Banksters Dodge 'Ticking Time Bomb' Of Crappy Massachusetts Real Estate Titles; State High Court Says Lenders Failing To Strictly Comply w/ Conditions Precedent To Exercise Of Power Of Sale Will Result In Void (As Opposed To Voidable) Foreclosure Sales, But Refuses To Apply Ruling To Past Sales

From a comment on the website of Massachusetts law firm Johnson & Borenstein, LLC:

• Mortgagees beware – the Supreme Judicial Court has ruled that a foreclosing entity must strictly comply with the provisions of the mortgage which delineate the notice of default to homeowners. This case extends the rule, set out in United States Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637 (2011), that strict compliance with the power of sale provisions and the statutory notice requirements is necessary to result in a valid foreclosure.
  
  
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  A majority of the Court interpreted a long line of mortgage foreclosure cases to stand for the proposition that a mortgagee “must strictly comply not only with the terms of the actual power of sale in the mortgage, but also with any conditions precedent to the exercise of the power that the mortgage might contain.”
  
  
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  The Court distinguished its decision in U.S. Bank Nat'l Ass'n v. Schumacher, 467 Mass. 421 (2014), on the grounds that G.L. c. 244, § 35A, the statute at issue in Schumacher, is not related to the exercise of the power of sale, but concerns the provision of a sufficient period of time to permit a homeowner to cure a default. Therefore, the Court decided, the defective notice sent to Phillips and Pinti rendered the foreclosure sale void.
  
  Lest mortgagees become unduly concerned about pending or past foreclosures being invalidated on the grounds of a notice failure, the SJC stated that this decision is prospective only.(1)

For more, see New Requirements For Foreclosing Mortgagees Courtesy Of The Supreme Judicial Court.

For the court ruling, see Pinti v. Emigrant Mortgage Co., No. SJC-11742 (Mass. July 17, 2015).

Thanks to Deontos for the heads-up on the court ruling.

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(1) Prospective vs. Retroactive effect

On this very significant point, the Massachusetts high court's desire here was to dodge, at all costs, the disaster with real estate titles that would have arisen throughout the state (the "ticking time bombs" of void - as opposed to voidable - titles) had the court applied this ruling retroactively. Some may remember that the court took this same dodge several years ago in Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569 (2012).

In this regard, this case represents a significant win for the banksters in that the court decided to give this ruling prospective (ie. "going forward") effect only (although it does apply the ruling to the parties to this litigation as well), thereby rendering the ruling inapplicable to any past foreclosures (and, thus, mooting any "ticking time bomb" problem that would have occurred with the flood of past foreclosure sales that would have been voided had the court decided to give this ruling retroactive effect).

The court addressed this point at the end of its majority opinion:

• We turn to the question whether our decision in this case should be given prospective effect only, because the failure of a mortgagee to provide the mortgagor with the notice of default required by the mortgage is not a matter of record and, therefore, where there is a foreclosure sale in a title chain, ascertaining whether clear record title exists may not be possible.
  
  We confronted the same issue in Eaton, 462 Mass. at 586-587. As Eaton also indicates, in the property law context, we have been more willing to apply our decisions prospectively than in other contexts. See id. at 588.
  
  We conclude that in this case, because of the possible [me here - "disasterous"] impact that our decision may have on the validity of titles, it is appropriate to give our decision prospective effect only: it will apply to mortgage foreclosure sales of properties that are the subject of a mortgage containing paragraph 22 or its equivalent and for which the notice of default required by paragraph 22 is sent after the date of this opinion.
  
  As in Eaton, however, and for the reasons stated there, we will apply our ruling to the parties in the present case. See id. at 589, and cases cited.[25]

The court also noted, in footnote 25 of the majority opinion, that it expressly declined to decide whether it will apply its ruling to cases currently pending on appeal, leaving that argument for other litigants to make in a future case:

• The parties have not argued, and we do not reach, the question whether our holding in this case should be applied to any other class of cases pending on appeal. See Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160, 167-170 (2014).

By giving this ruling prospective, as opposed to retroactive, effect only, the court appears to reaffirm the notion held by some that, no matter how badly the banksters screw up, they can usually count on the government (ie. the court system is part of the judicial branch of government) to somehow pull their collective asses out of the fire.