Mortgage Servicer Must Prove Authorization to Foreclose on Behalf of Fannie Mae

foreclosure-massachusetts-culiklaw-2The Massachusetts Court of Appeals has reaffirmed the principle that a bank must hold both the homeowner’s note and mortgage in order to foreclose. The decision in Khalsa v. Sovereign Bank puts a finer point on the principle and elaborates on how this must be shown.

Under Massachusetts law, a mortgage servicer is permitted to foreclose on behalf of the note holder. Here, Sovereign Bank (now Santander) was the servicer and Fannie Mae was the note holder.

In the case, both the homeowner and the bank filed motions for summary judgment, motions seeking a decision in their favor without a trial. The homeowner argued that Sovereign Bank did not have proof that it was authorized to act for Fannie Mae. Sovereign Bank, on the other hand, provided documentation stating that it serviced the loan for Fannie Mae, but that did not show the right to foreclose.

The trial court ruled in favor of Fannie Mae, and the homeowner appealed.

Overturning the trial court’s decision, the Appeals Court ordered a trial based on Sovereign Banks’s failure to provide sufficient proof that it was authorized to foreclose on behalf of Fannie Mae. There was a “genuine factual dispute” about whether Fannie Mae authorized the foreclosure.

This case shows that banks must be able to provide extremely specific proof of their right to foreclose. If the bank who is foreclosing is Fannie Mae, but the loan is serviced by another bank, there must be documentation proving a link between the two, and specifically authorizing foreclosure of the homeowner’s mortgage.

A link to the Appeals Court’s decision is here: Khalsa v. Sovereign Bank

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Josef Culik

Josef Culik

Attorney Joe Culik has built his reputation on helping people and has dedicated his practice in Boston, Massachusetts to consumer protection, employee rights, and individual personal injury. He has advocated for individuals against some of the largest companies in America and has a passion for helping people uphold their rights against impossible odds. He has filed both individual and class-action lawsuits against most of the major banks, against some of the biggest debt collectors and credit reporting agencies, as well as insurance companies and corporate employers. Contact Joe