The Massachusetts Supreme Judicial Court ruled Friday in an anxiously awaited foreclosure case that a lender must have proper paperwork to foreclose upon a house but that the ruling will not affect property seizures that have already occurred.
The state’s top court ruled in the case, known as Eaton versus Federal National Mortgage Association, that has been long awaited by members of the real estate and legal community, some of whom worried it would put a cloud on thousands of property titles.
The case revolves around whether a lender had the right to foreclose upon a home without the proper paperwork. At issue were two documents borrowers sign to get a home loan — the first a mortgage that establishes the right to seize a property and the second a promissory note that creates an obligation to pay the debt. The servicer in this case had the mortgage but not the note when it foreclosed.
The court ruled that the regulations are “not free from ambiguity,’’ but that the foreclosing entity must be “holding the mortgage and also either holding the mortgage note or acting on behalf of the note holder.’’
However, the court said the decision would “only to apply to foreclosures under the power of sale where statutory notice is provided after the date of this decision.’’