The foreclosure process varies across the United States, but the process traditionally occurs in one of two ways: judicial or non-judicial foreclosures. Residential foreclosures in Massachusetts are non-judicial, which means that the foreclosure process happens outside of the courtroom. Non-judicial foreclosures, also known as power of sale foreclosures, allow the mortgagee to sell the property if the mortgagor defaults on their loan provided the mortgagee complies with the statutory requirements under G.L.c. 244 §§ 11-17B. In addition to the requirements under the statute, mortgagees owe mortgagors a duty of good faith and reasonable diligence to protect their interest in the property.
In a recent Appeals Court decision, Prop. Acquisition Grp., LLC V. Ivester, 95 Mass. App. Ct. 170 (2019), there was no question that the mortgagee, the Federal National Mortgage Association (“Fannie Mae”), complied with all of the statutory requirements pertaining to the foreclosure sale. Fannie Mae ultimately sold the property to Property Acquisition Group, LLC (“PAG”) for $355,000. After PAG recorded the deed, the mortgagors, Kenneth and Susan Ivester (“Ivesters”), brought an action against Fannie Mae in Superior Court alleging that the opening bid at the foreclosure auction–$329,000–was too low because the government-sponsored enterprise failed to ascertain the fair market value of the property before conducting the auction. The Ivesters hired an expert who appraised the property at $975,000–clearly much higher than Fannie Mae’s opening bid. During the discovery phase, the Ivesters uncovered that Fannie Mae indeed did nothing to assess the fair market value of the property. Despite that revelation, the Superior Court concluded that the Ivesters did not present sufficient evidence to support their claim and granted summary judgment on this issue in favor of Fannie Mae.
However, the Appeals Court vacated the Superior Court’s grant of summary judgment on this claim and remanded this issue for trial. The Court stated that a mortgagee cannot fulfill their duty of good faith and reasonable diligence just by complying with the statutory requirements under G.L.c. 244, and mortgagees must make some effort towards ascertaining the fair market value of a property before beginning the foreclosure auction. Mortgagees need not hire an expert to appraise the property for every foreclosure sale, but the Court clearly stated that mere compliance with the statute cannot satisfy the duty of good faith and reasonable diligence to ascertain the fair market value of the property it intends to sell. Overall, this case demonstrates that despite the numerous requirements mortgagees must follow under G.Lc. 244, these actions often involve additional responsibilities and nuances that are not spelled out in statute itself.
Should you have any questions regarding a non-judicial foreclosure action in Massachusetts, please contact the attorneys at Fitch Law Partners LLP.