We previously covered the Massachusetts Supreme Judicial Court’s decisions in Ibanez and Bevilacqua on these pages, in which the court gave Massachusetts lenders agita when it upheld lower court decisions invalidating residential mortgage foreclosures. In a recent decision in Eaton v. Federal National Mortgage Association, the SJC set the record straight by clarifying foreclosure requirements in Massachusetts.
At a glance, the Eaton decision establishes that:
· In order to exercise the statutory power of sale in Massachusetts, a mortgagee must either be the holder of the underlying promissory note or be acting under the authority of the note holder.
· Physical possession of the note is not necessary in order to foreclose.
· Mortgagees should ensure the loan file clearly indicates their ownership of the promissory note at the time foreclosure is commenced in Massachusetts.
· Mortgagees should ensure the loan file clearly demonstrates their ownership of the mortgagee’s interest in the mortgage. Best practice dictates the recordation of all mortgage assignments.
· Mortgagees in Massachusetts should be careful to properly document servicing arrangements to provide servicers the statutory authority to foreclose in Massachusetts.
Matt Clark and B. Paul Goulet discuss this much-anticipated decision in more detail in their Dechert OnPoint, Massachusetts Supreme Judicial Court Clarifies Foreclosure Requirements: Eaton v. Federal National Mortgage Association, July 2012.
By: Stewart McQueen and Gennady Gorel