In a newly released opinion, the Supreme Judicial Court of Massachusetts took on the issue of illegal foreclosure sales. In an action filed by plaintiff-homeowners against their mortgage lender, Pinti v. Emigrant Mortgage Co., No. SJC-11742 (Mass. July 17, 2015), the homeowners challenged the validity of the foreclosure sale on their home, alleging that, since the lender failed to comply with the mortgage provisions, the foreclosure sale was void. The court agreed, finding that strict compliance with the mortgage provisions was required as a condition of sale, and it ruled in favor of the homeowners.
In Pinti v. Emigrant Mortgage Co., the terms of the mortgage provided that if the homeowners default on their mortgage payments, the lender can accelerate their loan only after providing notice to the homeowners of certain information. Specifically, the lender was obligated to provide notice of the default and inform the homeowners of the action required to cure the default, of the date by which the default must be cured, and that failure to cure by the date provided may result in acceleration of the mortgage. The lender’s notice must also state that they have “the right to bring a court action to assert the non-existence of a default or any other defense to acceleration and sale.” Upon the homeowner’s failure to cure the default, the mortgage allows the lender to invoke the statutory power of sale.
In 2012, the lender foreclosed on the homeowners by exercising the power of sale contained in the mortgage. However, while the lender did send notice as required under the mortgage, the notice merely stated that the homeowners 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.” The lender argued in court that it had complied with the terms of the mortgage substantially, although not strictly, and that it was sufficient for a valid foreclosure sale. The court disagreed with the lender, holding that in light of the fact that the Massachusetts statutory power of sale entitles the mortgagee to foreclose without judicial oversight, one who sells under a power of sale must follow strictly its terms, and failure to do so results in “no valid execution of the power, and the sale is wholly void.”
The court explained that while the lender’s notice may be sufficient to comply with the requirements in a judicial foreclosure state, it is not so in Massachusetts because it fails accurately to notify Massachusetts mortgagors of their right, and need, to initiate a legal action if they seek to challenge the validity of the foreclosure. This is important because, in misstating this information, homeowners may believe that they can initiate an action after the sale. However, in Massachusetts, where the sale goes through and results in title passing to a bona fide purchaser without knowledge, the homeowners’ right to redeem their home may be lost. Considering the interplay between the mortgage terms and the statutory power of sale, the court held that the foreclosure sale was void.
The Massachusetts real estate attorneys at Pulgini & Norton bring experience and individualized attention to each case they handle. Our attorneys will inform you of your rights under your mortgage and protect your interests in foreclosure cases, home purchases, sales, and other residential real estate transactions. To discuss your real estate issue with us, call (781) 843-2200 or contact us online.
More Blog Posts:
Massachusetts Court Ruling Questions Whether Wells Fargo Satisfied Procedural Requirements in Foreclosure Case, Massachusetts Real Estate Lawyer Blog, published July 17, 2015
Massachusetts Attorney General Obtains Nearly $2 Million Judgment in Alleged Predatory Foreclosure Business Lawsuit, Massachusetts Real Estate Lawyer Blog, published April 15, 2015