Pinti v. Emigrant Mortgage: Strict Compliance Required for Paragraph 22 of the Standard Mortgage

The Supreme Judicial Court issued its long awaited decision last week in Pinti v. Emigrant Mortgage, holding that a foreclosing entity needs to strictly comply with paragraph 22 of the standard mortgage.  (DISCLAIMER:  I represented the plaintiffs in Pinti in their Superior Court case).

The "standard mortgage" is the mortgage form used for almost all residential mortgages and comes from Fannie Mae/Freddie Mac (two of the largest holders of mortgages in the United States). Paragraph 22 of this mortgage requires the mortgagee to provide the homeowner with a default notice prior to foreclosure, containing specific disclosures.  These disclosures include:

• A thirty-day right to cure the loan default
• The borrower's right to reinstate after acceleration of the loan
• The right to bring a court action to assert the non-existence of a default or any other defense to acceleration and the foreclosure sale

The default notice in Pinti incorrectly stated one of these disclosures.  The question for the Court was whether strict compliance was required for this notice.

This matter of strict compliance was the make or break issue for this case.  The plaintiffs in Pinti, like most homeowners, could not show prejudice for this type of error (as in, they could not show that this error was the direct reason why the foreclosure occurred).   To have a viable claim, the plaintiffs in Pinti needed to show that any failure to comply with this notice made the foreclosure void.  The Supreme Judicial Court agreed that this heightened standard of review is necessary for paragraph 22.

Many people following this case (myself included) expected the Court to decide the case similar to U.S. Bank v. Schumacher, where the Court held that the statutory right-to-cure notice (which comes from Massachusetts law, and not the mortgage itself), was not a part of the foreclosure process, and therefore not requiring strict compliance.  The important difference was that the disclosure requirement in Pinti came from the mortgage itself. 

The Court made Pinti prospective:  it applies to only notices sent after July 17, 2015 (the Court left the question open as to whether those homeowners who have raised this defense when the Pinti decision came out are also entitled to the benefit of this holding).

So, what are the take home lessons of Pinti?

• The Supreme Judicial Court reaffirmed that strict compliance is required for the terms of the mortgage.  Beyond the default notice requirement of paragraph 22, Pinti could also have implications for other requirements in the standard mortgage. 
• Real risks comes in purchasing a foreclosed property.  The buyer of the home in Pinti was a third-party buyer (someone other than the foreclosing entity).  Anyone considering buying a foreclosed property should hire an attorney and get a title insurance policy.

Are you facing foreclosure?  Contact me to see if the Pinti decision (or another foreclosure defense) can help you save your home.

BLOG POST:

http://maforeclosurelawblog.sherwinlawfirm.com/2015/07/pinti-v-emigrant-mortgage.htm

WEBSITE:

http://www.sherwinlawfirm.com

Abate v. Fremont Investment: Supreme Judicial Court Limits Use of Try Title Actions in Foreclosure Defense Cases

The Supreme Judicial Court released its highly anticipated decision in Abate v. Fremont Investment today, considering whether homeowners challenging a foreclosure could use the try title statue as a cause of action in these types of cases.  The Court's decision in Abate limits the use of try title as a means of challenging a foreclosure in Massachusetts.

"Try title" is a cause of action that allows a person with (1) record title of property who is (2) in possession of the subject property to compel someone with an adverse claim to the property to assert their interest in the property or forever be barred from doing so.  Try title requires the other person, in essence, to "put up or shut up."  This cause of action shifts the burden of proof onto the party with the adverse claim and forces them to prove their case.  Try title is often used in boundary dispute cases, for the purpose of resolving all outstanding property claims in a single action.  Try title claims, importantly, may only be brought in Massachusetts Land Court.

In Abate, a homeowner who had been foreclosed attempted to use a try title case against the foreclosing entity, by arguing that he only needed to alleged record title and possession to bring such a claim.  Once he did so, Abate argued, the case could proceed.

Not so, said the Supreme Judicial Court.  The Court held that these two required elements, record title and possession, were subject to dismissal if the homeowner could not show a viable claim by a preponderance of the evidence (more likely than not).  The Court upheld the dismissal of this case because Abate could not show record title to the property, for the reason that Abate's claims that the foreclosure was void (based mostly on challenges to the mortgage assignments) were not viable claims.  The Court rejected Abate's claim that merely alleging record title and possession were enough to bring a try title case.  The Court also held that try title may only be used for foreclosure defense after a foreclosure has occurred.  

   

Personally, I have never used try title for foreclosure defense for the simple reason that I do not consider Land Court an ideal place for these cases.  Land Court is one of the best run courts in Massachusetts and a great forum for resolving general property claims, but its limited jurisdiction and lack of jury trials makes it less than desirable option for challenging foreclosures.  A much better court for these cases is Superior Court, which has greater jurisdiction over claims relevant to foreclosure defense.

I am pleased that Abate reaffirmed the types of claims that homeowners do have for foreclosure defense, including declaratory judgments, quiet title, and injunctions.  As the Court stated, these are better causes of action for fighting  foreclosure, leaving homeowners with the means necessary for defending these cases. 

Blog Post:

http://maforeclosurelawblog.sherwinlawfirm.com/2015/03/abate-v-fremon.html

Website:

http://www.sherwinlawfirm.com

Breaking News: Massachusetts Appeals Court Upholds Validity of Mortgage Assignments

The Massachusetts Appeals Court ruled in favor of the banks today in a decision that challenged the validity of mortgage assignments prior to a foreclosure.  In Shea v. Federal National Mortgage Association, a homeowner challenged the validity of the foreclosure against his home on the basis that the underlining assignment of his mortgage was void.  In short, this homeowner tried to argue that Federal National Mortgage Association (“Fannie Mae”) was never a valid recipient of his mortgage.  The Appeals Court rejected these arguments, and supported its decision by citing several, prior Appeals Court and Supreme Judicial Court decisions that limit the ability of homeowners to challenge the assignment of their mortgages.

The lesson from Shea is that challenges to mortgage assignments are difficult to make.  While there is documented evidence of “robo signing,” fraudulent assignments, and missing paperwork, homeowners have limited means to challenge the assignment of their mortgages unless they can show that the assignment is void, and never legally binding in the first place.  Shea reaffirms that both the underlining debt for the purchase of a home (“promissory note”) and the security interest for this debt (“mortgage”) can be freely transferable to third parties, with the original homeowner having few defenses to the person or entity acquiring these items.

Blog Post Website:
http://maforeclosurelawblog.sherwinlawfirm.com/2015/02/SheaFederalNational.html

Website:  www.sherwinlawfirm.com