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Improper Loan Modification and Acceleration Notice Addressed in New Appeals Court Foreclosure Decisi

A recent decision from the Massachusetts Appeals Court addresses two important foreclosure-related issues: when a notice of acceleration must be provided, and when homeowners may attempt to invalidate a foreclosure based on their bank’s failure to consider them for a loan modification.

The decision stemmed from an eviction case brought by Bank of New York Mellon (BNY for short) against homeowners in Attleboro, Massachusetts. After a foreclosure occurred, BNY commenced eviction proceedings. The homeowners filed a counterclaim, arguing that there were problems with the foreclosure process. The lower court decided in favor of BNY, and the homeowners appealed.

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The first issue in the appeal was whether the bank, BNY, actually “accelerated” the homeowners’ mortgage. Acceleration of a mortgage is when the full amount is declared due after payments are missed.

Under Massachusetts law, after homeowners fall behind on their mortgage, before their loan is accelerated they are allowed a 90-day grace period during which they can try to reinstate the loan. Homeowners get this right once every three years, so if they default more than once within a three-year period, the right does not apply again. This right is provided under G.L. c. 244, Section 35A. A notice of this right is required to be mailed to the homeowner, called the “Section 35A Notice.”

In this case, the borrowers fell behind, caught up, and then apparently fell behind again. There was no record of the loan having been accelerated again, however. Because of this, the Appeals Court said that “there is a genuine issue of material fact whether the bank was required to send a new Section 35A Notice to cure before accelerating the mortgage loan.” This issue was sent back to the trial court for further proceedings.

The second issue was whether BNY’s conduct was so unfair as to void the foreclosure entirely. Massachusetts law says that banks must take “reasonable steps and make a good faith effort to avoid foreclosure.” The homeowners argued that the BNY did not try to avoid the foreclosure as required, as it ignored the fact that their income had increased and refused to grant them a loan modification.

Deciding against the homeowners, the lower court took into consideration a written statement from BNY that “all available loss mitigation alternatives [such as loan modifications] have been exhausted.” The Appeals Court rejected BNY’s statement — it was not an affidavit signed under penalty of perjury, which is required under the court rules. This issue was also sent back to the trial court for further proceedings.

The Appeals Court did not make a final decision about either issue, but did hold that the trial court’s decision in favor of BNY was incorrect. The homeowners’ arguments on both issues will likely be credited more than they initially were.

This case shows the importance of banks and mortgage servicers complying with various procedural requirements of foreclosure. There are important rights that must be observed regardless of whether someone has fallen behind on their mortgage.

The name of the case is Bank of New York Mellon v. Morin, 96 Mass. App. Ct. 503.

Culik Law is a Boston, Massachusetts consumer protection and foreclosure defense law firm that represents homeowners throughout Massachusetts in issues involving mortgage law, mortgage servicing, and foreclosure. Contact us today for a free case evaluation,