February 5, 2014
by Thomas J. Santolucito
Harmon Law Offices, P.C. – USFN Member (Massachusetts, New Hampshire)
In Bank of America v. Rosa, 466 Mass. 613 (2013), the Massachusetts Supreme Judicial Court (SJC) expanded the rights of former mortgagors to challenge foreclosures and to seek monetary damages in post-foreclosure eviction cases. Massachusetts law governing eviction cases permits counterclaims, but limits those claims to cases involving properties “rented or leased for dwelling purposes.” Mass. G.L. c. 239, § 8A. In Rosa, the SJC declined to apply this limitation to post-foreclosure eviction cases. As a result, eviction courts may consider foreclosure-related counterclaims, including claims that would overturn the nonjudicial foreclosure. The courts may also award damages for these claims.
Before Rosa, parties seeking to have a foreclosure set aside on grounds other than a challenge to title based on a failure to strictly comply with the power of sale provided in the mortgage had to bring a separate lawsuit in a court of general equity jurisdiction. In Rosa, the SJC reasoned that, as a result of legislative changes to the jurisdiction of the trial courts, courts hearing post-foreclosure eviction cases may set aside foreclosures and entertain challenges to title for reasons other than for strict compliance with the statutory power of sale. The SJC cited considerations of judicial economy as the basis for its opinion — i.e., avoiding the need for multiple lawsuits to adjudicate title to, and possession of, a foreclosed property.
Rosa adds further delay, expense, and risk to an already slow and unpredictable eviction process. As a result of Rosa, the preferred forum for former owners to litigate foreclosures will likely shift from the Superior and Land Courts to the much busier District and Housing Courts. Substantive issues concerning loan servicing and loss mitigation may need to be addressed in the eviction case. It is also expected that these cases will include state consumer protection claims, which allow for the doubling or trebling of damages in certain cases and permit trial courts to award attorneys’ fees to a prevailing consumer.
In addition to the inability to obtain possession, the consequences of losing an eviction action to a former owner now include the possibility of significant monetary damages and/or an order setting aside the foreclosure. To mitigate against the inherent delays, risks, and costs of eviction litigation, servicers may want to consider other options such as more aggressive relocation assistance, programs to rent to former owners, and selling REO properties in an occupied status. Servicers may also want to take a proactive approach by foreclosing judicially in Superior Court to address borrower challenges at the beginning of the foreclosure process, rather than wait and face identical claims in Housing Court or District Court at the eviction stage after the foreclosure documents have been recorded.
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