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Angiulo: SJC Looks at Mortgage Foreclosure Process in Massachusetts

Monday, July 20, 2015

 

A person's home is one of the most expensive and meaningful possessions that they can own in this world.  Since at least 2008 people all over the United States have struggled with the expense part of that equation and have suffered when mortgage costs exceed their means.  The cause of those unbalanced ledgers could be unexpected job loss, the chronic underemployment that is part of our new economy, or even a mental or physical health concern.  Whatever the genesis, the function is the same: if you don't pay your mortgage the bank will foreclose.

Exactly how, why, and when a foreclosure will occur are seperate considerations that require a closer look.  In general, however, Massachusetts is known as a nonjudicial foreclosure state.  What that means is that a mortgage holder does not have to go to court in order to effectuate a seizure and sale of property.  They do, however, have to comply with the law and the terms of the mortgage.

This brings us to the July 17, 2015 Supreme Judicial Court case of Pinti v. Emigrant Mortgage Company.  In that matter, the court evaluated a mortgage company's process during a foreclosure.  The facts of that case revolved heavily around the terms of the mortgage contract itself, in the context of the statutory right of sale contained within our law.  

Massachusetts General Laws chapter 183, section 21outlines the rights that mortgage holders have in the event of default by creditors.  It is known as a statutory right of sale because the law says property can be sold to satisfy mortgage debt.  The same law also makes it clear that a mortgage holder must first comply with the terms of the debt instrument and the applicable laws surrounding the foreclosure process.  In the Pinti case the court recognized the finality of these kind of sales, and the general lack of immediate judicial oversight, in finding that mortgage companies must strictly comply with the foreclosure process requirements.  

Specifically, the SJC found fault in paragraph 22 of the mortgage in question.  Within that contract term was a reference to the resident's right to assert in any lawsuit for foreclosure and sale the defenses they may have to such an action.  The problem the court identified is that there was never going to be such a lawsuit unless the resident initiated it.  The term was, therefore, an inaccurate statement of the applicable law.  The court went on to opine that permitting this foreclosure would create the potential for future residents to be misled about how or when they could raise defenses.  

Interestingly, the court also had to take on the question of whether the person who purchased the property at foreclosure sale had valid title.  In deciding the sale was void, the SJC focused on how the process leading to the sale and the transfer of title were inextricably connected.  Since the second could not have occurred without the first the new title holder was essentially out of luck.

Some people looking at this situation may be wondering, why does all this matter?  If the plaintiffs could not afford the mortgage why fight the foreclosure process?  For others the importance of fair foreclosures is very high because of an imbalance in bargaining positions between lenders and borrowers.  What is certain is that borrowers typically have a far higher emotional attachment to, and practical need for, the residential properties that get foreclosed on.

Leonardo Angiulo is an Attorney with the firm of Glickman, Sugarman, Kneeland & Gribouski in Worcester handling legal matters across the Commonwealth. He can be reached by email at [email protected]   

 

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