The highest court in Massachusetts clarified protections in state law for homeowners facing foreclosure but said its Friday ruling applies only to future foreclosures, disappointing advocates who wanted any decision to apply more broadly.
The Supreme Judicial Court ruled in the case of Henrietta Eaton, a Boston woman who sued after Green Tree Servicing sold her house to Federal National Mortgage Association, Fannie Mae, at a foreclosure sale in 2010. Eaton's attorney argued that a lender does not have the right to foreclose unless it holds both the mortgage itself and the promissory note, which creates an obligation to pay the debt.
A lower court ruled the lender could not prove it held the promissory note and declared the foreclosure invalid. The high court agreed with Eaton that state law requires both documents before foreclosure, adding that its ruling applies only to future foreclosures.
Samuel Levine, who argued the case on Eaton's behalf while still a student at Harvard Law School, called the case "a win" for Eaton and homeowners who face foreclosure in the future, but said advocates had hoped the court would apply the rule retroactively. Georgetown University Law Professor Adam Levitin, who wrote a friend-of-the-court brief supporting Eaton's position, said the decision makes clear that lenders who do not hold both the mortgage and the promissory note do not have the right to foreclose, an area of state law that until now has been ambiguous.
"It's not an outright victory. The court was definitely concerned that if it applied the ruling retroactively, that it would cloud title for a lot of real estate in Massachusetts. They avoided that," Levitin said. "However, for people who are currently in foreclosure or worried that foreclosure will happen in the future, this rule matters quite a bit because the mortgage industry was, frankly, sloppy about its paperwork.
Richard Briansky, a Boston attorney who represented Fannie Mae and Green Tree, could not immediately be reached for comment..
More than 45,000 people in Massachusetts have lost their homes to foreclosure as a result of the economic downturn over the last several years, according to figures provided by the state attorney general's office.