The Massachusetts Court of Appeals recently decided whether a claim of unfair and deceptive review of a homeowner’s loan modification request could affect the bank’s title post-foreclosure. Bank of New York Mellon v. Fernandez arose out of a post-foreclosure summary judgment action filed by the bank, which was seeking to recover possession of the property. The homeowner answered with affirmative defenses and counterclaims asserting that the bank’s mortgage servicer had failed to comply with the Home Affordable Modification Program (HAMP) regulations when it denied her request to modify her loan. The case reached the court of appeals when the homeowner appealed a lower court’s judgment awarding possession of her house to the bank.
The case is slightly unusual because typically in a post-foreclosure summary judgment action, the only legal issue for the Housing Court to determine is whether the bank strictly complied with the power of sale provided in the mortgage, thereby lawfully obtaining title to the property. As a result, the homeowner’s claim that the mortgage servicer violated laws governing the loan modification program would generally not affect the bank’s title and right to possession.
Nevertheless, the Massachusetts Supreme Judicial Court has previously held that homeowners may bring claims of fundamental unfairness in the form of defenses challenging the bank’s right to possession and title. Such claims may include the failure to comply strictly with the power of sale in the mortgage, payment of the mortgage note, unlawful discrimination, and violations of unfair business practices statutes, among others. Therefore, in situations where violations of the law during the foreclosure process are so fundamentally unfair so as to entitle the homeowner to affirmative equitable relief, the court may set aside the foreclosure sale, for reasons other than the bank’s failure to comply with the power of sale.
In Bank of New York Mellon, the bank provided documentation that established a prima facie case that it held title to the property and was entitled to recover possession. In response, the homeowner argued that there were material facts in dispute regarding the denial of her request for loan modification and the validity of the assignment of the mortgage to the bank. The court stated that the denial of a request for a loan modification itself, even an erroneous denial, does not affect the bank’s right to possession and title. The court also recognized that the circumstances of the denial must be so fundamentally unfair so as to entitle the homeowner to equitable relief. Considering the evidence of record, the court found that the homeowner did not present sufficient evidence to support a claim that the actions of the mortgage servicer or the bank were fundamentally unfair, and it upheld the lower court’s judgment.
At Pulgini & Norton, our dedicated attorneys offer legal guidance to homeowners, buyers, and sellers in a variety of real estate issues throughout Massachusetts. To discuss your real estate needs with an experienced attorney, call (781) 843-2200 or contact us online.
More Blog Posts:
Massachusetts Supreme Judicial Court Finds in Favor of Homeowners, Voids Foreclosure Sale, Massachusetts Real Estate Lawyer Blog, published July 24, 2015
Massachusetts Court Ruling Questions Whether Wells Fargo Satisfied Procedural Requirements in Foreclosure Case, Massachusetts Real Estate Lawyer Blog, published July 17, 2015