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


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).

Overview of the Massachusetts Foreclosure Title Clearing Bill

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Governor Baker signed into law the Massachusetts Foreclosure Title Clearing Bill last week.  This bill, which supporters have been trying to pass for years, imposes a deadline for challenging the validity of foreclosures in Massachusetts.  Here, I’ll present an overview of the Massachusetts Foreclosure Title Clearing Bill and what homeowners and lawyers need to know about this new law.


The Massachusetts Foreclosure Title Clearing Bill is largely the direct result of the Supreme Judicial Court’s U.S. Bank v. Ibanez decision, which invalidated thousands of foreclosures across Massachusetts.  In Ibanez, the Supreme Judicial Court held that a mortgagee needs a valid assignment to perform a foreclosure, and the failure to have one at the time of foreclosure makes the foreclosure void.

The Supreme Judicial Court later held in Bevilacqua (a companion case to Ibanez) that a defective foreclosure can’t be fixed by simply going to court and asking the court to fix the problem.  The result of this made it extremely difficult to correct a void foreclosure. Consequently, homeowners who purchased these improperly foreclosed homes were stuck with properties that had bad title.

New Deadline for Challenging a Foreclosure

The Massachusetts Foreclosure Title Clearing Bill imposes a new deadline for challenging a foreclosure (akin to a statute of limitations).  Under this law, a homeowner has three (3) years from the recording of the affidavit of sale in the land records (usually done several months after the foreclosure sale) to challenge the foreclosure.  For foreclosures that occurred over three years before the effective date of this new law, homeowners have one (1) extra year to raise a foreclosure challenge.

A challenge to foreclosure can be brought on the offense (as a lawsuit against the foreclosing entity) or the defense (as a challenge to an eviction case brought by the bank, on the basis on a lawful foreclosure).  The law recognizes either type of action as a basis for challenging a foreclosure.

This law, importantly, is only about a homeowner’s right to reverse a foreclosure; the law does not impose a deadline on lawsuits bought solely for monetary damages.  The law recognizes that violations of Massachusetts foreclosure law are violations of the state’s Consumer Protection Law, which allows for monetary damages.

What is Required Under this New Law

The Massachusetts Foreclosure Title Clearing Bill requires a homeowner to bring a defense to a foreclosure within three (3) years of the foreclosure sale, or forever be barred from doing so.  The law requires a former homeowner to record a true and accurate copy of their lawsuit in the local registry of deeds in order to meet this deadline.

Possible Legal Challenges 

Now that the Massachusetts Foreclosure Title Clearing Bill is law, several legal challenges are expected to be raise against the legality of this bill.  Stay tuned.

Take Home Lesson


What’s the take home lesson of the Massachusetts Foreclosure Title Clearing Bill?  Sooner is always better than later in addressing a foreclosure. If you are a homeowner who may be impacted by this new law, contact me for a consultation.  The risks of not acting soon enough are greater than ever, and homeowners who have valid foreclosure defenses should not delay in acting on these important matters.

99 Homes: Fact v. Fiction

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When foreclosure defense comes to the big screen, you know I’m going to see it.  I took a break from work this weekend to watch 99 Homes, a movie about the 2o1o foreclosure crisis in Florida.  Overall, I thought it was a great movie that brought to life many of the issues I confront with foreclosure defense.   The movie tells the story of a father who, after losing his job, is foreclosed.  In need of work, he ends up getting hired by the same realtor who evicted him, and falls into the sleazy work of foreclosing people who were in his same situation.

For this post, I want to discuss the facts v. fiction of the depiction of the foreclosure/eviction process as shown in the movie.  Bear in mind that I am a Massachusetts attorney, which has a different foreclosure process than Florida.  However, many of the issues remain the same regardless of the state where a foreclosure occurs.


  • Difficulty in Contacting a Loan Servicer/Bank is a Major Reason Why Foreclosures Occur 

99 Homes does a great job of showing how a homeowner’s inability to successfully work with a loan servicer/bank is often the reason for foreclosure.  Too often, I have seen banks willfully ignore loan modification applications for qualifying homeowners and create excuse after excuse for refusing to properly consider homeowners for loss mitigation assistance.  99 Homes shows how the banks’ refusal to properly offer this assistance has forced many homeowners into foreclosure.

  • The Court Process is Not “User Friendly”

99 Homes shows many of the homeowners attempting to represent themselves in court, with disastrous results.  The movie takes place in 2010, when courts were flooded with foreclosure cases, and many judges simply pushed these matters through.  While things are better now, the court process can still be very difficult to understand, especially for a lay person.  For foreclosure defense, a homeowner should strongly consider seeking the assistance of an experienced lawyer with these matters.

  • The Federal Government is a Major Owner of Foreclosed Properties 

The realtor in 99 Homes often discussed how “Fannie/Freddie” were two of his largest clients.  Fannie Mae and Freddie Mac are government-sponsored entities who are the owners of many mortgage loans across the country.  When a foreclosure occurs, these entities often become the owner of these homes.

  • “Cash for Keys” Is a Popular Means of Shortening the Foreclosure/Eviction Process

The movie depicts the use of “cash for keys” for settling post-foreclosure eviction cases: the bank offers the homeowner a cash settlement (usually $3,000-$5,000) to immediately leave the home.  “Cash for keys” isn’t a terrible option for homeowners who wish to leave their homes and need financial assistance in doing so.  A homeowner interested in this deal should still consult an attorney to discuss this option.


  • A Homeowner Facing Foreclosure Can Be Out in a Matter of Days

99 Homes seems to suggest that a homeowner can be out of a foreclosed home in a matter of days.  In Massachusetts, the entire foreclosure process can take 2-3 years, which leaves homeowners with the time necessary to try and save their homes.  Sooner is always better than later in fighting a foreclosure, but rarely does a homeowner only have a matter of days to deal with a foreclosure.

  • Homeowners Have Limited Means of Fighting Foreclosure

Many of the homeowners in the movie are depicted as having few, if any, defenses to foreclosure.  In reality, homeowners have many more defenses available, such as a loan servicer’s refusal to properly consider a loan modification and failure to send the required notices required by the mortgage and law.  Not all of these defenses will work for each homeowner, but homeowners often do have means of defending themselves in these cases.

In need of assistance with foreclosure defense?  Contact me for a consultation.

Sherwin Law Firm Settles Post-Foreclosure “Ibanez” Case


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I’m pleased to announce that I settled a post-foreclosure “Ibanez” case this week.  I represented a former homeowner who had been improperly foreclosed due to the Supreme Judicial Court’s decision in U.S. Bank v. Ibanez, which invalidated thousands of foreclosures across Massachusetts.  My client was a former homeowner, and the entity who foreclosed her home lacked a proper mortgage assignment at the time of foreclosure, making the foreclosure void.  As I have written before, this has happened to thousands of homes across Massachusetts during the recent foreclosure crisis (a reason why the Massachusetts Legislature is presently considering a foreclosure title clearing bill). 

My client had been included in a lawsuit brought by the current owner of the foreclosed home and the lender who had done the void foreclosure.  After a lengthy court case, we reached a settlement with the lender agreeing to pay my client a cash settlement in exchange for her remaining interest in the home.

The settlement did not give my client a free home, nor did it make her rich.  It did, however, provide her with compensation for the lender’s disregard of Massachusetts foreclosure law, something that has become all too common in recent years.

These “Ibanez” problems continue to exist today, and have no easy solution.  If you find yourself in such a situation, contact me to see if I can be of help.

Massachusetts Foreclosures on the Rise

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The Boston Globe reports that foreclosures in Massachusetts are on the rise, increasing as much as 49% from July 2014 to July 2015.  Because Massachusetts is a non-judicial foreclosure state, where the lender does not need to go to court to foreclose, these filings generally represent the beginning of the foreclosure process for Massachusetts homeowners.  A major reason for the increase in these filings has been changes to Massachusetts foreclosure law, which has caused lenders to halt foreclosures to comply with these requirements.

While sooner is always better in avoiding foreclosure, Massachusetts homeowners at any stage in the process should consult an attorney to see if help is available.

Third-Party Buyers of Foreclosed Properties: Buyer Beware

Foreclosure by Sale

The ongoing foreclosure crisis in Massachusetts hasn’t just impacted homeowners. Third-party buyers of foreclosed homes who purchase unlawfully foreclosed properties can also be really hurt in this process, and need to be aware of the risks of purchasing foreclosed homes.

When a home is sold at a foreclosure sale, the lender is most often the person who ends up purchasing the property (against its own financial interest in the home).  Occasionally, an unrelated buyer (aka a third-party buyer) ends up buying the property at the sale.  This often occurs when the foreclosed property is in a desirable location or the home has significant equity (the difference between the property’s value and what is owed on it).  The third-party buyer often thinks he or she is getting a great deal, as foreclosed properties are often sold below the market rate for comparable properties.

However, buying a foreclosed property comes with enormous risks.  Massachusetts law is abundantly clear that the failure to strictly comply with the foreclosure process makes the foreclosure void (as in, it never happened in the first place).  If a mistake occurred in the foreclosure, even years in the past, the property’s title is shot (Ibanez and Bevilacqua are two examples of major foreclosure law cases on this matter).  Recent cases reaffirm that even minor defects can have serious consequences on the validity of a foreclosure.

If the former homeowner is still residing in the property, it gets even more tricky.  To obtain possession of the home, the third-party buyer needs to evict the former owner, and the former owner is permitted to argue as a defense that the foreclosure was void even though an unrelated party did the foreclosure.  In other words, the third-party buyer needs to defend a foreclosure it never performed and bears the full burden of proving it was done correctly.

This isn’t to say that all foreclosures are void.  Many are done correctly, and even if the foreclosure was done improperly, such mistakes can eventually be corrected.  But, there is no doubt that the purchase of a foreclosed property comes with risks.

What’s a potential third-buyer of a foreclosure to do?  Proceed with caution. These potential buyers need to do their research and, most importantly, get title insurance to protect themselves if a mistake did occur in the foreclosure process.  When possible, third-party buyers should also reach out to the former homeowners and see if a settlement can be reached to avoid problems down the road.

Pinti v. Emigrant Mortgage: Strict Compliance Required for Paragraph 22 of the Standard Mortgage


The Supreme Judicial Court issued its long awaited decision last week in Pinti v. Emigrant Mortgage, holding that a foreclosing entity needs to strictly comply with paragraph 22 of the standard mortgage.  (DISCLAIMER:  I represented the plaintiffs in Pinti in their Superior Court case).
The “standard mortgage” is the mortgage form used for almost all residential mortgages and comes from Fannie Mae/Freddie Mac (two of the largest holders of mortgages in the United States). Paragraph 22 of this mortgage requires the mortgagee to provide the homeowner with a default notice prior to foreclosure, containing specific disclosures.  These disclosures include:
  • A thirty-day right to cure the loan default
  • The borrower’s right to reinstate after acceleration of the loan
  • The right to bring a court action to assert the non-existence of a default or any other defense to acceleration and the foreclosure sale

The default notice in Pinti incorrectly stated one of these disclosures.  The question for the Court was whether strict compliance was required for this notice.

This matter of strict compliance was the make or break issue for this case.  The plaintiffs in Pinti, like most homeowners, could not show prejudice for this type of error (as in, they could not show that this error was the direct reason why the foreclosure occurred).   To have a viable claim, the plaintiffs in Pinti needed to show that any failure to comply with this notice made the foreclosure void.  The Supreme Judicial Court agreed that this heightened standard of review is necessary for paragraph 22.Many people following this case (myself included) expected the Court to decide the case similar to U.S. Bank v. Schumacher, where the Court held that the statutory right-to-cure notice (which comes from Massachusetts law, and not the mortgage itself), was not a part of the foreclosure process, and therefore not requiring strict compliance.  The important difference was that the disclosure requirement in Pinti came from the mortgage itself.

The Court made Pinti prospective:  it applies to only notices sent after July 17, 2015 (the Court left the question open as to whether those homeowners who have raised this defense when the Pinti decision came out are also entitled to the benefit of this holding).
So, what are the take home lessons of Pinti?
  • The Supreme Judicial Court reaffirmed that strict compliance is required for the terms of the mortgage.  Beyond the default notice requirement of paragraph 22, Pinti could also have implications for other requirements in the standard mortgage.
  • Real risks comes in purchasing a foreclosed property.  The buyer of the home in Pinti was a third-party buyer (someone other than the foreclosing entity).  Anyone considering buying a foreclosed property should hire an attorney and get a title insurance policy.
Are you facing foreclosure?  Contact me to see if the Pinti decision (or another foreclosure defense) can help you save your home.

Practice Pointers: “I’m Not a Lawyer, But . . .”

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In my work as a foreclosure defense attorney, I have met many passionate professionals committed to keeping hardworking homeowners in their homes.  Unfortunately, given the high stakes involved in these cases, I have also seen alot of bad advice being passed on to vulnerable homeowners; many of whom are too quick to accept the help being offered to them.  These conversations always begin the same way, with the disclaimer “I’m not a lawyer, but . . .”

The Internet is not always helpful in this regard; while the web makes it easier for homeowners to learn about foreclosure defense options, it also helps to spread rumors and lies.  I often come across defenses and strategies that are proclaimed to be effective foreclosure defense methods but in reality, are meritless strategies routinely rejected by courts.

If you are facing a foreclosure, you should absolutely read up about this area from reputable sources.  But, before you commit to a specific strategy or course of action, seek the advice of a lawyer in this area of law.


FAQ: I Received a Letter From My Loan Servicer Telling Me My Loan Has Been “Accelerated.” What Does this Mean?

Question:  I received a letter from my loan servicer telling me my loan has been “accelerated.”  What does this mean?
Answer:  After a borrower has defaulted on their mortgage loan, the lender has the option––under most mortgages––to demand that the borrower pay the full amount of the loan due.  The demand is referred to as “acceleration” of the loan, and is often made through a written letter to the borrower.  The borrower has the opportunity to pay the entire amount due or risk foreclosure.  This amount due includes the principle, interest, and other outstanding debt.  A borrower can avoid foreclosure if they are able to pay this debt, but generally, most borrowers in default are unable to do so.  After acceleration, the lender has no obligation to accept loan payments from the borrower and instead, can foreclose.
Borrowers who have received an acceleration letter are not without options.  Most servicers will still accept and review a loan modification after acceleration.  Moreover, the lender still needs to provide the borrower with ample notice prior to the foreclosure.  Homeowners who have received an acceleration letter should contact a lawyer right away to discuss their options.