Appeals Court Issues Decision on Legal Rights Following a Loan Modification

 

The Massachusetts Appeals Court issued an important decision last week concerning a homeowner’s legal rights following a loan modification.  In Barrasso v. New Century Mortgage Corporation, the Appeals Court held that a homeowner was unable to raise prior claims related to their mortgage loan after accepting a modification of that loan (a copy of the decision is below).

Background

In Barrasso, the homeowner entered into a loan modification with their lender, for the purpose of making the loan payments more affordable.  Years later, the homeowner brought a lawsuit against the lender, challenging several of the mortgage loan assignments and whether the present holder of the mortgage was the proper holder of the loan.

Legal Decision

Barrasso held that the homeowner was estopped from challenging the transfer of his mortgage due to the homeowner’s signing of this loan modification.  Estoppel is a legal defense that prevents a party from making an allegation or defense that contradicts a prior representation.  The loan modification in Barrasso, like most loan modification agreements, required the homeowner to agree to several factual representations about the mortgage loan, namely, who held the mortgage.  The Court reasoned that, because the homeowner benefited from this loan modification agreement, it could not then deny one of the prior statements in this agreement that it had agreed to: who the owner of the mortgage was.

Implications to Homeowners

Barrasso follows a line of reasoning that I have often taken with loan modifications: the signing of one of these agreements generally waives any prior legal claims associated with the loan.  A loan modification, in essence, is a new loan, with new terms and conditions.  If a homeowner had legal claims arising from the original loan (such as predatory lending), the homeowner probably won’t be able to raise them following a loan modification.  As explained by Barrasso, if a homeowner gets the benefits of a loan modification, it can’t then go back and raise matters that arose before the modification.

Some loan modification agreements, such as those coming from the federal Home Affordable Modification Program (“HAMP”), do not require a homeowner to waive any legal rights against a lender.  Barrasso makes clear, however, that  a loan modification has strong implications for one’s legal rights following one of these agreements.  Homeowners should keep this in mind when considering accepting a loan modification: homeowners generally won’t be able to raise claims arising out of the prior loan.

Barrasso should not scare homeowners away from accepting a loan modification.  Loan modifications are the best means of avoiding foreclosure, and a homeowner should absolutely accept a modification with an affordable loan payment.  The key is to make sure that such a modification is right for the homeowner.  If you find yourself in such a scenario, contact me for a consultation.

Barrasso v. New Century

SJC Rules that Failure to Send a Postforeclosure Notice Does Not Invalidate A Foreclosure

The Supreme Judicial Court issued a decision this week on postforeclosure notices, and whether the failure to send one invalidates a foreclosure sale.  In Turra v. Deutsche Bank, the Court ruled that the failure to send one of these notices does not void a foreclosure (disclosure: this was my appeal!).  A full copy of the decision is below.

The law in question, G.L. c. 244, § 15A, requires a mortgagee to notify the local municipalities of a foreclosure thirty days after the sale has occurred.  As the Court acknowledged in Turra,  prior court decisions suggested that strict compliance with this law was required to perform a lawful foreclosure.  The question in Turra was whether this was such a requirement, and whether a failure to comply with this step would invalidate a foreclosure.  Turra determined this statute isn’t grounds for challenging foreclosures.

I don’t read Turra to suggest that a failure to comply with a postforeclosure notice requirement can never be used to challenge a foreclosure.  If a homeowner or someone else is actually harmed from a bank’s failure to send such a notice, this violation may potentially be a consumer protection claim.  Turra is clear, however, that such a violation, on its own, is not enough to be a foreclosure defense.

While Turra wasn’t the outcome I wanted, I’m pleased that the Supreme Judicial Court acknowledged the basis for my argument, and conceded  that its prior caselaw suggested this was a plausible defense.  The decision mentions two other decisions where courts came out the oppositie way on this question of law (one of these decisions was one of my other cases using this defense).  You can’t win ’em all!

Turra has an important lesson of wisely choosing a foreclosure defense strategy.  The Internet is filled with foreclosure defense hoaxes and myths that do struggling homeowners more harm than good in trying to save their homes.  A review of unsuccessful foreclosure defense cases in state and federal court shows dozens of cases lost on the same arguments that courts routinely reject.  My strategy in defending homeowners is to make arguments that have a basis in law, and reject arguments that don’t work.  I reject the “kitchen sink” approach to foreclosure defense, where one raises every argument they can think of, irrespective of whether the claim has any hope of succeeding.  It is far better, in my opinion, to stick with arguments that work, and try new approaches.   While not successful in this case, my legal argument on these postforeclosure notices succeeded in several of my other cases, and helped keep a deserving family in their home.  If you find yourself facing foreclosure, don’t rely on an Internet myth to defend yourself: contact an experienced attorney for assistance.

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MA SJC Issues Important Decision on Consumer Protection Demand Letters

The Massachusetts Supreme Judicial Court issued an important decision on consumer protection demand letters last week, that is of particular importance to Massachusetts foreclosure defense.  The case, Moronta v. Nationstar Mortgage LLC,  is an interpretation of the consumer protection demand letters that are required for Massachusetts’s Consumer Protection Law (a full copy of the decision is below).

Overview of Massachusetts’s Consumer Protection Law

Massachusetts’s Consumer Protection Law (commonly known as “Chapter 93A”) prohibits “unfair and deceptive” practices by businesses.  The scope of this law is broad, and has been used successfully for a variety of consumer protection claims.  For foreclosure defense, Chapter 93A claims have been effective for loan modification denial claims; courts have increasingly allowed these lawsuits based on a loan servicer’s repeated refusal to properly review a loan modification application.

To bring a Chapter 93A claim against a business, a consumer is required to send the business a demand letter and provide them thirty days to make a settlement offer.  These consumer protection demand letters are an essential requirement of this law; courts have thrown out Chapter 93A claims for a claimant’s failure to send one of these letters (or to send a letter that makes a proper demand to the business).

Exceptions to the Demand Letter Requirement

A consumer does not need to send a demand letter if “if the prospective respondent does not maintain a place of business or does not keep assets within the commonwealth.”  The question in Moronta was whether one or both of these two exemptions are needed to avoid sending the demand letter.  As the Court explained: “if the defendant keeps assets in the Commonwealth, but does not maintain a place of business here, must the plaintiff serve a demand letter?”  The Court answered no: either one of these exceptions (no assets or no place of business in the Commonwealth) is an exception to the consumer protection demand letters under Chaper 93A.

How Does Moronta Affect Massachusetts Foreclosure Defense?

Moronta is of particular importance for Massachusetts foreclosure defense.  Because Massachusetts is a non-judicial foreclosure state (where a bank does not need to go to court to do a foreclosure), homeowners often need to go on “the offense” in avoiding foreclosure, through a civil action.  The demand letter requirement under Chapter 93A can be a burden for borrowers who have less than thirty days before a scheduled foreclosure to pursue a legal action.  Moronta will be a help for homeowners with cases against national banks and loan servicers, many of which do not have offices in Massachusetts, and would trigger the exception to the demand letter requirement.

Despite the benefit of Moronta for consumers, I caution consumers (especially homeowners with foreclosure defense claims) from pursuing Chapter 93A claims without the benefit of legal counsel.  Chapter 93A may be intended to help consumers, but consumer protection claims are often still too complicated for a non-lawyer to take on.  Consult an attorney if you believe you have a viable cause of action.

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Appealing a Foreclosure Case

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A recent Massachusetts Supreme Judicial Court decision illustrates the importance of properly appealing a foreclosure case.  The Court’s decision reaffirms that a homeowner has one–and only one–opportunity to appeal an unfavorable court decision.

In Eresian v. Merill Lynch Credit Corporation, the Supreme Judicial Court upheld the denial of a homeowner’s attempt to overturn a decision in a foreclosure case from the 1990s (a copy of the full decision is below). The homeowner attempted to file an appeal of this decision in 2015, years after the 1993 foreclosure case.  The Appeals Court rejected this appeal, and stated that the case was closed.  The homeowner then attempted to petition the Supreme Judicial Court for a subsequent order to review her prior decision.  Here, the Supreme Judicial Court rejected this requested relief, noting that the homeowner had already obtained an appeal of her decision, and there was no reason for the Court to allow her the opportunity for another review of the case.

The Court’s decision in this case reaffirms an important lesson for homeowners fighting foreclosure: there are few, if any, “do overs” in matters of law.  If a homeowner loses their foreclosure case and wishes to appeal, they get one–and only one–chance at appeal. Rarely will a homeowner ever be able to come back later for a second shot.

With this in mind, homeowners should strongly consider consulting an experienced foreclosure defense attorney in appealing a foreclosure case.  The risks of not doing the job right the first time just aren’t worth it.

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FHA Loan Foreclosure Requirements

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The Massachusetts Appeals Court issued an important decision on FHA loan foreclosure requirements in Jose v. Wells Fargo Bank (full decision below).  This decision reaffirms the strict requirements that come with foreclosing one of these loans.

A Federal Housing Administration (“FHA”) loan is a loan guaranteed by the federal government, aimed at helping lower income Americans buy homes.  For purposes of foreclosure, FHA loans have much detailed and elaborate requirements than traditional, private loans.  One of these requirements is a “face-to-face meeting” prior to accelerating the loan and foreclosure. This requires the lender to actually meet with the borrower before going forward with the foreclosure process, in an effort to help avoid foreclosure.  This requirement has a practical purpose: the federal government backs these loans if the borrower defaults, so the lender should be making every effort possible to avoid foreclosure.

Jose v. Wells Fargo Bank concerned one of the exceptions to the face-to-face meeting requirement, which allows a lender to avoid this requirement if it has no offices within 200 miles of the borrower.  Wells Fargo argued that this exception applied because there were no branch offices of the mortgagee (the holder of the loan) within this distance from the borrower.  Wells Fargo, undeniably, had branch offices of its servicer within 200 miles of the borrower (who is responsible for the day to day responsibilities of administering the loan).

The Court rejected this argument, holding that under the plain terms of the law, an office within 200 miles of either the mortgagee or servicer does not allow a foreclosing entity to qualify for this exception to the FHA loan foreclosure requirements.  As such, the lender was required to do a face-to-face meeting with the borrower, and its failure to do so made the foreclosure void.

This decision is an important win for homeowners, in that it makes this exemption to the FHA loan foreclosure requirements less viable for many lenders, who frequently have loan servicing offices across the state.  The decision also reaffirms the need to strictly comply with these FHA loan requirements, and the consequences of a lender’s failure to do so.

If you have a FHA loan and are facing a possible foreclosure, contact me to see if I can be of assistance.

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Fannie Mae v. Rego: Supreme Judicial Court Permits a Chapter 93A Defense to Foreclosure

 

SJC

The Massachusetts Supreme Judicial Court issued Fannie Mae v. Rego today, an important foreclosure law decision that permits a Chapter 93A defense to foreclosure (full copy of the decision is below).  Chapter 93A, the common name for Massachusetts’s Consumer Protection Law, is a broad consumer statute that prohibits “unfair and deceptive practices” by businesses.  Chapter 93A claims are commonly used for monetary damages, and can provide an an award of treble damages against a party who violates this law (along with attorney fees).  The question for the Court was whether a Chapter 93A defense could be raised to void a foreclosure (as opposed to simply awarding a party money).

Rego  was an appeal of a post-foreclosure eviction (“summary process”) case, where the homeowner was defending against the eviction of his home on the grounds that the foreclosure was void.  The homeowner brought a counterclaim (a lawsuit brought in the same case against the original party who filed the suit) for violation of the Consumer Protection Law.  Here, the trial court dismissed this counterclaim, without offering a real reason for doing so.  The Supreme Judicial Court held in Rego that a homeowner is permitted to raise a Chapter 93A defense in a eviction foreclosure case that goes to the issue of possession of the property; in other words, whether the foreclosure was done correctly.  If this is the relief sought by a Chapter 93A claim, Rego suggests that it can be raised in a post-foreclosure eviction case.  If the Chapter 93A merely seeks monetary damages, such a claim is not allowed in one of these cases (and would have to brought separately).

Rego, in my interpretation, is an important decision because it clarifies that a Chapter 93A claim may be used to void a foreclosure sale.  Many lawyers (and some judges) are not aware that Chapter 93A provides a court with equitable relief.  Equitable relief  is a remedy that goes beyond money damages, and requires a party to act or refrain from performing a particular act.  This type of relief is especially important in foreclosure defense, where the homeowner isn’t looking for money as a defense to foreclosure; the homeowner instead wants the foreclosure reversed.  Rego, in my interpretation, holds that there is a Chapter 93A defense to foreclosure; something that was less clear before today’s decision, where some trial courts took the position that money was the only award from a foreclosure that violated Chapter 93A.

 Rego also decided another issue of foreclosure law: whether an attorney could perform a foreclosure on behalf of a mortgagee without written authorization.  The relevant foreclosure law, G.L. c. 244, Section 14, seemed to suggest that such a writing was required for attorneys who performed foreclosures.  The Supreme Judicial Court held that no such writing is required, and that legal counsel may perform the steps of the foreclosure process without written authorization.  Although the bulk of  Rego was spent on this narrow issue of law, the Court’s decision is unsurprising:  I am aware of only one trial court decision that came out in the homeowner’s favor on this argument (with the overwhelming majority following the reasoning of  Rego).

 Rego

Guest Blog Post: Meikle v. Nurse (Defenses in Massachusetts Eviction Cases)

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The Massachusetts Landlord Tenant Blog is proud to have Attorney Joseph N. Schneiderman guest blog on the Massachusetts Supreme Judicial Court’s recent Meikle v. Nurse decision, an appeal involving the important issue of defenses in Massachusetts eviction cases.  Attorney  Schneiderman is an appellate attorney licensed in Massachusetts and Connecticut and may be contacted at connlawjoe@gmail.com.

Supreme Judicial Court:
Violation of the Security Deposit Statute is A Defense to Possession In An Eviction Case

On April 27, in Meikle v. Nurse, Slip Op., SJC-11859, 474 Mass.—, the Supreme Judicial Court held that a residential tenant could assert a violation of the security deposit statute (G.L. c.186, §15B) as a defense to possession in a summary process action (a copy of the decision is posted below).

In October 2011, Ms. Nurse executed a one-year lease to live in a residence Mr. Meikle owned and paid a $1,300 security deposit equivalent to one month’s rent. Although Mr. Meikle acknowledged receipt of the deposit, he neither informed Ms. Nurse where he deposited the lease-nor paid her interest. Ms. Nurse lived there until April 2014, when Mr. Meikle commenced the instant summary process action. Ms. Nurse counterclaimed on multiple grounds, including a violation of the security deposit statute.

A Judge in the Boston Housing Court held for Ms. Nurse on her security deposit claim because Mr. Meikle failed to provide proper receipts and interest. However, in conflict with at least three past Housing Court rulings, the Judge ruled that the violation would only offset the unpaid rent and was no defense to possession. Ms. Nurse appealed and the Supreme Judicial Court took the case directly on their own motion.

 Writing for the Court, Justice Geraldine S. Hines distilled the case to the interplay of G.L. c.186, §15B and G.L. c.239, §8A, establishing defenses to eviction. The Court applied two established interpretive principles to resolve this issue. First, the Court interprets statutes to effectuate the intent of the Legislature based on the language of the statute and its purpose. Plain and unambiguous language in a statute was “conclusive of the intent of the Legislature.”  Second, the Court interprets remedial statutes broadly to best effectuate their purposes.

 Against this backdrop, the Court noted that the fifth paragraph of Section 8A provided that “a tenant may retain possession if: (1) the tenant prevails on a counterclaim or defense brought “under this section; and (2) the damages on that defense or counterclaim exceed the amount due the landlord, the tenant pays to the court the amount due within one week.” Construed harmoniously, the phrase “under this section” referred back to the first paragraph of Section 8A to assert a defense or counterclaim “arising out of such property, rental, tenancy…occupancy of breach of warranty, for a breach of any material provision of the rental agreement, or for a violation of any other law.”

The Court held that violation of the security deposit statute “fits squarely within this framework [as relating to or arising] out of the tenancy” and its violation was one “of any other law.” The Court emphasized that security deposits were a “prerequisite to most residential tenancies” the security deposit statute was “part of an elaborate scheme of rights and duties to prevent abuses and to insure fairness to the tenant.” Moreover, a contrary interpretation would frustrate both statutes, especially the historic expansion of Section 8A leading to the language “violation of any other law” in 1977. Finally, Mr. Meilke was not without a remedy. If he ameliorated the security deposit violation, he could later bring a new summary process action-even if Ms. Nurse paid the amount due.

The Court’s decision reflects a thoughtful balance. First, the Court broadly effectuates two remedial statutes as a harmonious whole to protect residential tenants. Security deposits are a sine-qua-non of residential tenancies and the Legislature enacted a broad constellation of rights to protect tenants. Holding that a security deposit violation was not “a violation of any other law” ignored two lessons of history: the expansion of defenses to tenants and robust protection of security deposits.

At the same time, the Court establishes a key limit for future cases by interpreting “any other law” to invariably correlate to the landlord tenant relationship. Future tenants will therefore need to make this showing to have a defense to possession.  Landlords also may remedy their violation and bring a new summary process action; indeed, “the Legislature’s [was to provide…] a time limited equitable remedy.” The open question thus potentially becomes how long a tenant may retain possession for a security deposit violation-or, conversely, how long a landlord has to remedy a security deposit violation before commencing a new summary process action.  Hopefully, despite the summary nature of summary process, the SJC will address these issues again strike a balance.

Joseph N. Schneiderman has an appellate practice “on circuit” in Massachusetts and Connecticut, and argued his first civil appeal in the SJC on March 10. See Goodwin v. Lee Public Schools, SJC-11977. Joe gratefully thanks Adam for the opportunity to guest blog (again)!

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Guest Blog Post: Clark v. Leisure Woods Estates, Inc.

 

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The Massachusetts Landlord Tenant Blog is proud to have Attorney Joseph N. Schneiderman guest blog on the Massachusetts Appeals Court’s recent Clark v. Leisure  Woods Estates, Inc. decision, an appeal involving the important issue of damages in landlord tenant cases.  Attorney  Schneiderman is an appellate attorney licensed in Massachusetts and Connecticut and may be contacted at connlawjoe@gmail.com.

Appeals Court Partially Affirms and Vacates Damages To Tenants At Manufactured Housing Community in Orange

On February 23, 2016, the Massachusetts Appeals Court decided Clark v. Leisure Woods Estates, Inc., 89 Mass. App. Ct. 87 (2016). (full copy of the decision is below).  Justice Gregory Massing wrote for a unanimous Court and held that a Housing Court judge properly awarded treble damages under G.L. c.93A for breaches of the covenant of quiet enjoyment but erroneously awarded each household two triple rent awards under G.L. c.186, §14.

Leisure Woods Estates is a large manufactured housing community in Orange, Franklin County, home mainly to senior citizens.  Id. at 88. Residents own their own units but pay a monthly rental fee for the lots. Id.  Twenty-two residents sued Leisure Woods in the Western Housing Court over conditions there and a three-day bench trial followed. Id. at 89. On the last day, Leisure Woods’ president, Glenn Gidley, was set to testify but did not arrive at court until plaintiff’s counsel began her summation. The judge refused to reopen evidence to permit Gidley’s testimony.  Id. at 95.

The judge found that Leisure Woods committed “three distinct violations” of the convent of quiet enjoyment codified in Section 14. First, since 2007, Leisure Woods blocked access to common walking trails, which had been their selling point. Second, Leisure Woods permitted retaining walls to collapse, walkways to deterioriate, and flooding, which were particularly aggravating to Leisure Woods’ aged population. Third and finally, Leisure Woods “chronically failed” to clear snow and ice, causing potholes and impassable roads. Id. at 89. Leisure Woods appealed, asserting that (1) the Housing Court judge erred in determining damages and (2) in barring Gidley’s testimony.

The Appeals Court recalled that “an injury party may recover damages for claims or injuries that are ‘factually separable and distinguishable [but not] multiple awards for the same injury based on different theories.” 89 Mass. App. Ct. at 90-91. Section 14 permitted a tenant to recover either “actual and consequential damages [of] all reasonably foreseeable [personal and economic] losses”, or, three months rent, if the tenant could not calculate actual damages. Id.  Against this backdrop, the  plaintiffs had not received “repeated [or otherwise duplicative] damages for each rental period, but rather one triple rent award for each of two factually distinct breaches.” Id. at 92.

However, the Appeals Court held that “only one triple rent award is available in a single proceeding under §14, no matter how many ways the landlord interferes with the tenant’s quiet enjoyment.” Id. at 92-93, citing Simon v. Solomon, 385 Mass. 91, 112-113 (1982).  Since the plaintiffs could not prove actual damages, only one triple award was proper-unless Leisure Woods continued to violate Section 14.  Id. at 93, n.6.

Turning next to c.93A, the trial judge had found that Leisure Woods willfully and knowingly failed to repair extensive pot holes and permitted snow and ice to accumulate. 89 Mass. App. Ct. at 89. Leisure Woods contended that natural snow accumulation in and of itself could not constitute a defect. Although the Appeals Court noted that this specific position was of dubious merit in light of recent caselaw, the Appeals Court instead concluded that Leisure Woods’ conduct violated the Attorney General’s regulations on manufactured housing requiring maintenance of community roadways promulgated pursuant to c.93A. Id. at 93, and n.7. Because the regulations required removal of snow and pothole repair,  “overwhelming evidence” of damaged roads caused by these conditions made the treble damages award appropriate. Id. at 94.

Finally, the judge did not abuse his discretion in refusing to permit Gidley to testify. The defendants had multiple opportunities to bring Gidley to court timely that they missed, despite the judge calling a recess and tending to other matters. Because Gidley did not arrive until summations, the judge correctly precluded his belated testimony because it would likely prejudice the plaintiffs. Id. at 95-96.

Two open issues emerge from this case. First, although a landlord may commit multiple breaches of the covenant of quiet enjoyment, only one default award of triple rent is available under Section 14, unless the breach survives the initial suit-or actual damages can be calculated. 89 Mass. App. Ct. at. 93, n.6. Although this rule will avoid duplicative damage awards, it does not appear to incentivize the landlord to remedy the breach-and may undervalue a tenant’s damages, frustrating the purpose of Section 14.

Second, does negligent snow accumulation in and of itself breach the covenant of quiet enjoyment? As the Court noted, the law of premises liability no longer distinguishes between natural and unnatural snow accumulation. 89 Mass. App. Ct. at 93, n.7, citing Papadopoulos v. Target Corporation, 457 Mass. 368 (2010). In light of that case and the attendant hazards of snow accumulation to tenants and visitors from snow accumulation, such accumulation should constitute a freestanding breach of the covenant of quiet enjoyment. Papadopoulos, 457 Mass. at 382-384. Given the severe winters of 2014-2015, landlords should take care to clear snow or risk a litany of litigation.

Joseph N. Schneiderman has an appellate practice “on circuit” in Massachusetts and Connecticut.  Joe gratefully thanks Adam for the opportunity to guest blog!

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Massachusetts Appeals Court Issues Decision on “Hold the Note” Requirement for Foreclosure

 

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The Massachusetts Appeals Court issued an important appellate decision this week on the “hold the note” requirement for Massachusetts foreclosures.

First, a brief background.  A promissory note is a written contract to pay a certain sum of money at a specific point in time.  When a homeowner purchases a property, they sign a promissory note with the lender, promising to repay the borrowed money (and with it, grant the lender a mortgage to the property; a security agreement allowing the  lender to foreclose if the money isn’t repaid).  A promissory note is a legal agreement that can be sold to another entity (known in law as a negotiable instrument).

“Negotiability” is the essence of promissory notes for residential home buying: the original lender of the home rarely holds the note for the duration of the loan, and generally sells it on the secondary market (with Fannie Mae, Freddie Mac, and securitized trusts being the common buyers of these loans).  Many homeowners are shocked to realize that the entity they borrowed money from is often out of the picture not long after the home is purchased.

These transfers of promissory notes became a real problem for banks and lenders during the foreclosure crisis.  With so many foreclosures happening at once, banks had difficulty getting their paperwork in order, with some foreclosing entities performing foreclosures without actually owning the underlining loan.  In Eaton v. Federal National Mortgage Association, the Supreme Judicial Court held that a foreclosing entity needs to hold the promissory note, or act on behalf of the noteholder, to do a valid foreclosure (this requirement applies only to foreclosures occurring after the date of the Eaton decision: June 22, 2012.).

In this recent Appeals Court decision, Khalsa v. Sovereign Bank, N.A., the Appeals Court considered what a foreclosing entity needed to show that it was “holding the note” or acting on behalf of the owner of the loan.  In Khalsa, the owner of the loan was Freddie Mac (a government corporation who buys loans from lenders).  The loan servicer (who collects the loan payments on behalf of the owner of the loan) was Sovereign Bank, which was the entity who performed the foreclosure.  Under Eaton, Sovereign Bank could foreclose only if it had authority to act on behalf of Freddie Mac.

Easy enough to prove?  Not quite, said the Appeals Court.  The Court ruled that the question of whether Sovereign Bank had acted on behalf of Freddie Mac was a question of fact: a matter that needed to be decided at trial.  The Appeals Court considered the thousands of pages of documents and amply determined that a trial was needed to resolve this issue.  Simply put, Sovereign Bank wasn’t able to show that, undeniably, such a relationship existed.  The homeowner, in turn, also wasn’t able to prove the opposite: that Sovereign Bank had no authority to do the foreclosure.  As such, the matter needed a trial to be resolved.

I read two important “take home” lessons from Khalsa v. Sovereign Bankas it relates to foreclosure defense:

  1. Proving that a foreclosing entity “holds the note” at the time of foreclosure can be an arduous task.  Khalsa shows that these questions often need to be resolved at trial, which can make for an effective foreclosure defense.
  2. In a footnote at the end of the decision, the Appeals Court appears to reject the argument that simply recording an affidavit in the land records is proof, in and of itself, that a foreclosing entity “holds the note”  (an argument that lenders often raise against this foreclosure defense argument).  Khalsa suggests that while such an affidavit may be considered as proof for this purpose, this document does not by itself resolve these matters (especially in the face of conflicting and missing documents).

A copy of  Khalsa v. Sovereign Bank is below.

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Sherwin Law Firm Wins Foreclosure Appeal!

 

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Christmas came early for two of my clients this year.  I’m pleased to announce that I won a foreclosure appeal of a post-foreclosure eviction case this week in the District Court Appellate Division.  In this case, my clients were challenging the validity of the foreclosure in the eviction case, where the bank was attempting to remove them from the home on the grounds of a lawful foreclosure.  The basis of this foreclosure appeal was the lender’s failure to comply with the terms of the mortgage, an effective foreclosure defense following the Supreme Judicial Court’s Pinti v. Emigrant Mortgage decision.

In this case, which went to a full jury trial, the Trial Court denied our motion for a directed verdict, a request a defendant makes to end a trial on the basis that the plaintiff did not meet their burden of proof.  Simply put, because the bank never sent my clients the correct notice, the bank failed to perform a lawful foreclosure.

A foreclosure appeal requires an enormous amount of time: my records show I put over seventy hours of work into this case.  The effort, however, was well worth it, and just in time for the holiday season!  This is an important remindeer of the importance of hiring an experienced foreclosure defense attorney for help with a foreclosure appeal: the complexity of these legal arguments (and extensive appellate requirements) makes an appeal a project that only an attorney should handle.  If you are facing foreclosure and need to do a foreclosure appeal, contact me for a consultation.

A copy of the foreclosure appeal decision is below.

Foreclosure-Appeal-Decision