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Borrowers are starting to file lawsuits against their mortgage lenders and banks are not only finding themselves as defendants in courtrooms across the country, they are also finding judges more than happy to rule against them and in favor of home owners and home loan borrowers. Which is what happened this week in Massachusetts, when the highest state court there issued its opinion and ruled for a home owner fighting her bank in the Massachusetts courts over a wrongful foreclosure by the lender.

In the Massachusetts case of HSBC Bank USA v. Jodi Matt, the Massachusetts Supreme Court ruled yesterday that Jodi Matt was right and HSBC Bank was wrong.  HSBC Bank did not have standing to foreclose against Jodi Matt because it could not provide evidence that it had legal ownership of the mortgage on her house.   This reversed the trial judge’s attempt to allow the bank to proceed with the foreclosure even though there was no evidence of HSBC being the legal mortgage holder because the bank had shown it had “a contractual right to become (the) holder.”

The Massachusetts Supreme Court ruled this “contractual right to become the holder” isn’t enough to foreclose on a home that is subject to a mortgage: the bank must establish by admissible evidence that it is indeed the actual legal owner of the mortgage before the foreclosure can proceed.

From the trial court’s decision, here are the facts of Jodi Matt’s fight with her foreclosing bank:

In early 2005, Jodi Matt owned her Canton, Massachusetts, home, which was valued at over $750,000, free from any mortgages or other liens. Compl. ¶ 27. On March 18, 2005, Ms. Matt applied for a loan with Northeast Mortgage Company. The loan documents promised an 8.158% interest rate and required monthly payments of $1,329.26. Compl. ¶ 28. However, on April 6, 2005, a Northeast Mortgage Company representative came to Ms. Matt’s home and asked her to sign loan documents offering an interest rate of 10.528% and requiring monthly payments ranging from $1,429.37 to $1,806.23 after 12 months. During the signing of the documents, these changes were never explained to Ms. Matt. Compl. ¶ 29. In August of 2005, Countrywide Home Loans (“Countrywide”) began servicing the loan. By the end of 2005, Ms. Matt was in default. Compl. ¶ 30.

In February 2006, Ms. Matt’s monthly mortgage payment increased significantly and subsequent to this increase, the loan had become several months delinquent. After the bank denied her request that it honor the original interest and payment amounts of the mortgage contract, Ms. Matt entered into a repayment plan with Countrywide. Compl. ¶ 31.

In October 2007, Ms. Matt was three months in arrears and received a foreclosure notice from Countrywide. Compl. ¶ 33. Between November 2007 and March 2009, she contacted Countrywide to try to modify the terms of her loan but was unsuccessful. Compl. ¶ 34-41. After learning in May 2009 that Bank of America had taken charge of the loan, Ms. Matt repeatedly contacted Bank of America to try to modify the loan and “was told at all times that the modification was being processed and she would have to be patient.” Compl. ¶ 42-44. Nonetheless, on September 14, 2009, Bank of America sent Ms. Matt notice of its intent to foreclose on her home. Compl. ¶ 45. On January 27, 2010, HSBC Bank USA, to which Ms. Matt’s Note and mortgage had been assigned, filed a complaint in the Massachusetts Land Court to foreclose on Ms. Matt’s home. Compl. ¶ 47-49.

Larry Tolchinsky’s Tip:

Today, the Supreme Court of Massachusetts ruled that a home owner can fight in court and win against a big bank – especially when the bank simply cannot provide the proper document to prove it has a legal right to proceed as a party in the case.   In Florida, like Massachusetts, banks must provide evidence that they have “standing” to sue, that they have a legal right to file a lawsuit against the defendant.

Banks without proper legal documentation to support their ownership of the mortgage cannot prove their standing.  However, there is no requirement that the bank unilaterally show this to the court:  the home owner, as the opposing party, must make that challenge.  It can be done in a foreclosure case where the mortgage lender is plaintiff, asking for foreclosure.  Then the defendant challenges standing as a defense.

It can also be done in a lawsuit filed by the home owner/borrower, as a plaintiff in a lawsuit against the bank who is threatening to foreclose.  As discussed in prior posts, banks are being sued more and more often as their bad acts become more apparent to more people.  Homeowners associations are foreclosing on banks.  Borrowers who attempt to negotiate loan modifications with mortgage lenders are suing for bad faith in loan modification negotiations.

And now, borrowers are suing mortgage lenders who cannot prove they own the paper that they assert gives them the right to foreclose, or threaten to foreclose, on a home.  The Massachusetts case is not controlling in Florida courts; however, it can be an example to Florida borrowers who believe that the lender threatening their homes has no legal right to do so.

Florida foreclosure courts stand ready to serve justice: it’s up to Florida home owners to accept the invitation to fight for it.

Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at, or (954) 458-8655.  If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments.  He’s happy to take your call.

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