Bank Must Hold Note Earlier, Says MA Supreme Court
In the recent decision of HSBC Bank v. Matt, the Massachusetts Supreme Court held that when a bank takes the initial step in the foreclosure process by filing a complaint to foreclose under the Servicemembers Civil Relief Act (SCRA), it must hold the homeowner’s note.
This decision strengthens protections for homeowners, although it does not give homeowners the right to challenge the foreclosure proceedings.
Under the Servicemembers Civil Relief Act, a bank is prohibited from foreclosing on a homeowner who is in the active duty military. If a bank forecloses without checking whether the homeowner is in the military, title may be bad for 20 years, making the property virtually impossible to sell. So, to be sure that it will have clear title after an upcoming foreclosure, Massachusetts allows a bank to obtain an SCRA judgment beforehand that the homeowner is not in the military.
Previously, Land Court judges had often given banks permission to file under the SCRA even if the banks did not hold the note at the time of the filing.
This decision appears to require foreclosing banks to provide affirmative documentation that they hold the note at the time they file the SCRA case. It is expected that banks will submit affidavits or sworn statements that they own the note in question.
The catch for homeowners, though, is that in the SCRA proceedings homeowners are not allowed to contest whether the bank holds their note. Homeowners, the Supreme Court said, do not have what is called “standing” to dispute this issue unless they are actually in the military. The SCRA proceedings only decided whether the homeowner is in the military, not whether the bank has the right to foreclose. Nevertheless, a homeowner who has a doubt about their case would still be able to obtain a copy of the court’s file, which is a public record.
The court’s decision is available online here: HSBC v. Matt