Massachusetts Foreclosure Ruled Void Due to Misleading Default Notice
After their home was foreclosed upon by the defendant in the case, JPMorgan Chase Bank, the homeowners filed a lawsuit alleging that Chase failed to comply with the terms of their mortgage. The mortgage requires that before acceleration and foreclosure may occur, the bank must send a notice giving certain disclosures about the homeowners’ rights.
Though Chase purported to send such a notice, it was deficient, said the homeowners. Specifically, the mortgage requires that homeowners be informed of “the right to reinstate after acceleration of the loan.” Thought the notice stated that the homeowners had the right to reinstate, it did not tell them that under the terms of their mortgage they could only do so up to five days before the sale. If they tried to reinstate less than five days before the sale, the bank could still foreclose.
It was deceptive, said the court, to telling the homeowners that they could reinstate, but fail to disclose that this right ceased five days before the sale. The court explained:
Here, the notice’s additional language – “you can still avoid foreclosure by paying the total past due amount before a foreclosure sale takes place” — could mislead the [homeowners] into thinking that they could wait until a few days before the sale to tender the required payment. Suppose the [homeowners] had showed up with the payment three days before the sale believing that their tender was timely since the notice said that the tender may be made before the sale. The bank would properly have pointed out that under paragraph 19 a tender must be made at least five days before the sale.
Omitting the qualification (that the payment must be tendered at least five days before the foreclosure date) in our view rendered the notice potentially deceptive.
The court further pointed out that under Massachusetts law, before a bank may foreclose, there must be “strict compliance” with the terms of the mortgage. Here, where the notice was misleading, compliance could not be deemed to have been strict. The First Circuit Court of Appeals therefore ruled that the foreclosure was void and remanded the case back to the trial court for further proceedings.
The name of the case is Thompson v. JPMorgan Chase Bank, N.A.
The ultimate authority on this issue is the Massachusetts Supreme Judicial Court, which has the final say on matters like foreclosure that fall under state law. In the meantime, this issue is sure to be hotly litigated. Though some homeowners have preferred state court over federal court, they may want to file cases in federal court because this decision would be binding there. The language used by the bank here is ubiquitous in pre-foreclosure acceleration notices sent in Massachusetts, so although the First Circuit gave a final decision, it might not be the last word, and the issue is sure to continue to be contested.
Culik Law has litigated cases with most major banks and mortgage servicers throughout Massachusetts, and has saved many, many homes from foreclosure. If you have property in Massachusetts and are having mortgage difficulties, are dealing with a loan modification, or are facing foreclosure, contact Culik Law for a no cost case evaluation to see if we can help you.