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Massachusetts Homeowners Argue Lack of Standing, Improper Documentation to Defend Against Foreclosure

It is not uncommon for mortgage lenders to assign or transfer their original loan to another financial institution, although it may be confusing to borrowers.  For homeowners involved in a mortgage dispute, guidance from a Massachusetts real estate attorney can alleviate the complexity regarding their rights against each bank.  In a March 15, 2018 case before the Appeals Court of Massachusetts, an improperly documented mortgage was the subject of a declaratory judgment sought by the plaintiff, as an agent of a bank, against the homeowners.

The first mortgage on the defendants’ property was initially obtained in 2000.  In 2001, they refinanced that loan.  To do so, one of the defendants executed another mortgage with a second bank in order to satisfy and discharge the original mortgage.  Shortly thereafter, the second bank executed a blank assignment of the new mortgage and loan, which was subsequently altered to fill in the name of yet another bank, the assignee.

The plaintiff in the case was appointed as the servicer of the assignee bank’s mortgage loans in 2002, including the defendants’ mortgage, which was listed in a schedule with a pool of other loans assigned to the plaintiff.  In 2003, the defendants stopped making payments on their mortgage, and the plaintiff commenced an action against them in 2007.  In order to proceed, the plaintiff needed a declaratory judgment that the improperly documented mortgage was equitably subrogated to the prior first mortgage.  Several issues in the case were decided, appealed, and remanded before again returning to the Appeals Court of Massachusetts in 2018.

On appeal, the defendants challenged the plaintiff’s standing on two grounds.  First, the defendants argued that the blank assignment was not valid.  The court disagreed, finding that the agreement and mortgage loan schedule included the defendants’ loan, which was identified by loan number, servicing account number, and name of the borrower.

The defendants then argued that unless the plaintiff could show that the assignee bank was assigned the defendants’ mortgage (as distinct from the loan it secured), the plaintiff lacked standing to seek equitable subrogation of the mortgage.  The court explained, however, that the plaintiff does not have to show that the bank holds record title to the mortgage in order to have standing to seek subrogation by virtue of the assignment.  Instead, the plaintiff need only show that it has a definite interest in the matter, such that its rights will be significantly affected by the outcome.  The court held that, as the agent for the assignee bank, the plaintiff had a definite interest in the case.  Accordingly, the court affirmed the declaratory judgment that the improperly documented mortgage was equitably subrogated to the original mortgage.

At Pulgini & Norton, our Massachusetts real estate lawyers can provide legal representation and advice in residential property issues.  We have assisted individuals in home sale and purchase closings, mortgage refinancing, building permit applications, land use disputes, and other property issues.  If you are seeking guidance regarding a real estate transaction, contact our office by phone at (781) 843-2200 or online and schedule a free consultation with one of our attorneys.

More Blog Posts:

Massachusetts Bank’s Mistake Has Significant Consequences in Reverse Mortgage Case, Massachusetts Real Estate Lawyer Blog, published September 12, 2016

Massachusetts Court Reverses Deficiency Judgment Against Defendants Who Lost Their Home in Foreclosure, Massachusetts Real Estate Lawyer Blog, published May 8, 2017

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