HSBC Bank vs Matt

The SJC issued another mortgage decision yesterday, although the court pretty emphatically declared the case had nothing to do with mortgage law which is technically correct.  Jodi Matt had defaulted on her mortgage so HSBC filed a complaint in the Land Court under the Servicemembers Civil Relief Act seeking permission to foreclose.  Matt, who was not in the military, filed an answer claiming that HSBC did not have an interest in the mortgage and should be denied the right to foreclose.  The Land Court ruled that Matt had no standing and that, despite not yet being the holder of the mortgage in question, that HSBC could proceed with the action because it was a potential holder of the mortgage.

The SCJ agreed with the Land Court regarding the homeowner, holding that in a Servicemembers case, only homeowners who are on active duty in the military have standing to even file an answer.  The SJC disagreed with the Land Court decision regarding the bank, holding that only the mortgage holder (or one acting on behalf of mortgage holder) would have standing to file a Servicemembers claim.  Since this went to subject matter jurisdiction, mortgage ownership by the plaintiff was something that the judge should determine in every case, whether or not it was raised by the defendant.

In this case, HSBC had not yet had the mortgage assigned to it when it filed the Servicemembers complaint, so according to the SJC, HSBC did not standing to file the complaint so that matter should have therefore been dismissed.  Prior SJC decisions on foreclosures have held that the lender must possess the mortgage prior to the first publication of the notice of mortgagee's sale of real estate for the foreclosure to be effective.  This case pushes the date of possession of the mortgage even earlier in the process. 

The SJC did not specify whether this case applied retroactively.  If that's the case, thousands of foreclosures will be effected.  The foreclosure will still be good, but if the Servicemembers case was void, then the homeowners who were defendants in those cases will still have a potential right in the property even though the property had already been foreclosed and resold.  To extinguish that right will require a petition to the Land Court.