Recent First Circuit Decision on Required Massachusetts Foreclosure Notice
The First Circuit Court of Appeals issued a noteworthy decision earlier this month about one of the required notices for a Massachusetts foreclosure. The decision, Thompson v. JPMorgan Chase Bank, N.A., is included below.
Foreclosure Notice Requirement – “Paragraph 22”
This case concerns an interpretation of a foreclosure notice requirement commonly referred to as “paragraph 22.” This requirement is found in paragraph 22 of the standard mortgage agreement used in nearly every residential mortgage in the United States. Paragraph 22 requires that, prior to foreclosure, the mortgagee provide the borrower with several disclosures, including their right to cure the loan default and the right to reinstate the loan after acceleration, which was the subject of this appeal.
An acceleration of a loan is a demand by a lender to pay the entire balance of a loan prior to foreclosure. This generally comes after the borrower has defaulted on the loan, and is a sign that a foreclosure sale is forthcoming.
Strict Compliance for Paragraph 22 Notices
In Massachusetts, a lender is required to strictly comply with the paragraph 22 notice requirement. This comes from Pinti v. Emigrant Mortgage, a landmark 2015 Supreme Judicial Court decision. In Pinti, a minor mistake with one of the paragraph 22 notice provisions was grounds for invalidating a foreclosure sale.
Here, the First Circuit held that a paragraph 22 notice sent to a borrower made the foreclosure sale void because it misrepresented the borrower’s rights. The notice told the borrower that he could reinstate his loan after acceleration . . . anytime before the foreclosure was to occur.
The problem? The borrower’s mortgage required this reinstatement to occur five days before a foreclosure sale. The First Circuit held that, because the paragraph 22 notice was misleading, it made the underlining foreclosure sale invalid.
A critical part of Thompson v. JPMorgan Chase Bank, N.A is that the borrower did not need to show prejudice from this error in the paragraph 22 notice. There was no allegation that the borrower was able to bring his loan current, waited until the day of the foreclosure sale to pay this money, and was denied due to this five-day deadline in his mortgage. This is keeping with an important part of Massachusetts foreclosure law: a foreclosure can be unlawful from an error in the foreclosure process even if the borrower was never harmed from it.
Thompson is an important reminder of the importance of a proper foreclosure notice in Massachusetts. Even the smallest errors in the foreclosure process can be viable grounds for defending against foreclosure.
If you need assistance with foreclosure defense, contact me for a consultation.18-1559-2019-02-08