The Massachusetts Supreme Judicial Court’s (SJC) ruling in Federal National Mortgage Ass’n v. Hendricks just came down, and it’s good news for the foreclosure industry and bad news for distressed homeowners.
This case had the potential to change Massachusetts foreclosure practice, but the SJC rejected the challenge. The borrower, Oliver Hendricks, challenged the validity of the long-standing Massachusetts statutory form foreclosure affidavit which provided that the foreclosing lender has complied with the foreclosure laws. Rejecting the borrower’s claim that the affidavit was essentially robo-signed, the Court upheld the statutory form affidavit.
The case arose when Fannie Mae was attempting to evict Hendricks after the foreclosure. The court’s ruling provides that foreclosing lenders need only submit a valid foreclosure deed and statutory form affidavit during an eviction proceeding; the burden of proof then shifts to the borrower to come up with evidence of foreclosure irregularities. This has proven very difficult for distressed homeowners and their attorneys.
After this decision (and a recent Appeals Court ruling taking away a common eviction defense for post-eviction squatters), foreclosures and post-foreclosure evictions will be much harder to challenge. Also, we’ll likely see an acceleration of the pace of foreclosures, evictions of holdover borrowers, and a shrinking inventory of foreclosed and REO properties. Although distressed homeowners may be worse off, the overall real estate market stands to improve due to this ruling.
I’ll have more analysis later. The decision is embedded below. Also below is a video of the defendant, Olive Hendricks, speaking about his predicament produced by CityLife.
Court Will Consider Mortgage Servicer/MERS Standing and Statutory Foreclosure Affidavits
The Supreme Judicial Court has a busy Fall Term with several important foreclosure cases on the docket. Here’s a quick summary.
HSBC Bank v. Jodi Matt (SJC-11101)
The SJC is considering whether a mortgage servicer holding a securitized mortgage has standing to even begin a foreclosure action in the Land Court under the Servicemembers Civil Relief Act–one of the first steps in the Massachusetts foreclosure process. I wrote about this case in a prior post here. This ruling will affect just about every conventional mortgage foreclosure in the state. The lower court Land Court opinion can be read here. The court asked for friend-of-the-court briefs, and the Real Estate Bar Association filed a brief supporting the foreclosing lenders. Glenn Russell’s brief for the appellant Jodi Matt can be read here.
Oral arguments were held in early September, but unfortunately the webcast is unavailable. One of my sources told me that the justices were very active and peppered both attorneys with lots of questions.
Following the recent Eaton v. FNMA case, which held that a mortgage servicer may foreclosure upon a showing of proper agency and authority, I predict that the Court will ultimately hold that servicers and lenders holding rights to securitized mortgages have legal standing to start the Servicemembers Civil Relief Act proceeding, even if they merely hold a contractual right to the actual mortgage. The most compelling rationale for such a ruling is that the only purpose of the Servicemember proceeding is to ascertain whether the borrower is in active military service. It is not intended to be a forum to litigate issues relating to the propriety of securitized mortgage transfers and contractual standing.
Federal National Mortgage Ass’n v. Hendricks (SJC 11234)
This case has the potential to change Massachusetts foreclosure practice. The issue presented is whether the long-standing Massachusetts statutory form foreclosure affidavit that the foreclosing lender has complied with the foreclosure laws is on its face sufficient. The case will also decide whether the statutory power of sale form, originally drafted in 1912, is also facially sufficient. The docket and briefs filed in the case can be found here.
The case originated from the Boston Housing Court where Hendricks fought his post-foreclosure eviction by Fannie Mae, asserting that the affidavits filed by Fannie Mae reciting compliance with the foreclosure statute were inadmissible and insufficient. A Housing Court judge disagreed, and upheld the foreclosure and the eviction.
With the well-publicized robo-signing controversy looming in the background, I would not be surprised if the SJC rules in favor of Hendricks here and in the process tightens up the requirements for filing foreclosure affidavits. Indeed, that is the trend with the Legislature’s recent passing of the Foreclosure Prevention Act. As with the Eaton v. FNMA ruling, the Court should likely make its ruling prospective and not retroactive so as to not disrupt titles in the Commonwealth.
Galiastro v. MERS (SJC DAR 20960)
The SJC just accepted direct appellate review from the Appeals Court in this interesting case. This case will finally decide whether Mortgage Electronic Registration Systems (MERS) has standing to foreclose in its own name. The case, however, is somewhat mooted because MERS no longer forecloses in its own name, but there are plenty of MERS foreclosures in back titles. The SJC has announced that it will solicit friend-of-the-court briefs on the issue of “whether MERS “has standing to pursue a foreclosure in its own right as a named ‘mortgagee’ with ability to act limited solely as a ‘nominee’ and without any ownership interest or rights in the promissory note associated with the mortgage; whether the prospective mandate of Eaton v. Federal National Mortgage Association, 462 Mass. 569 (2012), applies to cases that were pending on appeal at the time that case was decided.” This case will be argued in April 2013. I will have analysis after that.
Richard D. Vetstein, Esq. is regarded as one of the leading real estate attorneys in Massachusetts. With 25 years in practice, he was voted a "Super Lawyer," a "Top Lawyer" by Boston Magazine and "Best of Metrowest." For Rich's professional biography, click here. If you are interested in hiring Rich or have a legal question, email or call him at [email protected] or 508-620-5352.
