Foreclosure May Be Invalid if There is No Authority for the Mortgage Servicer to Send Right-to-Cure Notice
The Massachusetts Supreme Judicial Court has entered a new decision explaining the requirements for a valid foreclosure.
In the case of Eaton v. Fannie Mae, the homeowner sued Fannie Mae seeking to invalidate the foreclosure of her home. The homeowner made three arguments. First she argued that there was not enough evidence about whether the bank had possession of her note. Second, she argued that the right to cure notice was deficient. Third, she argued that the bank did not have authority to send her a right to cure notice.
Although the Appeals Court rejected the first two arguments, it agreed with her third argument. There was no proof that the right-to-cure notice had been sent on behalf of Fannie Mae.
Under Massachusetts law, a right-to-cure notice must be sent pursuant to Paragraph 22 of the mortgage contract. If a valid notice is not sent by the lender, the foreclosure is void.
In this case, although Fannie Mae owned the loan, the right-to-cure notice was sent by a mortgage servicer, BankUnited. The servicing of the loan was then transferred to another servicer, Green Tree. The homeowner argued that although a notice was sent, there was no admissible evidence that it had been sent on behalf of Fannie Mae.
The only evidence Fannie Mae produced was an affidavit from Green Tree. But the Green Tree affidavit was insufficient to prove that BankUnited was authorized to sent the right-to-cure notice. Green Tree’s affidavit was deficient because the affiant not have personal knowledge of the agreement between BankUnited and Fannie Mae.
Accordingly, the case was remanded back to the trial court for further proceedings. Interestingly, this is the second case brought by the homeowner that reached the appellate level. The first case, which has the same name, was analyzed here: Eaton v. Fannie Mae I.
Although the homeowner did not prevail on all her claims, there a few takeaways from this decision.
First, if a bank has physical possession of a homeowner’s note at the time of foreclosure, such as an affidavit based on personal knowledge from a bank employee, that is probably sufficient to show the right to foreclose. A homeowner must produce evidence that there is a violation of the bank’s policy, industry practice, or legal or regulatory requirements, to disprove the bank’s right to foreclose.
Second, the right-to-cure notice does not have to quote the mortgage word for word. The notice does need to inform the homeowner of certain rights as required under the mortgage agreement, but minor discrepancies between the mortgage and the notice are not sufficient to invalidate a foreclosure.
Third and finally, as stated above, when a right-to-cure notice is sent by a mortgage servicer, there must be admissible evidence showing that the servicer was the authorized agent of the bank.
These issues, and other foreclosure-related issues, are sure to continue to be litigated throughout the Massachusetts courts.
The case is available here: Eaton v. Fannie Mae II
Culik Law is a Boston, Massachusetts law firm. Our attorneys represent homeowners in foreclosure prevention, loan modifications, and mortgage litigation. If you are experiencing issues with your mortgage, contact us.