintiff in association with the collection of a debt.

The defendants filed a motion for summary judgment, contending that the litigation privilege immunizes them from civil liability for their actions. The trial court denied the motion, ruling that the defendants’ alleged actions in violating the preliminary injunction were undertaken solely for the purpose of effecting a non-judicial foreclosure and therefore did not fall within the scope of the litigation privilege. The defendants then sought interlocutory review from the appeals court.

Massachusetts Appeals Court Reverses Summary Judgment, Allows Homeowner to Continue Suit Against Mortgage Company

Published on: November 17, 2015 | by Pulgini & Norton, LLP

The Massachusetts Court of Appeals recently reviewed an action brought by a home mortgage borrower against the lender and its assignee, alleging that they violated the consumer protection statute by modifying his mortgage, among other claims, and that they should be enjoined from evicting the borrower from his home. In Moronta v. Nationstar Mortgage, LLC, the borrower’s primary argument was that the defendants violated G.L. c. 93A by structuring a mortgage consisting of high-cost loans, which the lender had no reasonable expectation that the homeowner could pay, and therefore misleading the borrower as to the viability of the transaction. The lower court granted summary judgment in favor of the defendants, and the decision was appealed by the borrower to the Massachusetts Court of Appeals.

In Moronta, the borrower refinanced his original mortgage of $330,600 to consolidate his debt and lower his monthly payments. At the time he refinanced in 2007, the borrower’s monthly income was $6,000, although the loan application amount stated that it was $8,500. The lender granted two loans, one in the amount of $296,000 with an adjustable interest rate and large balloon payment of $264,963 at the end of 30 years, and a second in the amount of $74,000 at a fixed interest rate of 10.5%. In November 2009, the lender foreclosed on the property.

Massachusetts Land Court Upholds Validity of Home Foreclosure

Published on: September 18, 2015 | by Pulgini & Norton, LLP

In a newly issued opinion from the Massachusetts Land Court, Nutting v. Nationstar Mortgage, LLC (August 24, 2015), the homeowner-plaintiffs attempted to challenge the validity of a foreclosure sale of their home in their petition to try title pursuant to G.L. c. 240 §§ 1-5. They also argued that the subsequent foreclosure deed of the property was void based on errors in the chain of title, and that the defendants did not have lawful title to the property.

Under the Massachusetts try title statute, the court has subject matter jurisdiction only if the plaintiffs establish the following elements: (1) they hold record title to the property; (2) they are in possession of the property; and (3) there is an actual or possible adverse claim clouding the plaintiffs’ record title. The plaintiffs are entitled to a presumption of truth with regard to the third element, and they are in possession of the property by currently residing in the house, satisfying the second element. The only issue in dispute in Nutting was the first element, whether the plaintiffs held record title to the property.

If the plaintiffs could prove that at the time of the foreclosure, the foreclosing entity did not hold title to the property, they could satisfy the first element. Thus, to establish that they still held record title, the plaintiffs claimed that the foreclosure sale was void, arguing that the defendant did not hold both the promissory note and a valid assignment of mortgage at the time of the foreclosure sale. The court disagreed, however, stating that the underlying note and mortgage need not be conveyed together under Massachusetts law. As a result, a foreclosing mortgagee is not required to demonstrate that the previous holders of the recorded interest in the mortgage also held the note each time that the interest was assigned to the next holder.

Massachusetts Court Affirms Bank’s Claim for Possession of Homeowner’s Property in Foreclosure Case

Published on: August 7, 2015 | by Pulgini & Norton, LLP

The Massachusetts Court of Appeals recently decided whether a claim of unfair and deceptive review of a homeowner’s loan modification request could affect the bank’s title post-foreclosure. Bank of New York Mellon v. Fernandez arose out of a post-foreclosure summary judgment action filed by the bank, which was seeking to recover possession of the property. The homeowner answered with affirmative defenses and counterclaims asserting that the bank’s mortgage servicer had failed to comply with the Home Affordable Modification Program (HAMP) regulations when it denied her request to modify her loan. The case reached the court of appeals when the homeowner appealed a lower court’s judgment awarding possession of her house to the bank.

The case is slightly unusual because typically in a post-foreclosure summary judgment action, the only legal issue for the Housing Court to determine is whether the bank strictly complied with the power of sale provided in the mortgage, thereby lawfully obtaining title to the property. As a result, the homeowner’s claim that the mortgage servicer violated laws governing the loan modification program would generally not affect the bank’s title and right to possession.

Massachusetts Land Court Finds For Owners in Property Tax Lien Foreclosure Proceeding

Published on: July 31, 2015 | by Pulgini & Norton, LLP

In a newly released opinion, the Massachusetts Land Court discussed the harsh consequences of property tax lien foreclosure proceedings. In Tallage LLC v. Meaney, the homeowners’ unpaid water and sewer bills became a tax debt, since those utilities are provided by the city. The city auctions its tax receivables to private companies, which then pursue the taxpayers for the lien amounts and may obtain a right of redemption on a property tax lien. In Tallage, the company that purchased the property owners’ tax liens initiated tax lien foreclosure proceedings against the owners.

Procedurally, in tax foreclosure cases, the lienholder files an action in the Land Court to foreclose the right of redemption. If no voluntary agreement is made as to payment of a redemption amount, the court will determine the amount and date by which it must be paid. If the taxpayer fails to comply with the court’s order, the right of redemption is foreclosed and a judgment is entered. However, the judgment may be vacated if the party moves the court to do so within one year, and the court finds that, after careful consideration, this is required to accomplish justice.

It is important to note that there are key differences separating tax foreclosure cases from mortgage and other kinds of foreclosures. First, since the interest rate accrues at 14% from the time the taxes are due until the sale occurs, and 16% thereafter, small tax bills can rapidly become significant. In addition, unlike mortgage foreclosures or judgment liens where the remaining sale proceeds (minus the obligation amount) are returned to the property owner, when the right of redemption on a property tax lien is foreclosed, the lienholder acquires “absolute title” to the property, eliminating all of the property owner’s interest and equity. Remarkably, the lienholder receives the entire amount of the proceeds once the foreclosure is final, regardless of the amount owned on the lien. In Tallage, the owners’ property had a fair market value in excess of $270,000. The plaintiff acquired the tax title to the property for only $1,052—a windfall that did not go unnoticed by the court.

Massachusetts Supreme Judicial Court Finds in Favor of Homeowners, Voids Foreclosure Sale

Published on: July 24, 2015 | by Pulgini & Norton, LLP

In a newly released opinion, the Supreme Judicial Court of Massachusetts took on the issue of illegal foreclosure sales. In an action filed by plaintiff-homeowners against their mortgage lender, Pinti v. Emigrant Mortgage Co., No. SJC-11742 (Mass. July 17, 2015), the homeowners challenged the validity of the foreclosure sale on their home, alleging that, since the lender failed to comply with the mortgage provisions, the foreclosure sale was void. The court agreed, finding that strict compliance with the mortgage provisions was required as a condition of sale, and it ruled in favor of the homeowners.

In Pinti v. Emigrant Mortgage Co., the terms of the mortgage provided that if the homeowners default on their mortgage payments, the lender can accelerate their loan only after providing notice to the homeowners of certain information. Specifically, the lender was obligated to provide notice of the default and inform the homeowners of the action required to cure the default, of the date by which the default must be cured, and that failure to cure by the date provided may result in acceleration of the mortgage. The lender’s notice must also state that they have “the right to bring a court action to assert the non-existence of a default or any other defense to acceleration and sale.” Upon the homeowner’s failure to cure the default, the mortgage allows the lender to invoke the statutory power of sale.

In 2012, the lender foreclosed on the homeowners by exercising the power of sale contained in the mortgage. However, while the lender did send notice as required under the mortgage, the notice merely stated that the homeowners have “the right to assert in any lawsuit for foreclosure and sale the nonexistence of a default or any other defense [they] may have to acceleration and foreclosure and sale.” The lender argued in court that it had complied with the terms of the mortgage substantially, although not strictly, and that it was sufficient for a valid foreclosure sale. The court disagreed with the lender, holding that in light of the fact that the Massachusetts statutory power of sale entitles the mortgagee to foreclose without judicial oversight, one who sells under a power of sale must follow strictly its terms, and failure to do so results in “no valid execution of the power, and the sale is wholly void.”

Massachusetts Court Ruling Questions Whether Wells Fargo Satisfied Procedural Requirements in Foreclosure Case

Published on: July 17, 2015 | by Pulgini & Norton, LLP

The Appeals Court of Massachusetts recently issued an opinion in Wells Fargo Bank, N.A. v. Cook, 87 Mass.App.Ct. 382 (2015), evaluating whether the procedural and substantive requirements set out in the United States House and Urban Development (HUD) regulations were satisfied by Wells Fargo in a foreclosure case.

The homeowners in the case had refinanced their property in 2008 with a loan secured by a mortgage. Since the Federal Housing Administration had insured their mortgage, HUD regulations were incorporated into it. The HUD regulation at issue in the case restricted Wells Fargo’s right to accelerate the loan payments and foreclose on the house in the event of a default. Specifically, it provided that Wells Fargo must have a face-to-face interview with the homeowners, or attempt to do so, before three payments due on the mortgage go unpaid.

On August 12, 2008, Wells Fargo held an event at Gillette Stadium, providing hundreds of people with an opportunity to settle their mortgage disputes and negotiate loan modifications in a face-to-face interview. After missing three installments, the homeowners attended the event and met with a representative of Wells Fargo for 15 minutes. The homeowners testified that they attempted to cure the default by bringing a cash payment, but the representative would not accept it. The homeowners were instead told that they would receive a letter regarding the loan modification in the mail, which they did several days later, and they accepted the terms. However, after the homeowners made two payments under the new agreement, Wells Fargo rejected their third payment, declared the loan in default, accelerated the payments, and foreclosed. A lower court granted Wells Fargo’s eviction action in a summary judgment against the homeowners, which they appealed.