The Supreme Judicial Court issued an important ruling last weekend extending the “paragraph 22 defense” to other homeowners facing foreclosure. In Federal National Mortgage Association v. Marroquin, the Court extended the benefit of the prior Pinti v. Emigrant Mortgage decision to those homeowners who similarly challenged a foreclosure based on non-compliance with paragraph 22 of the standard mortgage (a full copy of the decision is included below). This is alot of information to take in at once, so read on for a “non-lawyer” explanation!
Paragraph 22 of the standard mortgage is a provision in a typical mortgage agreement that requires a foreclosing entity to provide a default notice to borrowers prior to foreclosure. This notice requires specific disclosures that need to be given to the borrower. In the wake of the recent foreclosure crisis, many of these notices have had errors, and have not included all of the required disclosures. A paragraph 22 defense is a challenge to a foreclosure based on non-compliance with this mortgage requirement.
In Pinti v. Emigrant Mortgage, the Supreme Judicial Court determined that the failure to strictly comply with this mortgage requirement made the foreclosure void. Pinti, importantly, required “strict compliance” for this part of the mortgage: a borrower does not need to show any harm from such a defect to challenge the foreclosure. The Court’s decision in Pinti was “prospective”: it would only apply to the homeowners in Pinti and future foreclosure challenges based on non-compliance with paragraph 22. In Aurora Loan Services v. Murphy, the Appeals Court extended the Pinti ruling to other cases on appeal at the time of the Pinti decision.
In Federal National Mortgage Association v. Marroquin, the Supreme Judicial Court needed to decide whether a paragraph 22 defense could be raised by a homeowner who had a trial court case pending at the time of Pinti. This would include post-foreclosure eviction cases and Superior and Land Court challenges to foreclosure. In Marroquin, the Supreme Judicial Court extended Pinti to these cases as well. If a homeowner had raised a paragraph 22 defense in one of these cases at the time of Pinti, “strict compliance” would apply.
Marroquin will likely apply to only a small range of cases. The Supreme Judicial Court did not suggest that the prospective ruling of Pinti has changed. In other words, a homeowner who did not properly preserve a paragraph 22 defense will not be helped by Marroquin. As this decision comes over 1.5 years after Pinti, there are likely many homeowners who had such viable defenses, but failed to preserve them, on the belief that Pinti’s prospective ruling would not let this defense apply to their case.
This is my main complaint with Marroquin and the Supreme Judicial Court’s other decisions on paragraph 22. The Court in Pinti knew that the issue of the paragraph 22 defense would come before the Court again. Why the Court could not have addressed this matter in the first place, making these later decisions unnecessary, is beyond me. Nonetheless, Marroquin fully resolves the scope of this defense for homeowners with a paragraph 22 defect.
If you find yourself in need of assistance with foreclosure, contact me for a consultation.