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Challenging a Foreclosure

Foreclosure law in Massachusetts was impacted by the Ibanez decision of January 2011.  Throughout Essex County, Middlesex County, the Northshore or elsewhere in the Commonwealth of Massachusetts, Ibanez and the string of Massachusetts cases that followed, such as Bevilaqua, Eaton, Pinti and Schumacher, examined and interpreted what does and does not constitute compliance with the Massachusetts foreclosure statute (M.G.L. c. 244) and what does and does not constitute an effective challenge to the validity of a foreclosure in Massachusetts.

commerce-acts-books-477966-mMassachusetts law allows the holder of a mortgage to foreclose without having to file suit in court (“Massachusetts does not require a [mortgagee] to obtain judicial authorization to foreclose on a mortgaged property.”  Pinti, citing Ibanez).  Because Massachusetts statutory law allows this streamlined, non-judicial process, Massachusetts courts narrowly interpret the statute and require strict compliance with it (“…we adhere to the familiar rule that ‘one who sells under a power [of sale] must follow strictly its terms…’”.  Pinti citing Ibanez)

In the Pinti case, borrowers in a standard Fannie Mae mortgage challenged validity of a foreclosure based on borrowers’ claim that that the lender/mortgagee, Emigrant Mortgage Company, Inc., failed to strictly comply with paragraph 22 in the mortgage.  Paragraph 22 states that prior to acceleration of the loan following a breach of the mortgage by the borrowers, the mortgagee must notice the borrowers of: “(a) the default; (b) the action required to cure the default; (c) a dated, not less than [thirty] days from the date the notice is given to [the plaintiffs], by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by [the mortgage].”  Paragraph 22 further requires that the borrower be informed “of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of [the plaintiffs] to acceleration and sale”.  Then, upon failure of the borrower to cure the default, Emigrant may proceed with the “statutory power of sale”.  The borrower, Pinti challenged Emigrant’s default notice because the notice stated that the borrowers “…have the right to assert in any lawsuit for foreclosure and sale the nonexistence of a default or any other defense [they] may have to acceleration and foreclosure and sale”.  Pinti.

On July 17, 2015 the Massachusetts SJC ruling in Pinti, concluded that strict compliance with the notice of default provisions in paragraph 22 of the mortgage was required as a condition of a valid foreclosure sale and that Emigrant failed to meet the strict compliance requirement.  The Court opined that strict compliance with the notice requirement in the mortgage itself is necessary for a valid foreclosure and that failure to do so renders the foreclosure void.

The Pinti decision concluded that because the failure of a mortgage holder to strictly comply with Paragraph 22 is not a matter of public record; ascertaining whether or not clear title exists may not be possible.  As a result, the SJC gave its decision prospective effect only, holding that, “it will apply to mortgage foreclosure sales of properties that are the subject of a mortgage containing paragraph 22 or its equivalent and for which the notice of default required by paragraph 22 is sent after the date of this opinion.”  Emphasis added.

On May 11, 2017 the SJC in FNMA v. Marroquin (SJC-12139) acknowledged that previous rulings had not answered the question whether or not its holding should apply to any case where the issue was raised in the trial court or on appeal before July 17, 2015.  In Marroquin, the SJC held that the Pinti ruling applied in all cases where the issue was timely and fairly asserted in the trial court or on appeal before July 17, 2015.  The SJC in Marroquin concluded that the defendants timely and fairly raised the issue in the Housing Court before that date, and because the notice of default did not strictly comply with the requirements in paragraph 22 of the mortgage, the foreclosure sale was void.

A foreclosure that is void does not bar the mortgage holder from re-initiating the foreclosure process.  However it may afford the Borrower some breathing room or provide an incentive to the Lender to negotiate a solution, such as a loan modification, with its borrower.