The Appeals Court issued a decision this week concerning an important topic for Massachusetts foreclosure law: who can foreclose in Massachusetts? The decision, Mitchell v. U.S. Bank National Association, is included below.
In this case, two homeowners challenged the validity of a foreclosure sale against their home. As is the case with many residential mortgages in the United States, these homeowners had a securitized mortgage loan.
Securitization is a process by which mortgage loans are put together into a trust, with shares of this trust (known as “certificates”) sold to investors. A trustee (often U.S. Bank National Association or Deutsche Bank) manages these trusts, with a loan servicer responsible for the day-to-day handling of the loan responsibilities, such as collecting loan payments and handling customer inquires.
Who Can Foreclose in Massachusetts?
The homeowners in Mitchell argued that U.S. Bank was not entitled to foreclose their home because this entity was not entitled to enforce their mortgage loan. Rather, they argued, the certificate holders were the only persons entitled to do so, and in turn, foreclose the home.
The Appeals Court rejected this argument. Because U.S. Bank was entitled to receive payments from the mortgage loan, it was therefore entitled to foreclose. The Appeals Court did not agree that, because these payments were for the benefit of the certificate holders, only these investors could foreclose.
Mitchell reaffirms that attempts to challenge foreclosures on the basis of the loan securitization process is an uphill battle. Massachusetts courts have almost always rejected these arguments, with Mitchell being the most recent example.
That’s not to say that anyone can foreclose in Massachusetts. A valid foreclosure requires that the foreclosing entity hold the mortgage and promissory note, and comply with pre-foreclosure notice requirements. Mitchell, however, again declined to extend the scope of these foreclosure requirements to include the underlining loan securitization process.
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