Fannie Mae v. Rego: Supreme Judicial Court Permits a Chapter 93A Defense to Foreclosure
The Massachusetts Supreme Judicial Court issued Fannie Mae v. Rego today, an important foreclosure law decision that permits a Chapter 93A defense to foreclosure. 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).