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Massachusetts Mortgage Holders Beware — Foreclosure Winning Bids May Now Need to Consider Development Potential of a Property

Under Massachusetts law, a foreclosing lender has a duty of good faith and reasonable diligence to obtain the highest possible price for a property at auction. Until recently, it was considered appropriate for the lender to make a credit bid up to the amount owed on the mortgage in order to satisfy this duty. However, a recent decision by the Massachusetts Appeals Court has expanded the duty of good faith and reasonable diligence beyond a review of the property's assessed or appraised fair market value. A property's development potential may also need to be reviewed in order to calculate an acceptable winning bid. More ›

The Third Circuit Takes a More Expansive Approach to What Constitutes a Debt Collector under the FDCPA

On February 22, 2019, the Third Circuit in Barbato v. Greystone Alliance, LLC, issued a decision that expands the scope of the Fair Debt Collection Practices Act's (FDCPA) definition of the term "debt collector" to any entity that acquires debt for the purpose of collection, but outsources the actual debt collection activity. More ›

First Circuit Concludes that "Potentially Deceptive" Language Added to Default Notice May Void Foreclosure Sale in Massachusetts

In Thompson v. JPMorgan Chase Bank, the First Circuit Court of Appeals held a foreclosure was potentially void where terms in the lender's default notice arguably conflicted with terms in Paragraph 19 of the Mortgage. Although Chase's notice of default provided the Thompsons with the disclosures required under Paragraph 22 of the Mortgage, Chase's default notice further stated that the Thompsons "could still avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place." The First Circuit interpreted this additional language as potentially misleading, because advising borrowers that they could make payment up to the time of the foreclosure sale differed from the Mortgage's Paragraph 19, which only allowed a reinstatement payment five days before the sale of the Property. More ›

Cover Letter from Loan Servicer May Unwittingly Change Terms of Forbearance Agreement

In Traut v. Quantum Servicing Corp., on the grounds that a cover letter accompanying a forbearance agreement may have altered the terms of that agreement, the Massachusetts federal court denied a loan servicer's motion for summary judgment in a lawsuit where the borrowers claimed breach of contract arising out of a loan modification agreement. The forbearance agreement required an additional down payment and six monthly installment payments. The cover letter to that agreement stated that the loan "will be modified," modification documents "will be generated" and some of the arrearage would be forgiven if six monthly payments were made. The servicer did not permanently modify the loan because two of the six payments on the forbearance agreement were late resulting in a breach. More ›

Mortgages or milk - do you need to check your expiration date?

There are borrowers out there who believe that the Massachusetts Obsolete Mortgage Statute, M.G.L. c. 260 sec. 33, relieves them of their repayment obligations. This statute, amended back in 2006, provides that five years after a mortgage reaches its term (or 35 years after the time the mortgage is recorded where a maturity date is not specified) it will be discharged by operation of law absent the timely recording of an extension or affidavit. The 2006 amendment specifically applied to all existing mortgages. The law is supposed to provide clarity in conveyancing and protect borrowers if their mortgagee or servicer failed to issue a discharge of the mortgage after the mortgage reaches its term.

In Hayden v. HSBC Mortgage, the borrowers alleged that the statute should apply to their loan and the loan should be discharged by operation of law because five years had passed from the time the servicer had accelerated the loan. Mortgagees and servicers can rest easy, however, because the First Circuit rejected this theory outright. In a succinct and emphatic rejection, the court held that "[n]othing in the text of the statute supports the Haydens' assertion that the acceleration of the maturity date of a note affects the five-year limitations period for the related mortgage." Thus, a borrower's milk will undoubtedly expire well before his mortgage.

No Surrender: Massachusetts Appeals Court Preserves Foreclosure Challenges for Bankruptcy Petitioner

Like Bruce Springsteen, a Massachusetts bankruptcy debtor said "no surrender" when it came to his home. In EverBank v. Chacon, a panel of the Massachusetts Appeals Court issued a non-binding decision that a debtor's "surrender" of real property in a bankruptcy petition does not waive defenses to an eventual foreclosure. EverBank had foreclosed on Mr. Chacon's home mortgage, acquired the property at the sale, and then sought to evict him through summary process action filed in Massachusetts state court. Mr. Chacon claimed that that EverBank did not comply with a HUD regulation that requires a face to face meeting prior to foreclosure rendering the foreclosure void. More ›

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