July 23, 2015
by Thomas J. Santolucito
Harmon Law Offices, P.C. – USFN Member (Massachusetts, New Hampshire)
The Massachusetts Supreme Judicial Court (SJC) has issued its long-awaited ruling in Pinti v. Emigrant Mortgage Company, Inc. [Supreme Judicial Court No. SJC-11742, slip op. (July 17, 2015)]. In a 4-3 decision, the SJC held that a foreclosing mortgagee must send borrowers a default notice that complies strictly with the requirements of the mortgage.
Paragraph 22 of the Fannie Mae/Freddie Mac Uniform Mortgage Instrument (the mortgage form used in Pinti) requires, among other things, that a lender send a default notice informing the borrower of the right to bring an action to challenge the foreclosure based on the lack of a default. However, the notice sent in Pinti stated only that the borrower had the right to assert non-default as a defense in any judicial foreclosure proceeding.
The SJC reasoned that the statutory power of sale requires strict compliance with the mortgage terms and certain specific statutory requirements, particularly in light of the fact that Massachusetts foreclosures are typically nonjudicial. [Massachusetts is also known as a quasi-judicial foreclosure state. The first part of the foreclosure is a judicial SCRA action. The second part is a nonjudicial foreclosure sale. In its decisions, the court considers the “foreclosure process” in Massachusetts nonjudicial because it characterizes the required judicial process (a SCRA action) as not being part of the mortgage foreclosure proceedings.] Failing to comply strictly with the power of sale renders any attempted foreclosure void.
Because the default notice in Pinti did not comply with paragraph 22 — it did not affirmatively state that the borrower had the right to bring an action to challenge the foreclosure — the resulting foreclosure was void. The SJC applied its decision prospectively to cases where lenders send default notices after July 17, 2015. Despite its prospective ruling, the court left open the possibility of extending its decision to similar cases on appeal or (less likely) to cases before the trial courts. The SJC also suggested that mortgagees should record an affidavit as evidence of compliance with paragraph 22.
As a result of Pinti, servicers should review their Massachusetts default notices very carefully to ensure that they comply verbatim with the mortgage terms (note: language in either a contractual breach notice or a statutory 150-day default notice may comply with the requirements of the mortgage contract). It remains to be seen: (1) how courts will analyze default notices sent prior to July 17, 2015; (2) how title insurers will treat foreclosures relying upon default notices sent prior to July 17, 2015; or (3) what “Pinti affidavits” must contain.
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