Massachusetts Supreme Court Foreclosure Case Has Mixed Impact For Consumers
The case was initially brought as an eviction after the foreclosure of the homeowner’s home. The homeowner challenged the bank’s right to foreclose because a mandatory pre-foreclosure notice that was sent to him did not comply with the requirements of Mass. Gen. Laws ch. 244, Section 35A (sometimes just called “Section 35A”).
Under Section 35A, prior to foreclosure, a bank must send a letter informing the homeowner of the right to cure the default and making certain other disclosures. The homeowner claimed that these disclosures, one of which is the right to be told who the holder of his note was, were incomplete. The homeowner claimed that because he did not receive the disclosure under Section 35A, the foreclosure was “void.”
The SJC rejected this argument, ruling that even if the disclosure was not made correctly, it did not render the foreclosure void. Section 35A, the Court said, was not a necessary part of the bank’s right to foreclose, and could not be raised as an issue after a foreclosure.
The SJC did rule that if the foreclosure has not taken place yet a homeowner may take a bank to court if the Section 35A notice is defective, which could cause the bank to re-start the foreclosure process.
Additionally, a foreclosure could be held void if there is a violation of Section 35A combined with other actions by the bank that were “fundamentally unfair.”
The decision is disappointing to advocates for Massachusetts homeowners, who, prior to this decision, have been using this argument to defend against foreclosures that were unfair or unjust. But there are still a number of other claims that consumers can use to challenge foreclosures. The major lesson from the decision is that it is always better to act before the foreclosure because they are more difficult to undo than to stop in the first place.
The decision is available here: U.S. Bank v. Schumacher
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