A Notice of Default That Does Not Strictly Comply With Paragraph 22 Of The Mortgage Renders a Foreclosure Sale Void So Long As The Issue Of Noncompliance Was Asserted In Court Before July 17, 2015

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The Supreme Judicial Court (“SJC”) recently held that its holding in Pinti v. Emigrant Mtge Co., 472 Mass. 226, which was decided on July 17, 2015, “applies in any case where the issue was timely and fairly asserted in the trial court or on appeal before July 17, 2015.” Federal National Mortgage Association v. Marroquin, 477 Mass. 82, 74 N.E.3d 592 (May 11, 2017).

Massachusetts is a non-judicial foreclosure state, meaning that a mortgagee, through its power of sale, is authorized to conduct a foreclosure sale without obtaining court approval. Before doing so, however, the mortgagee must “first comply [ ] with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of the power of sale.” G.L.c. 183, §21.

Under Paragraph 22 of the mortgage (or its equivalent), and prior to the acceleration of the loan secured by a mortgage, the mortgagee is required to send a notice of default to inform the borrower of “the right to reinstate after acceleration of the loan and the right to bring a court action to assert the non-existence of a default or any defense to acceleration of sale.” In Pinti, the language in the notice of default did not conform with paragraph 22 in that it said the borrowers “have the right to assert in any lawsuit for foreclosure and sale the nonexistence of a default or any other defense [they] may have to acceleration and foreclosure sale” (emphasis added). The SJC observed that such language could mislead the plaintiffs “into thinking that they had no need to initiate a pre-foreclosure action against the mortgagee – even though, as a practical matter, such a lawsuit would never be brought.” Pinti, supra at 239. Concluding that the notice of default did not strictly comply with paragraph 22 of the mortgage, the SJC held that the foreclosure sale was void.

The SJC was mindful, however, that failure to comply with Paragraph 22 is not a matter of record (because a notice of default is not recorded at the registry of deed). Therefore, out of concern that the validity of titles might be impacted by its decision, the SJC applied its holding to the parties in Pinti but otherwise held that its ruling only had a prospective effect to foreclosure sales for which a notice of default was sent after July 17, 2015. Left answered was the question as to whether the Pinti holding would apply to cases pending as of July 17, 2015.

In Marroquin, the SJC reached that question and concluded “the Pinti decision applies in any case where the issue was timely and fairly asserted in the trial court or on appeal before July 17, 2015.” Marroquin, supra at 593. As in Pinti, the language of the notice of default in Marroquin did not mirror the language in the mortgage in that it said, “you may, if required by law or your loan documents, have the right to cure the default” and “you may have the right to bring a court action.” The SJC agreed with the trial court judge “that this language in the notice ‘significantly, and inexcusably, differed from’ the language in paragraph 22 of the mortgage, and ‘watered . . . down’ the rights provided in that paragraph to the mortgagor homeowner.” Marroquin, supra at 598. The SJC concluded that the notice of default did not strictly comply with paragraph 22. The SJC also found that the borrowers had fairly raised the Pinti issue as a defense, and they did so before the Pinti decision. The SJC concluded that the foreclosure sale was void.

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