• DYE CULIK PC | Consumer Protection Division

Allegation of Bank’s Foreclosure of Home Violated Duty of Good Faith and Reasonable Diligence, Says

Because foreclosures in Massachusetts are effected without judicial oversight – the bank does not have to get permission from a judge to foreclose – the law imposes a duty of good faith and reasonable diligence on the bank. This generally means that the mortgage holder, i.e., the bank, has a duty “to obtain for the property as large a price as possible.”

This means that the sale has to be done in a commercially reasonable way. Typically, this is done via public auction with an advertisement of the sale beforehand so that interested buyers have an opportunity to purchase it. Failure to do so provides a homeowner with a putative claim for wrongful foreclosure, as well as violation of laws like the Consumer Protection Act, G.L. c. 93A.

In this case, the foreclosing bank allegedly sold the property about $250,000 when it was actually worth around $500,000 – about half its value. Foreclosures sometimes sell for less than they would in a regular sale, but not always, and never, at least in our office’s experience, by this amount.

To make matters worse, the bank allegedly told the homeowner prior to the sale that he would lose all his equity. That is, the bank knowingly sold the property for far less than it was worth.

A Massachusetts Superior Court judge wrote that “drawing all reasonable inferences in [the Plaintiff’s] favor, the court can conclude that [the bank] knowingly sold the property for approximately half its market value in an attempt to take away [the Plaintiff’s] ability to recoup some of his losses.”

Thus, the bank’s motion to dismiss the case was denied, and the plaintiff-homeowner is permitted to move forward with his case. The homeowner will be permitted to request documentation related to the foreclosure, such as valuations and recordings of the bank saying he would lose his equity.

This case stands for the fundamental proposition that even if someone has difficulties with their mortgage, their bank or mortgage servicer is not permitted to run roughshod over legal requirements. One of these requirements is that a foreclosure be conducted in a reasonable manner, pursuant to the duty of good faith and reasonable diligence.

In fact, our office previously prevailed in a decision against mortgage giant Fannie Mae when it sold a homeowner’s property for hundreds of thousands of dollars less than it was worth without even getting an appraisal.

Culik Law represents homeowners throughout Massachusetts dealing with mortgage issues, everything from a loan modification to a lawsuit against one’s mortgage servicer. If you’re having mortgage problems, call us at 617-830-1795 and see if we can help.

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