Massachusetts Homeowners May Not Challenge Mortgage Transfers Via Pooling and Servicing Agreements,
Massachusetts Appeals Court endorses the principle that homeowners whose mortgages have been securitized may not challenge the transfers of their mortgages as a defense to foreclosure.
Many home loans have been securitized by selling them in bulk into trusts administered by major banks. Some of these banks include Deutsche Bank, U.S. Bank, and The Bank of New York Mellon. Banks often refer to these as “investor-owned loans” or “private investors.”
The trust agreements are called “pooling and servicing agreements,” or PSAs, and contain the guidelines for ownership and transfer of the mortgage.
The trust agreements typically require that the paperwork for transferring the mortgages from the originator into the trust be completed by a certain date. Most mortgages, however, are transferred later than the deadline. They are often transferred only when the bank begins to foreclose.
In this case, the homeowners argued that the bank who was attempting to foreclose, Deutsche Bank, had “violated the terms of the trust involved in Deutsche Bank’s pooling and servicing agreement.” As a result, they argued, the transfer was invalid – Deutsche Bank did not own their mortgage, and thus could not foreclose.
Rejecting the homeowners’ argument, the Appeals Court held that even if the transfer was invalid, the homeowners could not challenge it. Why? Because the homeowners “were not party to the trust nor the PSA, nor were they the intended beneficiaries of the trust.”
This decision is consistent with a number of other decisions from Massachusetts state and federal courts, which also held that homeowners do not have standing to challenge invalid mortgage assignments as a means of preventing foreclosure.
The most effective ways to challenge a foreclosing bank involve the following: reviewing whether the bank has complied with the right-to-cure statute Massachusetts General Laws chapter 244, section 35A; reviewing whether the bank complied with the power of sale contained in most mortgages at Paragraph 22; or reviewing whether the bank has committed unfair and deceptive practices – often in connection with a loan modification – in violation of the Consumer Protection Act, called Chapter 93A.
Our office has experience with all of the above challenges to foreclosure, as well as numerous other legal theories. If you’re having trouble with your bank, contact us today for a no-risk case evaluation to see how we can help you.