Thursday, May 31, 2018

Foreclosing Bank Must Send A New Default Notice If the Borrower Cures

This recent (2018) case, Pereira v. Politano  affirms the concept that under the standard form Massachusetts residential Fannie Mae mortgage, the lender cannot rely on having sent a single default notice. If the lender sends a default notice and the borrower cures the default, the lender has to send new default notices as many times as the borrower defaults then cures her default.

In this case, on May 12, 2008 the foreclosing bank  sent the borrower a notice under paragraph 22 of the Massachusetts standard form mortgage. The notice specified the default, (failure to pay) and the amount necessary to cure the default. The evidence showed the borrower cured the default by paying. The borrowers went into default again five years later, in 2013. The bank foreclosed. In 2013, however, the bank did not send the default notice required under paragraph 22 of the  mortgage. The court said the bank could not rely on its first, 2008 default notice. Since the bank did not send a second default notice, for the 2013 default, the foreclosure was void.

The standard form Massachusetts Fannie Mae mortgage paragraph 22 clearly states if the borrower defaults, the bank has to send the borrower a notice specifying the default, like failure to pay. But it also says if the borrower cures the default, it is as if no default ever occurred. So if the borrower defaults again, the lender has to send another notice. It does not matter if the borrower is months or even years behind on her mortgage, nor if the lender has sent notices for several previous defaults which the borrower has cured. The bank cannot rely on previous notices of default but must send another notice each time the borrower cures and then defaults again.

This is not new but the case is helpful because it sets out the requirement in detail. If you are a bank, you have to send a new notice of default if the borrower cures a previous default. If you are a borrower, keep track of the notices you get from your bank. Even if you are behind many months, if you previously brought your account current the bank has to send you a new notice of default. If they don't, they can't foreclose.

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