A proposed class action alleges New Rez/Shellpoint Mortgage Services and the Federal Home Loan Mortgage Corporation (Freddie Mac) have breached the terms of their contracts with borrowers by sending default and right-to-cure notices that contained materially misleading statements in violation of Massachusetts law.
The plaintiff behind the 28-page complaint alleges the default and right-to-cure notices he and proposed class members received from New Rez/Shellpoint are invalid and resulted in void foreclosures. According to the suit, the defendants’ contract breaches have also voided foreclosure auctions, sales and deeds pursuant to proposed class members’ mortgages.
The plaintiff was granted the deed to his Pepperell, Massachusetts property in August 1995 and was secured a mortgage loan of a little more than $96,000 in June 2003, the lawsuit says. Paragraph 22 of the mortgage contract states that the mortgagee, prior to acceleration and foreclosure, is required to be sent by the defendants a default notice that includes information on the plaintiff’s “right to reinstate after acceleration,” according to the case. In May 2017, the plaintiff’s mortgage was assigned to Nationstar Mortgage, and in October 2018 it was reassigned to New Rez/Shellpoint, the suit states.
Around July 26, 2019, the plaintiff received from New Rez/Shellpoint a form default/right-to-cure letter that stated, in part, that the homeowner could “still avoid foreclosure by paying the total past due amount before a foreclosure sale takes place . . . to avoid foreclosure.” The lawsuit alleges this statement amounts to an affirmative misstatement in that the plaintiff’s mortgage only allows for reinstatement of the mortgage after acceleration “prior to the earliest of” either five days before the sale of the property; such other period as applicable law might specify for the termination of the defendants’ right to reinstate; or entry of judgment enforcing the mortgage.
Since there is no applicable law that specifies the termination of the right to reinstate, and there is no entry of judgment enforcing the mortgage, the plaintiff’s right to reinstate and avoid foreclosure expired five days before the foreclosure sale, the suit says.
“Therefore, the default/right to cure letter’s assertion that the [plaintiff] could pay the ‘total past due amount before a foreclosure sale takes place … to avoid foreclosure’ is potentially misleading and deceptive because the letter omits the conditions of paragraph 19 of the mortgage,” the lawsuit summarizes.
Moreover, the default/right-to-cure letter received by the plaintiff violates Massachusetts law in that it failed to inform the homeowner that the right to reinstate expires five days before a foreclosure sale, the complaint claims.
Overall, the defendants’ failure to properly describe the plaintiff’s “right to reinstate after acceleration” and the “date by which the default may be cured” amounts to a breach of contract, the suit says. According to the lawsuit, the defendants conducted on February 24, 2020 a void foreclosure sale on the plaintiff’s property, with the deed ending up with defendant Freddie Mac.
The case looks to represent all homeowners or former homeowners who were sent default/right-to-cure letters by New Rez/Shellpoint that stated or implied that the homeowners could pay the “total past due amount before a foreclosure sale takes place … to avoid foreclosure” and omitted the five-day-prior-to-sale reinstatement conditions outlined in their mortgage, as well as the date by which the default may be cured.
The lawsuit, filed on October 19, 2020 in Massachusetts Superior Court, was removed to the state’s federal court on January 25, 2021.
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