In Massachusetts, 2014 was Another Year of Significant Foreclosure Litigation Decisions for Consumer
The Massachusetts Supreme Judicial Court decided in U.S. Bank v. Schumacher that if certain pre-foreclosure notices, called the “right to cure” notices, sent to the homeowner under General Laws chapter 244, Section 35A, are defective, then a foreclosure is still valid and legal. The only exception is if there are some other circumstances beyond the faulty notices which rendered the foreclosure fundamentally unfair. Housing advocates had previously been using this strategy to invalidate foreclosures.
The Appeals Court then expanded on the Schumacher decision in Haskins v. Deutsche Bank. In that case, the court made two significant holdings. First, the court said that the “right to cure” notice could be sent by a mortgage servicer, not just the investor who owns the mortgage. (The day-to-day payment processing, collections, and loan-modification proceedings are generally handled by a mortgage servicer on behalf of the investor.) Second, the court held that the requirement that the foreclosure be “fundamentally unfair” only applies after a foreclosure, and that a homeowner challenging a foreclosure prior to the sale only has to show that the notice at issue was defective. The lesson is that homeowners need to raise these issues as soon as possible, because after a foreclosure it may be too late.
Mortgage assignments were also a hot issue in 2014. Homeowners may only challenge mortgage assignments that are “void,” but not ones that are merely “voidable.” What is the difference? A “void” assignment is one that violates public policy or where the assignor did not actually have an assignment to assign. A “voidable” assignment is one that was entered into by fraud, mutual mistake, or an officer of the company exceeding his or her authority. Massachusetts courts have generally concluded that homeowners do not have the right to challenge mortgage assignments that are made in violation of an investor’s guidelines, often called a “pooling and servicing agreement.” The decisions that led to these rules are Culhane v. Aurora, Wilson v. HSBC, and Sullivan v. Kondaur Capital.
What’s next for 2015? The Supreme Judicial Court recently heard argument in the case of Pinti v. Emigrant Mortgage on an issue similar to that in the Schumacher case, which is whether deficiencies in pre-foreclosure notices render void a foreclosure sale. The difference in this case is that the notices were required to be sent under the terms of the mortgage itself, not under a statute. A decision is expected by summer 2015.
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