SJC rules bank had no right to take home

Ruling against bank stresses requirement for proper paperwork

The state’s top court Monday ruled in favor of a Canton woman fighting her foreclosure, a decision that puts more pressure on lenders to clean up seizure procedures, but also complicates efforts for borrowers seeking court relief from such property take-backs.

The Massachusetts Supreme Judicial Court ruling buttresses several others it has made in recent years that require foreclosing lenders to have proper paperwork in place before seizing homes from delinquent borrowers.

In this case, the court found the lender, HSBC Bank USA, did not have the right to start a foreclosure process against homeowner Jodi B. Matt because it couldn’t prove it held the mortgage on her house.

Foreclosing lenders are required to file a complaint in court under the state’s Soldiers’ and Sailors’ Civil Relief Act. That law offers certain legal protections to those who serve in the military. A Land Court judge, Keith C. Long, had ruled HSBC may not have been the legal mortgage holder, but had “a contractual right to become [the] holder” and therefore could start the foreclosure process.

The seven-member SJC disagreed.

“We conclude that only mortgagees or those acting on behalf of mortgagees have standing to bring service member proceedings,’’ the court wrote in a decision authored by Judge Barbara A. Lenk.

Going forward, the court said, mortgage lenders must “present such evidence as may be necessary and appropriate” to prove they have a legal authority to begin the foreclosure process.

Richard D. Vetstein, a Framingham attorney and author of the Massachusetts Real Estate Law Blog, said the ruling will further complicate lenders’ efforts to seize properties, especially with loans that have been sold and resold along the way.

“It could become very problematic in terms of figuring out who really does hold the indebtedness here,’’ he said.

Nadine Cohen, managing attorney for the consumer rights unit of the nonprofit Greater Boston Legal Services, called the ruling a “victory for homeowners,” and one of many reasons state lawmakers should revamp the entire foreclosure process.

“So many of the recent cases are chipping away at longstanding foreclosure practices that do not always comply with the law,” she said. “At some point, we need an overhaul of the entire foreclosure practice in Massachusetts — so that real due process is afforded borrowers who are about to lose their homes in foreclosure.”

But the decision also creates headaches for parties on both sides — people trying to stay in their homes and the lenders seeking to get them out.

Lenk emphasized the lower court judge should never have considered Matt’s petition because she did not serve in the military. Although the court decided to answer the question anyway — whether HSBC had legal standing in the case — the decision bars many other borrowers from using the same tactic to stave off foreclosure, said Edward Bloom, an attorney with Sherin & Lodgen and a member of the Real Estate Bar Association for Massachusetts.

“It makes it clear that any borrower or mortgagor who wants to challenge a foreclosure or raise any of the multiple defenses that have been raised in court, that [Land Court] is not the forum to do it,” said Bloom.

Glenn Russell Jr., Matt’s attorney, said that even if the court prohibits a homeowner who is not in the military from appearing in Land Court, a borrower could still submit legal documents to the court questioning a lender’s legal status. Matt is also disputing her foreclosure in US District Court, where her case is still pending.

Russell said he was thrilled by Monday’s SJC ruling — many people had told him that his Land Court action would prove futile, he said.

“People thought I was crazy,’’ Russell said. “These things are viewed as perfunctory rubber-stamp procedures.”