A recent Massachusetts Superior Court case, Germinara v. Bakis, et al. (decided May 13, 2019), involved a plaintiff borrower who obtained a commercial loan in order to fund the purchase and operation of a gas station/convenience store, which was owned by an LLC formed by the plaintiff. The loan was secured by both the gas station property and contents and a second property that was owned by the borrower in trust. Further, the lender and the funder of the loan were granted mortgages and deeds-in-lieu of foreclosure to secure the interest on both properties owned by the borrower. When the plaintiff defaulted on the loan, the lender and the funder took title to the two properties by exercising the deeds-in-lieu of foreclosure. They sold both properties and, additionally, seized some items of the borrower's personal property that had been located at the properties, such as trucks and vehicles. Some of these items were owned by the plaintiff in his individual capacity, and not by the LLC that held title to the gas station; however, the lender held other security obligations which included the vehicles.
In Thompson v. JPMorgan Chase Bank (1st Cir. 2019), the First Circuit reversed the District Court's dismissal of the borrowers' claims against the mortgagee, finding that the notice of default did not strictly comply with the terms of the mortgage and Massachusetts law.
In Obduskey v. McCarthy & Holthus L.L.P., the Supreme Court examined whether an entity engaged in the limited purpose of enforcing a security interest in a nonjudicial foreclosure proceeding fit the definition a "debt collector," thereby subjecting it to all of the provisions of the Fair Debt Collectors Practices Act ("FDCPA"). The Supreme Court unanimously ruled that the Respondent, McCarthy & Holthus LLP ("McCarthy"), hired by Wells Fargo to enforce its security interest by acting as its agent to foreclose on a defaulting, Colorado debtor's home, in that narrow instance, was not a "debt collector" within the meaning under the FDCPA, except with regard to the confines of §1692f(6). In order to reach its decision, the Court partitioned the FDCPA's definition of a "debt collector" into two parts: (1) a 'primary' debt collector defined as "any person . . . in any business the principal purpose of which is the collection of any debt, or who regularly collects or attempts to collect, directly or in-directly, debts[;]" and (2) for the purposes of §1692f(6) of the FDCPA, a 'limited-purpose' debt collector defined as also including "any person . . . in any business the principal purpose of which is the enforcement of security interests."
The Massachusetts Land Court has held that a plaintiff's failure to timely file a copy of a complaint challenging a foreclosure with the registry of deeds, as required by Mass. Gen. Laws c. 244, § 15, requires dismissal of a complaint challenging the subject foreclosure. Kenney, et al. v. Brown, et al., No. 16 MISC 000530 (Mass. Land Court July 27, 2017).
The Massachusetts Supreme Judicial Court ("SJC") has held that a bank's failure to comply with post-foreclosure notice provisions in Mass. G.L. c. 244, § 15A ("Section 15A"), does not render a foreclosure void. Turra v. Deutsche Bank Trust Company Americas, 476 Mass. 1020 (2017). The SJC's decision clarifies its prior rulings that appeared to state that any failure to comply with a provision appearing in Mass. G.L. c. 244, §§ 11-17C, rendered a foreclosure void.
The Massachusetts Supreme Judicial Court (the "SJC) has rejected a challenge to the authority of an attorney to conduct foreclosure activities on behalf of clients without specific written authorization to perform those activities. See Federal National Mortgage Association v. Rego, et al., No. SJC-11927, 2015 WL 10895667 (Mass. May 24, 2016). At a foreclosure sale conducted by GMAC Mortgage, LLC, Federal National Mortgage Association ("Fannie Mae") purchased the home formerly owned by Edward and Emanuela Rego. When Fannie Mae filed a complaint for summary process in the Housing Court seeking possession of the home, the Regos argued that the foreclosure sale was void because the attorneys for GMAC lacked authority to undertake foreclosure activities on GMAC's behalf because their actions had not been authorized by a prior writing pursuant to Mass. Gen. L. c. 244, § 14 ("Section 14").
The statute providing borrowers with a right to cure mortgage payment defaults before acceleration and foreclosure can occur imposes no deadline on completion of foreclosure proceedings once commenced, according to two very recent Massachusetts decisions.
While the American economy has shown tentative signs of stabilization and recovery, the nation's courts continue to grapple with legal questions that emanate from the Great Recession and the bursting of the so-called "housing bubble." In one notable development, the United States Supreme Court has decided an important question regarding the treatment of home mortgages in Chapter 7 bankruptcy cases (i.e., cases in which the bankruptcy trustee gathers and sells the debtor's non-exempt assets and uses the proceeds of such assets to pay creditors in accordance with the Bankruptcy Code.)
The United States District Court for the Middle District of Florida has issued an opinion collecting 11th Circuit precedent and reiterating that foreclosure or other enforcement of a security interest, without more, is not "collection of any debt" under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692-1692p ("FDCPA"). While an enforcement of a security interest comingled with an attempt to collect payment on the underlying debt may fall under the FDCPA, mere foreclosure or other security enforcement does not. Gillis v. Deutsche Bank Trust Company Americas, 2015 WL 1345309 (M.D. Fla., Mar. 23, 2015).
Where a mortgage states the term of its underlying debt but includes no separate statement of its own term, the two are one-and-the-same, the Massachusetts Supreme Judicial Court (the "SJC") has decided in an opinion interpreting and upholding the so-called "obsolete mortgage" statute.
A Massachusetts Superior Court judge has held that the 2008 injunction against foreclosure of certain Fremont Investment & Loan ("Fremont") mortgages did not apply to Fremont mortgages assigned to third parties prior to the entry of the injunction. Moronta v. Nationstar Mortgage, LLC et al., 32 Mass. L. Rptr. No. 14, 339 (November 24, 2014) (Connors, J.).
Naming a mortgage servicer as mortgagee on a statutory right-to-cure notice satisfies the requirements of the Commonwealth's pre-foreclosure right-to-cure statute, according to a recent decision of the Appeals Court.
The United States Court of Appeals for the First Circuit has reaffirmed its prior holdings in Culhane v Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir. 2013) and Woods v. Wells Fargo Bank, N.A., 733 F.3d 349 (1st Cir. 2013) regarding Mortgage Electronic Registration Systems, Inc.'s ("MERS") assignments of mortgages. The Court in Wilson v. HSBC Mortgage Services, Inc., 2014 WL 563457 (1st Cir. Feb. 14, 2014) found that while a plaintiff has standing to challenge a void assignment, they lack standing to challenge allegedly voidable assignments, and the MERS system for assignments comports with Massachusetts law.
The Massachusetts Land Court division of the Trial Court has affirmed that contemporaneous evidence of off-record assignments are adequate to satisfy the requirements of U.S. Bank N.A. v. Ibanez, 458 Mass. 637 (2011).
The First Circuit has affirmed a holding finding that no private right of action exists for homeowner-borrowers under the Home Affordable Modification Program ("HAMP"), bringing clarity on this issue to courts within the Circuit. In the underlying mater, Mackenzie v. Flagstar Bank, FSB, 2013 WL 139738 (D. Mass. Jan. 9, 2013) aff'd, 2013 WL 6840611 (1st Cir. Dec. 30, 2013), Magistrate Judge Bowler of the United States District Court had held a borrower is not an intended third-party beneficiary of the Servicer Participation Agreement ("SPA") among the banks and the federal government relating to HAMP. The District Court further held that absent an independent duty to modify the mortgage, neither the existence of a mortgagor-mortgagee relationship nor HAMP itself created any duty enforceable by the borrower.
A decision from the Land Court has muddied the waters regarding whether a mortgagor can raise a claim under the Massachusetts try title statute against a mortgagee. A 2012 Land Court decision by Judge Robert B. Foster found that the try title statute was unavailable to a mortgagor prior to foreclosure. In Abate v. Fremont Investment & Loan, et al., Judge Foster found that until foreclosure, during which the mortgagor's equitable title is extinguished, the mortgagor and mortgagee hold complementary equitable and legal title to the property, and have no adverse claims. The First Circuit reached a similar decision in July in Lemelson, et al. v. U.S. National Bank Association.
The First Circuit has affirmed a holding finding that the system under which mortgages are held in the name of Mortgage Electronic Registration Systems, Inc., commonly known as MERS, comports with Massachusetts law relating to mortgage transactions. In the underlying matter, Culhane v. Aurora Loan Services of Nebraska, 826 F.Supp.2d 352 (D.Mass. 2011), Judge Young of the United States District Court had held that a mortgagor possesses standing to challenge the chain of assignment of his or her mortgage in defense to a foreclosure action, but further held that the MERS system of registration and transfer of mortgages is lawful.
Even technical errors in mortgage and foreclosure documents can invalidate the foreclosure and subsequent sale of a condominium unit, according to the Massachusetts Housing Court. Following foreclosure, and purchase at the foreclosure sale by the foreclosing bank, the former owner asserted that erroneous references in the foreclosure documentation for the unit invalidated the foreclosure and left her with the superior right of possession. The Housing Court, J. Muirhead, agreed and invalidated the foreclosure. East West Bank v. Chung, Lawyers Weekly No. 17-001-13.
A mortgagor who is not personally liable for payment of the note securing a property loan cannot rescind the loan transaction or mortgage, the United States Bankruptcy Court for the District of Massachusetts has held. In re Smith-Pena v. Wells Fargo Bank, N.A.In re Smith-Pena v. Wells Fargo Bank, N.A., 2013 WL 28696 (Bankr. D. Mass. Jan. 2, 2013).
A panel of the United States Court of Appeals for the First Circuit heard oral argument in the matter of Oratai Culhane v. Aurora Loan Services of Nebraska earlier this week. The panel was comprised of Chief Judge Hon. Sandra L. Lynch, Senior Circuit Judge Hon. Bruce M. Selya, and retired U.S. Supreme Court Associate Justice Hon. David H. Souter, sitting by designation. The Culhane case is notable for District Court Judge Hon. William G. Young's discussion in a summary judgment decision of Mortgage Electronic Registration Systems, Inc. ("MERS") and the propriety of MERS's system of assigning mortgages held in its name to loan servicers prior to foreclosure. See Culhane v. Aurora Loan Serv. of Neb., 826 F. Supp.2d 352 (2011).