Foreclosures Invalid For Failure to Name Mortgage Originator
Under Massachusetts law, before a bank can foreclose, it is required to send a notice to the homeowner that he or she has the right to cure the default (catch up on past-due payments). The notice must also disclose the name of the bank or mortgage broker who originated the loan.
Oftentimes, however, through laziness, sloppiness, or oversight, banks fail to include the disclosure of the broker and originator. They likely think these are insignificant pieces of information that do not affect their right to foreclose.
Well, they better think again.
A series of recent opinions has held that banks who fail to disclose this information have no right to foreclose. These are the cases of Freddie Mac v. Bisnath, No. 11-SP-4131 (Mass. Housing Ct.) and EMC Mortgage v. Rivera, No. 12-SP-0871 (Mass. Housing Ct.).
This principle should naturally extend to any other failure to provide the information required in any foreclosure notice, no matter how seemingly inconsequential.
How is it that such a small violation can invalidate a foreclosure? It comes down to the way Massachusetts allows banks to foreclose. Massachusetts is a non-judicial foreclosure state, meaning that the bank does not have to take you to court to foreclose. (In some other states, the bank actually has to file a lawsuit against you to foreclose.) Because the banks don’t have to get court permission, they must strictly comply with each and every requirement of the foreclosure process, no matter how technical or seemingly insignificant. As one time-tested opinion held, if a bank does not comply with every requirement, then “the sale is wholly void.” Moore v. Dick (1905).
These opinions give homeowners fighting foreclosure another tool in their toolbox to try to remain in their homes, and to resist banks that think that the laws don’t apply to them.