Can Your Mortgage Become “Obsolete” If Your Note is Accelerated Early and What is The Obsolete Mortgage Act?
Massachusetts mortgage law says that if your bank doesn’t foreclose within five years of the mortgage’s maturity date, then the mortgage is considered discharged. This law is the Obsolete Mortgage Act. G.L. c. 260, § 33.
The Obsolete Mortgage Act, in relevant part, states as follows:
A power of sale in any mortgage of real estate shall not be exercised … nor proceeding begun for foreclosure of any such mortgage after the expiration of, … in the case of a mortgage in which the term or maturity date of the mortgage is stated, 5 years from the expiration of the term or from the maturity date, unless an extension of the mortgage … is recorded before the expiration of such period.
G.L. c. 260, § 33.
Many people don’t realize it, but when you take out a mortgage, though, there are two documents you sign: the promissory note (the loan itself), and the mortgage (security for the loan).
If you stop paying the note, though, the whole loan comes due at once – it “matures.” But is this the same thing as when the mortgage itself “matures”? And does this mean that the mortgage might expire early, thereby discharging the mortgage entirely? A recent case answers these questions.
Some background on the case will help make sense of this. A homeowner had taken out a mortgage on his home. He later filed for bankruptcy and then stopped paying the note for over five years. The mortgage, however, was a 30-year mortgage.
The homeowner argued that because his note matured more than five years ago, his mortgage also matured. And because the bank had not foreclosed during this time, the mortgage was discharged due to the Obsolete Mortgage Act, he said.
Not so fast, said the court. The homeowner’s “theory” that the note’s acceleration affected the expiration of the mortgage is “unsupported” by Massachusetts law, the court held. There was thus no “relationship between an acceleration of payments and the obsolete mortgage statute.”
The homeowner’s lawsuit was dismissed. The mortgage remained on his property and would have to be paid off, even if the note were past the statute of limitations.
The argument the homeowner made was creative, but disregarded the language of the Obsolete Mortgage Act itself, which refers only to the maturity date of the mortgage – not the maturity of the note.
The decision is here: Gelfatt v. U.S. Bank.
There are, however, many other legal reasons for stopping a foreclosure or declaring a mortgage unenforceable. If you are struggling with your mortgage, contact Culik Law for a no-cost case evaluation to see whether we can help.