Consumer Crossroads: Where Financial Services and Litigation Intersect

A highly contested and controversial legal defense to residential foreclosures in Maine resurfaced earlier this month with the Maine Supreme Judicial Court's decision in Finch v. U.S. Bank, N.A.

In Deutsche Bank Nat'l Trust Co. v. Ezeji, 2021 N.Y. App. Div. LEXIS 3313 (2d Dep't, May 19, 2021), New York's Appellate Division, Second Department, reversed a judgment of foreclosure and sale, finding that although the mortgagee asserted it possessed the subject note before commencing the foreclosure and had complied with service of the statutory predicate notices pursuant to RPAPL 1304, it failed to introduce the actual business records evidencing these facts. The ruling is instructive for mortgagees and their servicers about the evidence they must provide in support of a prima facie case to foreclose.

Massachusetts moved one step closer to resolving an ongoing debate over pre-foreclosure notices of default that started with the First Circuit's decision in Thompson v. JPMorgan Chase Bank back in February of 2019. Initially, the First Circuit concluded that a notice of default, which disclosed that borrowers "could still avoid foreclosure by paying the total past-due amount before a foreclosure sale," was potentially misleading because the mortgage only allowed reinstatement five days before the sale. Chase filed a petition for rehearing, joined by numerous amici, that demanded reconsideration of the First Circuit's decision on grounds that the potentially misleading language was in fact a mandatory disclosure under the Code of Massachusetts Regulations.

In Thompson v. JPMorgan Chase Bank, the First Circuit Court of Appeals held a foreclosure was potentially void where terms in the lender's default notice arguably conflicted with terms in Paragraph 19 of the Mortgage. Although Chase's notice of default provided the Thompsons with the disclosures required under Paragraph 22 of the Mortgage, Chase's default notice further stated that the Thompsons "could still avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place." The First Circuit interpreted this additional language as potentially misleading, because advising borrowers that they could make payment up to the time of the foreclosure sale differed from the Mortgage's Paragraph 19, which only allowed a reinstatement payment five days before the sale of the Property.