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Bank of New York v. Bailey: Is Non-Judicial Foreclosure An Oxymoron?

In Massachusetts, mortgage foreclosure has long been considered "non-judicial," meaning that it is unnecessary to initiate an action before a Court to foreclose, and there is no judicial oversight of foreclosures unless a mortgagor brings a claim based on alleged improprieties in the exercise of the power of sale. 

Although foreclosing mortgagees must file a limited civil action pursuant to the federal Servicemembers Civil Relief Act (the "Servicemembers' Act") in order to avoid a cloud on the title in the event that an interested party was active in or recently released from military duty, it has long been held that the steps necessary to comply with the Servicemembers Act "are not in themselves mortgage foreclosure proceedings in any ordinary sense," but "occur independently of the actual foreclosure itself."  See Beaton v. Land Court, 367 Mass. 385, 390 (1975).  See also Eaton v. Federal Nat. Mortg. Ass'n, 462 Mass. 569, 580 & n.14 (2012).

Approximately one year ago however, the Supreme Judicial Court (the "SJC") decided that judges sitting in summary process sessions have jurisdiction to hear allegations that a mortgage foreclosure sale was defective as a defense to an eviction action.  See Bank of New York v. KC Bailey, 460 Mass. 327 (2011).  In Bailey, supra, the Court held that "[c]hallenging a plaintiff's entitlement to possession has long been considered a valid defense to a summary process action for eviction where the property was purchased at foreclosure sale."  See id., 460 Mass. at 333.  Accordingly, the Housing Court could hear the defendant's claim that he was not provided proper notice of the foreclosure sale that formed the basis for the plaintiff's attempt to oust him from the property.  Moreover, the Court handed down the following holding about the plaintiff's burden in prosecuting a summary process claim for post-foreclosure eviction:

In a summary process action for possession after foreclosure by sale, the plaintiff is required to make a prima facie showing that it obtained a deed to the property at issue and that the deed and affidavit of sale, showing compliance with statutory foreclosure requirements, were recorded.

Id. at 334.

In this Firm's view, the upshot of Bailey is that, notwithstanding a long history of "non-judicial" foreclosure in Massachusetts, judicial oversight of foreclosure proceedings will occur where the mortgagor remains in the property after a sale is concluded.  Moreover, the validity of the sale will not only be examined in the context of an affirmative defense as to which the holder mortgagor bears the burden of proof.  Even where a mortgagor fails to defend an eviction action, a post-foreclosure owner will be required to make a prima facie showing that it has obtained good title in compliance with all applicable statutes in order to leave the Courthouse with a judgment for possession. 

To view author Jennifer E. Greaney's biography and find her contact information, click here.  

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