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Boynton v. Federal Housing Finance Agency

United States District Court, D. Rhode Island

September 15, 2017



          John J. McConnell, Jr. United States District Judge.

         This case presents the issue of whether a mortgagee must comply with the notice conditions in Paragraph 22 of the mortgage before it files suit seeking a judicial foreclosure. The simple answer to this question is, yes.


         Nancy A. Boynton and Patricia Beekes executed a promissory note in favor of Sovereign Bank for $165, 000 on July 18, 2007. A mortgage on the property secured repayment of the note. Sovereign transferred and assigned its right, title, and interest in the note and mortgage to Federal National Mortgage Association ("Fannie Mae") by an assignment recorded in the land evidence records for the town of North Providence, Rhode Island.

         Thereafter, Ms. Boynton and Ms. Beekes failed to make monthly principal and interest payments as required under the terms of the note.

         Paragraph 22 of the mortgage contains notice provisions, and reads, in pertinent part, as follows:

Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument... The notice shall specify-' (a) the default; (b) the action required to cure the default, ' (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate alter acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys' fees and costs of title evidence.

         Emphasis added.

         Following the default, on October 8, 2013, a law firm acting for the mortgagee, sent written notice to Ms. Boynton and Ms. Beekes of the default. A non-judicial foreclosure then took place. Fannie Mae purchased the property at foreclosure auction and recorded a foreclosure deed.

         Plaintiffs filed a complaint for declaratory judgment, injunctive relief, and damages against Federal Housing Finance Agency, Fannie Mae, and Santander Bank, N.A (f/k/a/ Sovereign Bank). Three months after Plaintiffs filed their complaint, Fannie Mae filed an assented to Motion to Set Aside the Foreclosure and to Rescind Foreclosure Deed (EOF No. 11), which this Court granted. ECF No. 13. The Court later dismissed Plaintiffs' complaint against Defendants as moot because the parties assented to the revocation of the non-judicial foreclosure.

         Fannie Mae then filed a counterclaim for judicial foreclosure against Plaintiffs pursuant to R.I. Gen. Laws § 34-27-1. ECF No. 15. Santander, on behalf of Fannie Mae, then issued a second Notice of Default to Plaintiffs. Both sides filed motions for Summary Judgment on the counter-claim. Arguing that the second notice was proper, Defendants seek a judicial foreclosure under Rhode Island law through an order from this Court, instead of non-judicial means. ECF No. 32. Countering that the notice was untimely in violation of Paragraph 22 of the mortgage, Plaintiffs seek to dismiss the counterclaim for judicial foreclosure. ECF No. 33.


         This Court may grant summary judgment only if it determines that the moving party shows that there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); AGA Fishing Group Ltd. v. Brown & Brown, Inc., 533 F.3d 20, 23 (1st Cir. 2008).

         This Court has ruled, as have many other courts, that mortgagees must comply with Paragraph 22 of the mortgage, i.e. they are required to give the mortgagor the notice that they agreed to give. Martins v. Fed. Hous. Fin. Agency, 214 F.Supp.3d 163, 169 (D.R.I. 2016) ("Simply put, if a mortgagee agrees to give a certain notice before a foreclosure, it does not matter whether it ...

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