Articles Posted in Mortgages

The Massachusetts Court of Appeals recently reviewed an action brought by a home mortgage borrower against the lender and its assignee, alleging that they violated the consumer protection statute by modifying his mortgage, among other claims, and that they should be enjoined from evicting the borrower from his home. In Moronta v. Nationstar Mortgage, LLC, the borrower’s primary argument was that the defendants violated G.L. c. 93A by structuring a mortgage consisting of high-cost loans, which the lender had no reasonable expectation that the homeowner could pay, and therefore misleading the borrower as to the viability of the transaction. The lower court granted summary judgment in favor of the defendants, and the decision was appealed by the borrower to the Massachusetts Court of Appeals.

In Moronta, the borrower refinanced his original mortgage of $330,600 to consolidate his debt and lower his monthly payments. At the time he refinanced in 2007, the borrower’s monthly income was $6,000, although the loan application amount stated that it was $8,500. The lender granted two loans, one in the amount of $296,000 with an adjustable interest rate and large balloon payment of $264,963 at the end of 30 years, and a second in the amount of $74,000 at a fixed interest rate of 10.5%. In November 2009, the lender foreclosed on the property.

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In a newly issued opinion from the Massachusetts Land Court, Nutting v. Nationstar Mortgage, LLC (August 24, 2015), the homeowner-plaintiffs attempted to challenge the validity of a foreclosure sale of their home in their petition to try title pursuant to G.L. c. 240 §§ 1-5. They also argued that the subsequent foreclosure deed of the property was void based on errors in the chain of title, and that the defendants did not have lawful title to the property.

Under the Massachusetts try title statute, the court has subject matter jurisdiction only if the plaintiffs establish the following elements:  (1) they hold record title to the property; (2) they are in possession of the property; and (3) there is an actual or possible adverse claim clouding the plaintiffs’ record title. The plaintiffs are entitled to a presumption of truth with regard to the third element, and they are in possession of the property by currently residing in the house, satisfying the second element.   The only issue in dispute in Nutting was the first element, whether the plaintiffs held record title to the property.

If the plaintiffs could prove that at the time of the foreclosure, the foreclosing entity did not hold title to the property, they could satisfy the first element. Thus, to establish that they still held record title, the plaintiffs claimed that the foreclosure sale was void, arguing that the defendant did not hold both the promissory note and a valid assignment of mortgage at the time of the foreclosure sale. The court disagreed, however, stating that the underlying note and mortgage need not be conveyed together under Massachusetts law. As a result, a foreclosing mortgagee is not required to demonstrate that the previous holders of the recorded interest in the mortgage also held the note each time that the interest was assigned to the next holder.

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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.

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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.”

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The Appeals Court of Massachusetts recently issued an opinion in Wells Fargo Bank, N.A. v. Cook, 87 Mass.App.Ct. 382 (2015), evaluating whether the procedural and substantive requirements set out in the United States House and Urban Development (HUD) regulations were satisfied by Wells Fargo in a foreclosure case. 

The homeowners in the case had refinanced their property in 2008 with a loan secured by a mortgage. Since the Federal Housing Administration had insured their mortgage, HUD regulations were incorporated into it. The HUD regulation at issue in the case restricted Wells Fargo’s right to accelerate the loan payments and foreclose on the house in the event of a default. Specifically, it provided that Wells Fargo must have a face-to-face interview with the homeowners, or attempt to do so, before three payments due on the mortgage go unpaid.

On August 12, 2008, Wells Fargo held an event at Gillette Stadium, providing hundreds of people with an opportunity to settle their mortgage disputes and negotiate loan modifications in a face-to-face interview. After missing three installments, the homeowners attended the event and met with a representative of Wells Fargo for 15 minutes. The homeowners testified that they attempted to cure the default by bringing a cash payment, but the representative would not accept it. The homeowners were instead told that they would receive a letter regarding the loan modification in the mail, which they did several days later, and they accepted the terms. However, after the homeowners made two payments under the new agreement, Wells Fargo rejected their third payment, declared the loan in default, accelerated the payments, and foreclosed. A lower court granted Wells Fargo’s eviction action in a summary judgment against the homeowners, which they appealed.

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In another recent real estate case from the Appeals Court of Massachusetts dealing with mortgage foreclosure, Hoyt v. BAC Home Loan Servicing, L.P., the individuals who mortgaged a property attempted to challenge a foreclosure decision reached in the lower court regarding the legality of assignment and foreclosure.

The homeowners in the case were challenging the assignment of the underlying note that was attached to their mortgage, in addition to the validity of the subsequent foreclosure.

In this very commonly litigated topic right now, the Appeals Court reviewed the record and evidence in the case, and it found that the legal interest in the mortgage may properly be separated from the interest in the debt that it actually secures. It found that the assignment to Mortgage Electronic Registration Systems (MERS) was both valid and legally conveyed, and that it had a proper interest in  because it held the record legal title interest in the mortgage when it executed the subsequent assignment.

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At the end of last month, the Attorney General announced that a court had reached a decision in an alleged predatory foreclosure company that had been conducting business in Massachusetts. The announcement stated that a legal and financial services company was ordered by a judge to pay in excess of $1.9 million to the Commonwealth as a penalty for its purported role in taking advantage of consumers and engaging in the unauthorized practice of law in relation to the massive foreclosure epidemic. The company is also prohibited from soliciting any further business or marketing within the state.

The Attorney General released a statement regarding the case and stating that her office will work against potentially predatory loan modification and foreclosure scams that take place within the state.

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In a recent opinion entered by the Appeals Court of Massachusetts, Webster Bank v. Ragge, Mass. App. Ct. (2014), the court ruled on a situation involving the enforcement of a default judgment in a real estate foreclosure case.

A default judgment is what happens when a party institutes a legal claim, action, or lawsuit, and the other party in the case, most likely the defendant, does not respond. When there is a failure to respond within the statutorily established period of time, the moving party then files a motion for default judgment. This causes the court to review the relevant moving papers, or motions and attached evidence, and decide whether finding for that party based on the evidence presented is proper. If so, the court enters a default judgment. This allows the party that wins the default judgment to then file something in order to enforce that judgment against the other party.

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In the recent Massachusetts Appeals Court case, The Bank of NY Mellon Corp v. Wain, 85 Mass. App. Ct. 498 (2014), the court had before it the issue of rightful ownership of a home that had been mortgaged.

In the case, two individuals owned a property that was subjected to a mortgage. The plaintiffs eventually defaulted on the mortgage, at which point the bank foreclosed and bought the property at a foreclosure sale. The bank then filed a lawsuit in order to legally establish proper ownership. The homeowners responded by filing their own claims, and attempted to challenge the foreclosure’s legal validity. The lower court judge ruled in favor of the bank.

When the homeowners purchased the property initially, during the closing, they also signed the relevant mortgage payments. After the homeowners stopped making their payments on time, a separate company sent the homeowners a notice to cure letter, informing them they were in default, and stating how it could be cured. The letter also stated that a failure to cure by a certain date would result in foreclosure.

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