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.