What are the legal steps that a mortgage lender has to satisfy in order to properly foreclose on my home in Massachusetts?
Initially, one must understand that Massachusetts is one of the states that allows a mortgage lender to avoid filing suit in court to obtain approval to foreclose, etc. For this reason, Massachusetts is known as a “non-judicial foreclosure” state.
Mortgage lenders in Massachusetts almost always have what is known as the “power of sale” in their mortgages which allows them to take advantage of this option.
Under the power of sale, there are many legal steps that a mortgage lender in Massachusetts must fulfill in order to properly legally foreclose. Most of the process appears in chapter 183 of the Massachusetts General Laws. One of the requirements is that a mortgage lender must follow whatever the specific terms are in the mortgage. Mass. Gen. Laws c. 183 § 21. “Failure to comply strictly with the power of sale renders the foreclosure sale void.” U.S. Bank Natl. Assn. v. Schumacher, 467 Mass. 421, 428 (2014). Thus, it is important for a mortgage lender to follow the process and avoid making a mistake, including following the express terms of the mortgage itself.
This blog is written to highlight one requirement that appears to be very often disregarded by mortgage lenders. In some mortgages that are insured by the Federal Housing Administration, United States Department of Housing and Urban Development (“HUD”) regulations are incorporated into the terms of the mortgage. One of the HUD regulations is that the lender seek to obtain a face-to-face meeting with homeowners conducted by a representative of the lender authorized to negotiate modification of payment provisions prior to foreclosure. 24 C.F.R. § 203.604(b).
In a recent case, Wells Fargo Bank, N.A. v. Cook, this requirement may not have been followed. 87 Mass. App. Ct. 382 (2015). For this reason, the Massachusetts appeals court reversed a summary judgment order issued by a trial court. Id. In Cook, the bank had claimed it had properly foreclosed, had bought the house at its foreclosure sale, and sought to evict the homeowners. The defendant homeowners challenged the lender’s title to the home by way of a defense in the eviction (summary process) action. Specifically, they argued that the bank failed to fulfill the HUD regulations, including the face-to-face meeting, as required by the terms of the mortgage. The trial court ruled in favor of the bank by a legal ruling before trial, known as summary judgment. The Massachusetts Appeals Court reversed and ruled that: 1) the HUD Handbook should have been considered as persuasive interpretive guidance when interpreting the face-to-face interview requirement; 2) there was a material disputed facts as to whether the face-to-face requirement was met; and 3) since the HUD requirements were specifically incorporated into the mortgage failure to adhere to same would void the foreclosure sale. The details of this decision also helped give guidance on exactly what the face-to-face requirement really looks like, but most importantly, again, it established that HUD regulations appearing as express terms of a mortgage must be followed strictly.
Although it looks like the defendants in Cook may ultimately prevail in their defense, keep in mind that every case is different and that there are many details not covered in this post. Review and presentation legally technical defenses is best done by a competent professional.
If you are facing foreclosure and seek to keep your home, feel free to give us a call.