Massachusetts Supreme Court Holds Standing in Servicemember Proceeding Requires Evidence of Mortgagee Status

Foreclosure Servicemembers

On January 14, the Massachusetts Supreme Judicial Court (SJC) reversed a Land Court decision and held that a trustee lacked standing to bring a servicemember proceeding because the trustee was not the clear holder of either the note or the mortgage. HSBC Bank USA, N.A. v. Matt, 464 Mass. 193 (Mass. 2013). As the court explained, under the Massachusetts Soldiers’ and Sailors’ Civil Relief Act, a lender must file a complaint in equity, a proceeding separate from the foreclosure proceeding, to determine if a borrower is entitled to foreclosure protections under the federal Servicemembers Civil Relief Act (SCRA). Failure to bring a such a servicemember proceeding leaves the title vulnerable to a challenge that the foreclosure sale was defective due to the possibility that it violated a borrower’s rights under the SCRA. On appeal, the borrower argued that the Land Court erred in holding that the trustee bringing the servicemember proceeding satisfied general requirements of standing based on its contractual right to become the holder of a mortgage, even though the trustee failed to establish that it was the current holder of the note or the mortgage. Extending its holding in Eaton v. Fannie Mae that a party with an option to become the holder of a mortgage does not have the present authority to foreclose, the court held that the Massachusetts servicemembers act contemplated that only mortgagees would have the requisite standing to bring a servicemember complaint, and parties with an option to hold the mortgage lack standing. As such, the court held that “only mortgagees or those acting on behalf of mortgagees have standing to bring servicemember proceedings.”