Foreclosure Notices in Massachusetts: What’s Required?
Massachusetts’s Supreme Judicial Court issued its long-awaited decision in the Thompson case, concerning foreclosure notices in Massachusetts. This is a decision that lenders, title examiners, and other real estate professionals have been closely following since the original federal court decision. The full decision is below.
Thompson was a federal court case brought by a borrower challenging a foreclosure sale against his home. In 2019, the First Circuit of Appeals ruled that the foreclosure in this case was void due to an error in the right to cure notice, which both state law and the terms of most mortgages required to be sent prior to foreclosure.
This decision surprised many (including yours truly) because it seemed to “stretch the limits” on what is required for one of these notices, per established law.
For this reason, Thompson generated a great deal of concern and criticism, leading the Supreme Judicial Court to take this decision for the purpose of resolving this matter.
Foreclosure Notices in Massachusetts: Basic Requirements
To be clear, there are several required foreclosure notices in Massachusetts, including those notifying the property owner about the scheduled foreclosure sale. Here, I am focusing on the required default notice that must provide the mortgagor with an opportunity to cure their loan default, prior to foreclosure. Both state law, as well as the terms of most standard mortgages, require such notice.
Under the SJC’s decision in Pinti v. Emigrant Mortgage, a lender must strictly comply with the mortgage requirements for such notices. Even a minor error in one of these notices could seemingly invalidate a foreclosure.
In Thompson, the question for the court was whether an alleged error in one of these notices was fatal to a foreclosure’s validity.
Here, the First Circuit had 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 with this was that the borrower’s mortgage required this reinstatement to occur five days before a foreclosure sale.
The SJC ruled that, because state law gave the borrower a longer time to reinstate than the mortgage itself, the default notice was not deceptive.
Implications of Thompson
Due to a series of SJC decisions in the wake of the 2008/2009 financial crisis (including Pinti), the validity of many Massachusetts foreclosures have been often called into question, with many areas of foreclosure law remaining unclear. Thompson is a step away from this trend, and avoided a circumstance where many foreclosures across Massachusetts could have been voided.
The SJC, however, avoided answering an underlining question in this decision: how strict is strict compliance? In other words, how much of a mistake needs to occur in a foreclosure notice for an underlining foreclosure to be invalidated? Such a question remains unclear, and will likely be resolved in future court cases.
If you need assistance with a foreclosure matter, contact me for a consultation.g12798