A recent opinion in the Massachusetts Supreme Judicial Court clarified a sticking point regarding a mortgagee’s right to foreclose, in spite of some unclear wording in the original mortgage paperwork.
The case was brought against James B. Nutter Company by three reverse mortgage borrowers, all of whom had secured home equity conversion mortgages (reverse mortgages) in 2007 and 2008. Two of the borrowers had passed away and one had been forced to move out after becoming too ill to remain in the home. When the Nutter Company moved to foreclose on the properties, the mortgage holders or their estates attempted to prove that Nutter did not have the right to do so.
J.B. Nutter’s original reverse mortgage paperwork stated that the company could “invoke the power of sale and other remedies permitted by applicable law … At this sale, Lender or another person may acquire the Property. This is known as ‘foreclosure and sale.’ In any lawsuit for foreclosure and sale, Lender will have the right to collect all costs allowed by law.” However, since the paperwork didn’t specifically address the lender’s “statutory power of sale,” the dispute claimed that J.B. Nutter did not have the power to foreclose on the properties following the original borrowers’ deaths or departures.
The Massachusetts Supreme Judicial Court disagreed. In the Court’s January opinion, it wrote,
“It matters that this is a contract for a reverse mortgage, rather than a traditional mortgage, where the borrower makes no monthly payments of principal or interest, where the lender cannot hold the borrower personally liable for the debt, and where the lender’s only recourse on default is to obtain repayment through a foreclosure sale.”
Julie Moran, Esq., Senior Executive Counsel for the law firm of Orlans PC, a Legal League 100 member, handled the case for the plaintiff. Moran told DS News, “The Supreme Judicial Court reminded the parties that contractual language is deemed ambiguous and therefore construed against the drafter if it is susceptible of multiple meanings and the circumstances surrounding it don’t indicate its intended meaning. However, here the Court concluded that under Massachusetts foreclosure law there is no power of sale except the statutory power and no reasonable borrower would have expected a lender to enter into a reverse mortgage without retaining this right. We are very pleased with this outcome, which we believe will have applicability to other types of mortgages containing similar language.”