Mortgage Litigation: March 2013 Archives

No Implied Covenant Before Mortgage Note Executed

Massachusetts' implied covenant of good faith and fair dealing does not apply to negotiations and contract preparations for a mortgage and accompanying promissory note, the First Circuit has held. In Latson v. Plaza Home Mortgage, Inc., the plaintiffs filed suit against their lender alleging, among other claims, violation of the implied covenant based on the lender's alleged failure to provide a proper commitment letter, good faith estimate, or other documents required by law, and gave them insufficient opportunity to review the terms in the loan documents. The United States District Court for the District of Massachusetts dismissed the case for failure to state a claim, and the borrowers appealed.

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