1st Cir. Notes that acceleration did not trigger Massachusetts SOL at 5 years for “obsolete mortgages”
The United States Court of Appeals for the First Circuit recently ruled that accelerating a note’s maturity date does not affect the five-year limitation period for the related mortgage under the obsolete Massachusetts mortgage law.
In that ruling, Circuit First also confirmed that MERS can legitimately assign a mortgage without holding beneficial title to the underlying property.
A copy of the notice in Hayden v. HSBC Bank USA, NA is available on: Link to Opinion.
In March 2007, a couple (“borrowers”) obtained a mortgage from a lender to purchase a property in Massachusetts. The borrowers signed a promissory note commemorating the loan and a mortgage identifying MERS as the mortgagee, acting “only as a nominee” for the lender and its successors and assigns. The mortgage also granted MERS and his successors and grants selling power over the property.
In January 2008, MERS assigned the mortgage to an asset securitization trust (“First Trust”). In February 2010, the first trust reassigned the mortgage to itself as trustee of another asset securitization trust (“second trust”).
The borrowers defaulted on their loan in 2008. They then filed several bankruptcy applications and sought injunctive relief, thus delaying the foreclosure until 2016.
After the service agent provided notice of the foreclosure sale in June 2016, borrowers sued the loan owner and the service agent in federal court to prohibit the sale, arguing that the MERS assignment of the mortgage to the first trust was invalid.
The trial court dismissed the borrowers’ request for a preliminary injunction and allowed the motion to dismiss the loan owner and the service agent.
The borrowers appealed to the First Circuit, arguing that (1) the manager cannot foreclose their property under Chapter 244, § 14, of the Massachusetts General Laws, and (2) that the mortgage is obsolete by application of Chapter 260 of the General Laws of Massachusetts, § 33.
As you may recall, under the Massachusetts Obsolete Mortgage Act, a mortgage becomes obsolete and is automatically discharged five years after the expiration of the stated term or due date of the mortgage. .
The first circuit ruled that MERS can validly assign a mortgage without holding beneficial title to the underlying property (Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291-93 (1st Cir. 2013)), and that borrowers do not have standing to challenge a mortgage assignment on the basis of an alleged breach of the pooling agreement and management of a trust (Butler v. Deutsche Bank Tr. Cie Ams., 748 F.3d 28, 37 (1st Cir. 2014)).
The Court also held that a mortgage contract can validly make MERS the mortgagee and authorize it to assign the mortgage in the name of the lender to the successors and assigns of the lender.
Then, the First Circuit ruled that the borrowers’ “obsolete mortgage” request had no basis in the clear text of the law or in precedent, as nothing in the text of the law supports the claim of the borrowers. borrowers that accelerating the maturity date of a note affects the five-year limitation period for the related mortgage.
The Court concluded that the borrowers’ citation to the Massachusetts Supreme Court decision in Deutsche Bank National Trust Co. v. Fitchburg Capital, LLC, 28 NE3d 416 (Mass. 2015), inappropriate because the decision makes no mention of the impact of an accelerated note on the statute of limitations of the obsolete mortgage law.