The U.S. District Court for the District of Massachusetts has held that the inclusion of attorneys fees in a right-to-cure notice delivered to a home mortgage loan borrower under Section 35A of Chapter 244 of the General Laws of Massachusetts caused the notice to be ineffective. The case involved a home mortgage loan in which the borrower had previously defaulted in 2006. After being granted a loan modification, the borrower remained current on the loan payments for a time, and then fell behind again in 2011. The lender sent a notice of default that included a notice of the borrower’s right to cure under Section 35A of Chapter 244. Section 35A of Chapter 244 provides that mortgagors are entitled to an opportunity to cure a mortgage default prior to foreclosure, and requires the mortgagee to notify the mortgagor of the mortgagor’s right to cure. Section 35A also provides that “[t]he mortgagor shall not be liable for any attorneys’ fees relating to the mortgagor’s default that are incurred by the mortgagee or anyone holding thereunder prior to or during the period set forth in the notice required by this section.” The notice provided in this case summarized past due installments that the borrower would need to pay in order to cure the default. The summary of past due installments included attorneys fees that, according to the lender, arose from the 2006 default but not the current default. In its July 23 decision, the court nevertheless found that Section 35A prevents a mortgagee from adding any attorneys’ fees to a right-to-cure notice letter. The court held that the inclusion of attorney’s fees, even if incurred in connection with a prior default, rendered the right-to-cure notice ineffective.
Nutter Notes: Division of Banks regulations implementing the right-to-cure notice requirements of Section 35A (201 C.M.R. §§ 56.03 and 56.04) specify the form and content of the right-to-cure notice that a foreclosing mortgagee must deliver to the mortgagor. The mandatory form includes a line item where the mortgagee may list “other late charges or fees” on the right-to-cure notice. The mortgagee in this case argued that the law’s prohibition of attorney’s fees that were incurred “prior to” the cure period refers only to attorney fees that were incurred from the time the present default began through the cure period. On that basis, the mortgagee argued that a mortgagee may condition a mortgagor’s right to cure on the payment of attorney’s fees that resulted from previous defaults, and that it was proper to list such fees along with other late charges or fees on the right-to-cure notice. This case is the first to address the question of whether a mortgagor’s right to cure may be conditioned on payment of attorney’s fees incurred by the mortgagee in connection with a default that occurred prior to the default giving rise to the right-to-cure notice.