TABLE OF CONTENTS

TABLE OF AUTHORITIES
STATEMENT OF THE ISSUES PRESENTED FOR REVIEW
STATEMENT OF THE CASE
I. The Nature of the Case.
II. The Course of Proceedings.
III. Disposition in the Court Below.
IV. Statement of Facts.
SUMMARY OF THE ARGUMENT
ARGUMENT
I. MOTION TO DISMISS STANDARD.
II. MERS IS CONTRACTUALLY AND STATUTORILY
AUTHORIZED TO FORECLOSE WHERE IT IS THE
MORTGAGEE AND EXPRESSLY GRANTED THE
iv
1
1
1
3
4
5
7
10
10
POWER OF SALE IN THE MORTGAGE ........... 13
A. The Galiastros Expressly Granted
MERS Authority to Foreclose in the
Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Massachusetts Courts Have
Consistently Ruled That MERS Can
Foreclose. . . . . . . . . . . . . . . . . . . . . . . . . . 14
C. The Majority of Courts Around the
Country Agree that MERS Can
Foreclose. . . . . . . . . . . . . . . . . . . . . . . . . . 18
D. The Minority Decisions Cited by
the Galiastros are Distinguishable
and/or Inconsistent with
Massachusetts law .................. 20
i
III. MASSACHUSETTS' NON-JUDICIAL FORECLOSURE
STATUTE DOES NOT REQUIRE THE
FORECLOSING PARTY TO HOLD OR PRODUCE
THE NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
A. The Galiastros' Reliance on Eaton
v. Fed Nat'l Mortgage Assoc. is
Misplaced. . . . . . . . . . . . . . . . . . . . . . . . . . 2 7
B. Eaton Does Not Analyze the
Statutory Power of Sale And the
Alternative Statutory Authorities
to Foreclose Provided in G.L.
c. 244 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
C. G.L. c. 244 is Unambiguous and
Eaton Should Not Have Gone Beyond
the Literal Meaning ................ 32
D. The So-Called Common Law Cases
Cited in Eaton Pre-Date the Modern
Foreclosure Statute and Do Not
Support the Supposed Requirement
that There Be Unity of the Note
and Mortgage ....................... 34
IV. THE GALIASTROS' TORT CLAIMS FAIL
BECAUSE THERE HAS NOT BEEN A
FORECLOSURE SALE AND, THEREFORE, THEY
HAVE NO DAMAGES ......................... 35
V. THE GALIASTROS WAIVED ANY APPEAL OF THE
DISMISSAL OF THEIR 93A CLAIMS AGAINST
MERS.
VI. THE GALIASTROS' 93A CLAIM FAILS BECAUSE
MERS WAS NEVER ENJOINED BY THE FREMONT
INJUNCTION AND THE LOAN DOES NOT MEET
THE INJUNCTION CRITERIA.
A. The Fremont Injunction.
B. MERS Did Not Violate the Fremont
Injunction Because it Was Not
36
37
37
Enjoined. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ii
C. The Galiastrost Loan Does Not
Satisfy Essential Fremont Factors .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
VII. THE SUPERIOR COURT CORRECTLY DISMISSED
THE CONSPIRACY CLAIM BECAUSE THERE WAS
NO UNDERLYING WRONG ..................... 42
VIII. THE SUPERIOR COURT CORRECTLY DISMISSED
THE CONSPIRACY CLAIM BECAUSE THE
GALIASTROS FAILED TO PLEAD SUFFICIENT
FACTS TO SUPPORT THE CLAIM ............. 42
A. The Galiastros Did Not State a
Claim For Coercive Civil
Conspiracy. . . . . . . . . . . . . . . . . . . . . . . . 44
B. The Galiastros Cannot State a
Claim for Concerted Action Civil
Conspiracy. . . . . . . . . . . . . . . . . . . . . . . . 4 6
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ADDENDUM Add. 1
SUPPLEMENTAL APPENDIX S.A. 1
CERTIFICATE OF COMPLIANCE
iii
Adamson v. Mortgage Elec. Registration SYS·• InC·•
28 MaSS· L. Rptr. (Mass. super. ct. zonl .................... 25
CASESS
Aetna cas. sur. co. v. P & B Autobody,
43 F.3d cir. ............... 44, 46
Aliberti v. GMAC Mortgage, LLC,
U.S. nist. LEXlS 4SB5B (D. MaSS·
Apr. zs, zo1l.l ................................. 25
Ashcroft v. Iqbal,
s. ct. tu.s. zoo9l ................ n.
Barrett Assoc., rnc. v. Aronson. 346 Mass. l ........................... 35
Bell Atl. CorP· v. TwomblY,
sso u.s. 544 (2007) ............................
Bellistri v. ocwen Loan serv., 2B4 s.w.3d (MO. Ct. APP· 2009) ........ 23, 24
BliSS Valley PrOP·• LLC v.
2005 MaSS· super. LEXlS (2005) .... ······ ... 43
Boston BoUS· Auth. v. National conference of Firemen
and oilers, Local 3, 4SB MaSS·
(MaSS· ................................... 32
commonwealth v. Fremont,
23 MaSS· L· Rptr. 567 (MaSS· super. Ct.
Feb. z6, zoos) ............................. passim
v. Fremont InV· & Loan.
24 MaSS· L. ReP· (MaSS· SUP· Ct.
March 3 2 oos l ............................ passim
v. Fremont Nev. & Loan.
452 Mass. 733 tzooBl ........ ············· ..
crowleY v. Adams,
226 MaSS· SB2   .... ············· .... ·· 34, 35
Curtis v. Herb Chambers I-95, Inc.,
458 Mass. 674 (2011) ........................... 10
Depauw v. Liquidation Prop., Inc.,
2011 U.S. Dist. LEXIS 14465 (E.D. Mich.
Feb 14, 2011) .................................. 18
Dept. of Cornrn. Affairs v. Mass. State Coll. Bldg.
Auth., 378 Mass. 418 (1979) .................... 33
E.A. Miller, Inc. v. S. Shore Bank,
4 0 5 Mass . 9 5 ( 19 8 9 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Eaton v. Fed. Natn'l Mortgage Assoc.,
Docket No. 11-01382 (Suffolk Sup. Ct.
June 17, 2011) ............................. passim
Elias v. HorneEQ Serv.,
2009 U. S. Dist. LEXIS 14907 (D. Nev. 2009) .... 19
Fazio v. Bank of Am., NA,
27 Mass. L. Rep. 81 (Mass. Super Ct.
May 13 , 2 0 1 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1
Fleming v. Dane,
3 o 4 Mass . 4 6 ( 19 3 9 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5
Gardner v. Am. Horne Mortgage Serv., Inc.,
2010 U.S. Dist. LEXIS 12068 (E.D. Cal. 2010) ... 26
Gerrnon v. BAC Horne Loans, L.P.,
2011 U.S. Dist. LEXIS 17084 (S. D. Cal.
Feb. 22, 2011) ................................. 18
Gomes v. Countrywide Horne Loans, Inc.,
121 Cal. Rptr. 3d 819
(Cal. App. 4th Dist. 2011) ..................... 19
Gomez v. Countrywide Bank, FSB,
2009 U.S. Dist. LEXIS 108292 (D. Nev. 2009) .... 19
Haley v. Elegen Horne Lending LP,
2010 WL 1006664 (D. Nev. Mar. 16, 2010) ........ 36
Haser v. wright,
65 Mass. App. Ct. 903 (2005) ................... 36
v
Horbal v. Cannizzaro,
26 Mass. L. Rptr. 388 (Mass. Super. Ct. 2009) .. 42
Iannacchino v. Ford Motor Co.,
451 Mass. 623 (2008) ................ 10-11, 12, 42
In re Huggins,
357 B.R. 180 (Bankr.
D . Mass . 2 o o 6 ) . . . . . . . . . . . . . . . . . . . . . 15 , 16 , 1 7 , 2 3
In re Lopez,
446 B.R. 12 (Bankr. D. Mass.
February 9, 2 011) .............................. 16
In re Marron,
2011 Bankr. LEXIS 2487 (Bankr. D. Mass.
June 2 9 , 2 0 11 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 , 2 7
In re Martinez,
444 B.R. 192 (Bankr. D. Kan.
Feb. 11, 2 011) ............................. 18 , 21
In re MERS Litig. (MDL),
Docket No. 09-2119-JAT (D. Ariz.
Jan. 2 5 , 2 011) ................................. 18
In re Smith,
366 B.R. 149 (Bankr. D. Col. 2007) ............. 19
Jackson v. Mortgage Elec. Registration Sys., Inc.,
770 N.W. 2d 487 (Minn. 2009) ............... 19, 22
Jeffrey v. Rosenfeld,
179 Mass. 506 (1901) ........................... 26
Jurgens v. Abraham,
616 F. Supp. 1381 (D. Mass. 1985) ........... 44-45
Kiah v. Aurora Loan Servs., LLC,
2010 U.S. Dist. LEXIS 121252 (D. Mass.
Nov. 16, 2010) ................................. 15
Kramer v. Zoning Bd. of Appeals of Somerville,
65 Mass. App. Ct. 186 .......................... 12
Kurker v. Hill,
44 Mass. App. Ct. 184 (1998) ................... 44
vi
Lamson & Co., Inc. v. Abrams,
3 o 5 Mass . 2 3 8 ( 19 4 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 7
Landmark Bank v. Kessler,
2 8 9 Kan . 52 8 ( Kan . 2 0 o 9 ) . . . . . . . . . . . . . . . . . . . 2 0 , 2 1
Latham v. Homecomings Fin., LLC,
2009 Mass. Super. LEXIS 406
(Mass. Super. 199) ............................. 41
Linkhart v. U.S. Bank Nat'l Assoc.,
2010 U.S. Dist. LEXIS 48281
(S. D. Cal. 2010) .............................. 18
Lyons v. Mortgage Elect. Registration Sys., Inc.,
2011 WL 61186 (Mass. Land. Ct.
Jan 4 1 2 0 11 ) • • • • • • • • • • • • • • • • • • • • • • • • • • • 15 I 16 I 1 7
McAuslan Nutting, Inc. v. Futurity Thread Co.,
2 54 Mass . 216 ( 19 2 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5
McGinnis v. GMAC Mortgage Corp.,
2010 U.S. Dist. LEXIS 90286 (D. Utah 2010) ..... 19
McKenna v. Wells Fargo Bank, N.A.,
2011 U.S. Dist. LEXIS 28719 (D. Mass.
Mar. 21, 2 011) ................................. 2 5
Miller v. Skogg,
2011 U.S. Dist. LEXIS 10887 (D. Nev.
Feb 3, 2011) ................................... 18
Morgera v. Countrywide Home Loans, Inc.,
2010 U.S. Dist. LEXIS 2037 (E.D. Cal. 2010) .... 18
Mortgage Elec. Registration Sys., Inc. v. Azize,
965 So.2d 151 (Fla. Dist. 2d Ct. App. 2007) .... 19
Mortgage Elec. Registration Sys., Inc. v. Saunders,
2 0 1 0 Me . 7 9 ( 2 0 1 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2
Mortgage Elec. Registration Sys. v. Ventura,
2006 Conn. Super. LEXIS 1154 (Conn. Super.
Ct. 2006) .' ..................................... 19
Pantoja v. Countrywide Home Loans, Inc.,
640 F. Supp. 2d 1177 (N.D. Cal. 2009) .......... 19
vii

Quintero Family Trust v. Onewest Bank, F.S.B.,
2010 U.S. Dist. LEXIS 6618 (S.D. Cal. 2010) .... 26
Residential Funding Co, LLC v. Saurman,
2011 Mich. App. LEXIS 719 (Mich. Ct. App.
Apr. 21, 2 011) ................................. 21
Santarose v. Auruora Bank FSB,
2010 U.S. Dist. LEXIS 78007
( s. D. Tex. 2 010) ............................ 18 -19
Sawyer v. Mortgage Elec. Registration Sys., Inc.,
2010 WL 996768 (N.D. Tex. Feb. 1, 2010) ........ 18
Silva v. OneWest Bank, FSB,
2010 Mass. Super. LEXIS 106 (Mass. Super. Ct.
May 19 , 2 o 1 0 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1
Sullivan v. Brookline,
435 Mass. 353 (2001) ........................... 32
Trent v. Mortgage Elec. Registration Sys., Inc.,
288 Fed. Appx. 571 (11th Cir. 2008) ............ 18
U.S. Bank Nat'l Assoc. v. Ibanez,
458 Mass. 637 (2011) ............ 8, 23, 24, 26, 27
Valerio v. U.S. Bank, N.A.,
716 F. Supp. 2d 124 (D. Mass. 2010) ............ 25
Wolcott v. Winchester,
81 Mass . 4 61 ( 18 6 o ) . . . . . . . . . . . . . . . . . . . . . . . . 3 4 , 2 5
viii
STATUTES:
Massachusetts General Laws
c. 93A ............................... 2, 9, 36, 37
c. 106, §3-101 et   ......................... 17
c. 183, § 21 ............................... 13, 24
c. 244, § 14 ............................... passim
St. 1857, c. 229, § 1 .................. 30, 31, 32
MCL 600.3204 (i) (d) .................................. 21
M.R.A.P. 18 (b) ....................................... 3
Rule 12 (b) (6) ................................. 3, 4, 10
OTHER AUTHORITIES:
Black's Law Dictionary, 8th ed. 2004 ................. 17
Black's Law Dictionary, 9th ed. 2009 ................. 33
ix
STATEMENT OF THE ISSUES PRESENTED FOR REVIEW
I. Whether Mortgage Electronic Registration
Systems, Inc. ("MERS"), which is the record mortgagee
of the Galiastros' mortgage specifically granted the
statutory power of sale, is entitled to foreclose
under G.L. c. 244, § 14?
II. Whether a foreclosing party must possess or
produce the promissory note to validly foreclose?
III. Whether MERS violated an injunction entered
against Fremont Investment and Loan in another case by
sending a notice of foreclose on the Galiastros'
mortgage?
IV. Whether a civil conspiracy claim exists
against a lawyer and client where lawful foreclosure
is pursued, but not completed?
STATEMENT OF THE CASE
I. The Nature of the Case.
The Galiastros admit they defaulted on their
mortgage by failing to make monthly payments. Even
though they admit the default, they admit that MERS is
the record mortgagee (acting as nominee for the lender
and lender's successors and assigns, and they admit
that they expressly granted MERS the statutory power
1
of sale, the Galiastros claim that MERS is not
entitled to foreclose because it is not the holder of
their promissory note.
The Galiastros also contend that MERS conspired
with its foreclosure counsel to fraudulently avoid a
2008 preliminary injunction that enjoined Fremont
Investment & Loan ("Fremont") from foreclosing on
certain adjustable rate loans that it originated and
still holds.
1
While Fremont did originate the
Galiastros' loan, Fremont sold it prior to the
injunction. So, it was not subject to the injunction.
Furthermore, the Galiastros' loan does not contain the
four characteristics that the Court found
presumptively unfair.
The Galiastros appeal the dismissal of their
five-count complaint in which they alleged: 1) that
Defendants lack standing and authority to foreclose;
2) that Defendants violated G.L. c. 93A based on the
Fremont injunction; 3) civil conspiracy; 4) fraud; and
5) injunctive relief. All five claims were based on
the following two legal theories: (1) MERS allegedly
lacks standing and authority to foreclose; and (2)
1
Commonwealth v. Fremont Inv. & Loan, 24
Mass. L. Rep. 12, *17 (Mass. Sup. Ct. March 31, 2008).
2
MERS' initiation of foreclosure violated the Fremont
injunction. The Superior Court correctly dismissed
the Galiastros' Complaint because it did not
demonstrate a plausible entitlement to relief.
II. The Course of Proceedings.
On March 29, 2010, the Galiastros filed a
Complaint with a motion for preliminary injunction to
enjoin the scheduled foreclosure of their home. See
Appendix, Page 1 (App. 1) .
2
On July 8, 2010, the
Worcester Superior Court (Moriarty II, J.) denied the
Galiastros' injunction motion noting, "[u]pon
consideration of the briefs and arguments of counsel,
I am not persuaded that the plaintiffs enjoy a
likelihood of success on the merits and accordingly
the motion is DENIED." MERS then moved to dismiss the
Galiastros' Complaint under Rule 12(b) (6) of the
Massachusetts Rules of Civil Procedure. Co-Defendant
Harmon Law Offices, P.C. ("Harmon") also moved to
dismiss. After a consolidated hearing on the motions
2
The Galiastros omitted documents related to
the injunction from the Appendix despite disclosing,
under M.R.A.P. l£(b), that they would include "[a]ll
pleadings contained on the docket in this matter" in
the joint Appendix. While these documents are in the
record, the excluded orders are provided in MERS'
Supplemental Appendix for the Court's reference.
3
1
to dismiss, the Worcester Superior Court (McCann, J.)
granted MERS' motion to dismiss for "[the] reasons set
forth in defendant's Memorandum and as to all counts."
See Nov. 3, 2010 Order (S.A. 1). The Court also
granted Harmon's motion to dismiss. (App. 172). On
November 24, 2009, the Galiastros filed a Notice of
Appeal. (App. 173). On January 19, 2011, the Court
entered a Judgment on the Motion to Dismiss. (App.
175). On or around February 3, 2011, the Galiastros
filed a second notice of appeal. (App. 177).
III. Disposition in the Court Below.
The Worcester Superior Court granted MERS' motion
to dismiss under Rule 12(b) (6) without a written
memorandum for the "reasons set forth in the
defendant's memorandum and as to all counts." See
Order dated Nov. 3, 2010. (S .A. 1) .
3
On January 20,
2011, the Worcester Superior Court entered Judgment on
the motion to dismiss for both defendants "for the
reasons set forth in the Defendant's memorandum."
(App. 175).
3
Plaintiff's omitted this order from their
Appendix.
4
I
I
IV. Statement of Facts.
As they must, MERS accepts the Galiastros' well-
pled factual allegations as true for the purposes of
the appeal of the motion to dismiss.
4
On July 26,
2006, the Galiastros obtained a home mortgage loan
from Fremont in the principal amount of $436,000 {the
"Loan") by executing a promissory note in favor of
Fremont {the "Note"). {App. 64). As security for the
Loan, the Galiastros granted a mortgage on real
property located at 23 Christina Road, Milford,
Massachusetts {the "Mortgage") to MERS. {App. 45) .
5
Under the terms of the mortgage:
{App.
"MERS" is Mortgage Electronic Registration
Systems, Inc. MERS is a separate
corporation that is acting solely as nominee
for Lender and Lender's successor's and
assigns. MERS is the mortgagee under this
security instrument.
45). MERS' rights and authority are provided in
the Mortgage:
4
Since the Galiastros filed a preliminary
injunction motion with their verified complaint, the
exhibits attached to the injunction motion are treated
as part of the Complaint. They are referenced in the
Complaint, were relied upon by both parties and the
Court below, and their authenticity is not disputed.
5
Additional copies of the note and mortgage
are provided in the Supplemental Appendix for the
Court's convenience as the copies in the Appendix are
difficult to read.
5
'l
TRANSFER OF RIGHTS IN THE PROPERTY
The Security Instrument secures to Lender:
(i) the repayment of the Loan, and all
renewals, extensions, and modifications of
the Note; and (ii) the performance of
Borrower's covenants and agreements under
this Security Instrument and the Note. For
this purpose, Borrower does hereby mortgage,
grant and convey to MERS (solely as nominee
for Lender and Lender's successors and
assigns) and to the successors and assigns
of MERS, with power of sale, [the following
described Property] .
(App. 47) (emphasis added). The Mortgage continues:
_Borrower understands and agrees that MERS
holds only legal title to the interests
granted by the Borrower in this Security
Instrument, but, if necessary to comply with
law or custom, MERS (as nominee for Lender
and Lender's successors and assigns) has the
right: to exercise any or all of those
interests, including, but not limited to,
the right to foreclose and sell the
Property ...
(App. 47) (emphasis added).
The principal amount of the Loan was $436,000.
(App. 64). It was a thirty-year fixed rate loan with
an 8.1% interest rate. The initial monthly payments
of $3,064.33 began on September 1, 2006. (App. 64) .
Shortly after origination, Fremont transferred its
interest in the Loan to a mortgage securitized trust.
(Compl.     6-8) (App. 2). MERS remained the record
mortgagee.
6
The Galiastros defaulted on their monthly
mortgage payments and MERS filed a Servicemember's
Action in the Land Court to begin foreclosure. MERS
gave the statutory notices required under G.L. c. 244,
§ 14. However, the foreclosure sale was not
completed. The Galiastros allege that MERS' attempt
to foreclose violated the Fremont injunction and that
by beginning, but not completing, foreclosure, it has
committed fraud and engaged in a conspiracy with its
legal counsel.
SUMMARY OF THE ARGUMENT
The Superior Court correctly dismissed the
Galiastros' Complaint because the Galiastros did not
plead facts demonstrating a plausible entitlement to
relief on any of their claims. The Galiastros'
contention that they were wrongfully denied discovery
is misplaced because they are not entitled to
discovery where they did not state a claim. (pp. 10-
12)
The Galiastros' contention that MERS lacks
authority to foreclose is belied by Massachusetts law
and the mortgage contract itself. MERS is authorized
to foreclose under the letter of the non-judicial
foreclosure statute, G.L. c. 244, § 14, and the
7
express terms of the mortgage. Under the Mortgage,
the Galiastros made MERS the mortgagee and expressly
granted MERS the power of sale. G.L. c. 244, § 14
expressly authorizes the mortgagee or the person with
the power of sale the right to foreclose. Since MERS
is both the mortgagee and has the power of sale, it is
authorized to foreclose. The majority of state and
federal decisions in Massachusetts and throughout the
country support MERS' authority to foreclose. {pp. 13-
24)
The Galiastros' argument that a foreclosing party
must hold the underlying promissory note at the time
of foreclosure is misplaced. The Massachusetts
foreclosure statute does not expressly, or even
impliedly, mention any note holder requirement.
Massachusetts state and federal courts, with one
recent exception, have repeatedly ruled that
Massachusetts does not require the foreclosing party
to be the note holder. In addition, the SJC's recent
decision in u.s. Bank Nat'l Assoc. v. Ibanez
6
belies
the Galiastros' position because the SJC clearly
stated that the focus is on whether the person
6
458 Mass. 637 {2011).
8
foreclosing is the mortgagee. The note has no impact
on the validity of a foreclosure. (pp. 24-35)
MERS did not, and could not, have violated the
injunction entered in Commonwealth v. Fremont Inv. &
Loan
7
because MERS was not enjoined. It was not even a
party in that case. While the Galiastros' loan was
originated by Fremont, it is clear from the face of
their Complaint that Fremont had no interest in the
loan at the time of the foreclosure and is not alleged
to have taken any action. Since only Fremont, and not
MERS, was enjoined, MERS could not have violated the
injunction. In addition, the Galiastros' loan did not
even satisfy the four required factors that Fremont
found "presumptively unfair." Therefore, the
injunction, even if it applied to MERS, would not have
prevented foreclosure. (pp. 37-41)
The Superior Court correctly dismissed the
Galiastros' remaining claims for fraud, civil
conspiracy, and G.L. c. 93A because they are all
premised on the flawed underlying theories discussed
above. In addition, the Galiastros have waived their
G.L. c. 93A claim because they did not argue (or even
7
23 Mass. L. Rptr. 567 (Mass. Super. Ct. Feb.
26, 2008).
9
mention) it in their brief. The fraud and conspiracy
claims both fail because the Galiastros have not
alleged, or sustained any damages, where a foreclosure
did not occur. Those claims also fail because the
underlying tort claims, discussed above, fail.
Finally, each of the tort claims fail because the
Galiastros have not alleged sufficient facts to
survive 12(b) (6) scrutiny under Iannacchino v. Ford
Motor Co.
8
Instead, the Galiastros rely on unsupported
conclusions and bare bone recitations of the elements
- precisely the type of allegations that fall short of
pleading a plausible entitlement to relief. (pp. 36,
42-46)
ARGUMENT
I. MOTION TO DISMISS STANDARD.
The allowance of a Rule 12(b) (6) motion to
dismiss is reviewed de novo. Curtis v. Herb Chambers
I-95, Inc., 458 Mass. 674, 676 (2011). The
Massachusetts Supreme Judicial Court heightened Rule 8
pleading requirements by adopting the federal Rule
12(b) (6) motion to dismiss standard articulated by the
United States Supreme Court in Bell Atl. Corp. v.
Twombly, 550 U.S. 544 (2007). See Iannacchino v. Ford
8
4 51 Mass . 6 2 3 , 6 3 5 - 3 6 ( 2 0 0 8 ) .
10
Motor Co., 451 Mass. 623, 635-36 (2008). Now, a
plaintiff must provide a sufficient factual basis for
her claims, and cannot survive on the mere hope that
discovery might provide such a basis. Id.
'While a complaint attacked by a ... motion to
dismiss does need not detailed factual
allegations _a plaintiff's obligation to
provide the 'grounds' of his 'entitle[ment]
to relief requires more than mere labels and
conclusions ... Factual allegations must be
enough to raise a right to relief above the
speculative level _ [based] on the
assumption that all the allegations in the
complaint are true (even if doubtful in fact
What is required at the pleading stage
are factual 'allegations plausible
suggesting (not merely consistent with) ' an
entitlement to relief, in order to 'reflect[
] the threshold requirement of
[Fed.R.Civ.P.] 8(a) (2) that the 'plain
statement' possess enough heft to 'sho[w]
that the pleader is entitled to relief.'
Id. "The plausibility standard is not akin to a
'probability requirement,' but it asks for more than a
sheer possibility that a defendant has acted
unlawfully. Where a complaint pleads facts that are
'merely consistent with' a defendant's liability, it
stops short of the line between possibility and
plausibility of 'entitlement to relief.'" Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1953 (U.S. 2009). Rule 8 now
has teeth, and the Galiastros' have not satisfied
their burden.
11
The Galiastros contend that their Complaint
should not have been dismissed because they did not
have a chance to conduct discovery. The Galiastros'
argument misses the mark. A party only "unlocks" the
door to discovery by showing a plausible entitlement
to relief. See Iqbal, 129 S. Ct. at 1950 ("Rule 8 _
does not unlock the doors of discovery for a plaintiff
armed with nothing more than conclusions"). This had
been the rule in Massachusetts even before
Ianacchinno. See E.A. Miller, Inc. v. S. Shore Bank,
4 OS Mass. 95, 100 ( 1989) (holding litigants must make
a threshold showing that there is factual and legal
basis to support their claim before being entitled to
discovery); Kramer v. Zoning Bd. of Appeals of
Somerville, 65 Mass. App. Ct. 186, 196 at n.10 (2005)
(validating trial court decision to not allow
discovery before motion to dismiss) . Since the
Galiastros were unable to clear the modest hurdle of
pleading a plausible entitlement to relief, they were
not entitled to discovery.
12
II. MERS IS CONTRACTUALLY AND STATUTORILY AUTHORIZED
TO FORECLOSE WHERE IT IS THE MORTGAGEE AND
EXPRESSLY GRANTED THE POWER OF SALE IN THE
MORTGAGE.
MERS is contractually authorized to foreclose
because it is the "mortgagee" and the Galiastros
expressly granted MERS the statutory power of sale.
MERS is statutorily authorized to foreclose under
Massachusetts' non-judicial foreclosure statute, G.L.
c. 244, § 14.
A. The Galiastros Expressly Granted MERS
Authority to Foreclose in the Mortgage.
The Galiastros executed and granted a Mortgage to
MERS. The Mortgage designates MERS as the "mortgagee
under [the] Security Instrument." See Mortgage, Page
1 (App. 45) . In that capacity, MERS acts " ... solely as
nominee for Lender and Lender's successor's and
assigns." Id. (App. 45). In addition to making MERS
the mortgagee, the Galiastros expressly granted MERS
the statutory "power of sale" and the "right to
foreclose and sell the property." See Mortgage, Page
3 (App. 47). The statutory power of sale is set forth
in G.L. c. 183, § 21 and is incorporated by reference
into the Mortgage. It authorizes the mortgagee "or
his executors, administrators, successors, or assigns ...
13
to sell the mortgaged premises" after default.
Consistent therewith, Massachusetts' non-judicial
foreclosure statute, G.L. c. 244, § 14, authorizes the
"mortgagee or ... a person authorized by the power of
s a l e ~   to foreclose. Section 14 provides:
The mortgagee or person having his estate in
the land mortgaged, or a person authorized
by the power of sale, or the attorney duly
authorized by a writing under seal, or the
legal guardian or conservator of such
mortgagee or person acting in the name of
such mortgagee or person, may, upon breach
of condition and without action, do all the
acts authorized or required by the power ...
G.L. c. 244, § 14. {emphasis added). Since the
foreclosure statute permits the "mortgagee" and "a
person authorized by the power of sale" to
foreclosure, and MERS is both the mortgagee and has
the power of sale, MERS is authorized to foreclose in
Massachusetts.
B. Massachusetts Courts Have Consistently Ruled
That MERS Can Foreclose.
Since the power to foreclose is statutory and
state-specific, decisions analyzing Massachusetts'
non-judicial foreclosure statute, G.L. c. 244, § 14,
are more persuasive then decisions interpreting other
state laws. The Massachusetts Land Court, the
Massachusetts Superior Court, and Massachusetts
14
federal courts have all ruled that MERS has standing,
and is authorized, to foreclose. See ~   Adamson v.
Mortgage Elec. Registration Sys., Inc., 28 Mass. L.
Rptr. 153, *3 (Mass. Super. Ct. 2011) (denying
preliminary injunction noting "MERS has authority as
mortgagee under the Mortgage to foreclose on the
Property and the Mortgage specifically grants MERS the
power to foreclose"); Lyons v. Mortgage Elect.
Registration Sys., Inc., 2011 WL 61186 (Mass. Land.
Ct. Jan 4, 2011) (ruling MERS had authority, as
mortgagee with the express power of sale, to foreclose
under Massachusetts law); In re Huggins, 357 B.R. 180,
182 (Bankr. D. Mass. 2006) (granting relief from stay
to foreclosure after analyzing MERS' authority in
mortgage under Massachusetts foreclosure statute) .
Massachusetts courts have also validated MERS
authority to assign mortgages. See In re Marron, 2011
Bankr. LEXIS 2487 (Bankr. D. Mass. June 29, 2011) ("In
Massachusetts ~ courts have generally held that MERS
may both foreclose and assign mortgages held in its
name."); Kiah v. Aurora Loan Servs., LLC, 2010 U.S.
Dist. LEXIS 121252 (D. Mass. Nov. 16, 2010)
(validating MERS assignment noting "MERS had the power
to act as the agent of any valid note holder under the
15
terms of the mortgage documents."); In re Lopez, 446
B.R. 12, 19-20 (Bankr. D. Mass. February 9, 2011)
(allowing motion for relief from stay, finding MERS,
as nominee for lender and lender's successor's and
assigns, has authority to assign mortgage).
In Lyons, plaintiff obtained a mortgage loan and
executed a promissory note in favor of the lender.
Like the Galiastros, Lyons granted a mortgage naming
MERS as the mortgagee "as nominee for the Lender and
the Lender's successor and assigns." Id. at 2.
Lyons' also granted MERS the statutory "power of
sale." Id. Lyons filed a lawsuit challenging MERS'
power and authority to foreclose. On the defendant's
motion to dismiss, the Land Court ruled that there was
"no viable basis for Plaintiffs' claim that the
foreclosure sale of the Property should be invalidated
because MERS foreclosed on the property as nominee for
[lender]." Id. The Court specifically noted that
"the mortgage itself specifically names MERS (as
nominee for the Lender) as the 'mortgagee,' and
expressly grants the power of sale to MERS as
nominee." Id.
Likewise, in In re Huggins, 357 B.R. 180, 182
(Bankr. D. Mass. 2006), the Bankruptcy Court for the
16
District of Massachusetts considered a virtually
identical mortgage provision. There, MERS brought a
motion for relief from the automatic stay to foreclose
on the debtor's residence. Id. at 183. The mortgage
contained the provision that "MERS is a separate
corporation that is acting solely as nominee for [the
lender] and [the lender's] successors and assigns.
MERS is the mortgagee under this Security Instrument.n
Id. The debtor argued that MERS lacked standing to
foreclose because it did not have a property or
ownership interest in the rights of the lender, and as
such, was not the real party in interest. Id. In
holding that MERS had standing, the court explained
that "a nominee is generally understood as a person
designated to act in place of another.n Id. (citing
Black's Law Dictionary (8th ed. 2004)). Since MERS was
acting as a nominee and was expressly granted the
"power of salen including the power to "do all acts
authorized by the powern the Court found that it could
pursue foreclosure. Id.
The Galiastros' mortgage is substantively the
same as the mortgages in Lyons or In re Huggins.
Since MERS is the mortgagee and has the power of sale,
it is authorized to foreclose under Massachusetts law.
17
C. The Majority of Courts Around the Country
Agree that MERS Can Foreclose.
Since MERS' authority to foreclose derives mostly
from state statute, decisions from Massachusetts
courts based on Massachusetts laws are more persuasive
than other states' decisions. But, the overwhelming
majority of courts in other states have also ruled
that MERS has the legal right and standing to
foreclose. See     Trent v. Mortgage Elec.
Registration Sys., Inc., 288 Fed. Appx. 571, *1 (11th
Cir. 2008); In re MERS Litig. (MDL), Docket No. 09-
2119-JAT (D. Ariz. Jan. 25, 2011); In re Martinez, 444
B.R. 192, (Bankr. D. Kan. Feb. 11, 2011), motion to
reconsider denied; Germon v. BAC Home Loans, L.P.,
2011 U.S. Dist. LEXIS 17084, *5-6 (S. D. Cal. Feb. 22,
2011); Depauw v. Liquidation Prop., Inc., 2011 U.S.
Dist. LEXIS 14465, *2-3 (E.D. Mich. Feb 14, 2011);
Miller v. Skogg, 2011 U.S. Dist. LEXIS 10887, *9 (D.
Nev. Feb 3, 2011); Linkhart v. U.S. Bank Nat'l Assoc.,
2010 U.S. Dist. LEXIS 48281, *6-8 (S. D. Cal. 2010);
Morgera v. Countrywide Home Loans, Inc., 2010 U.S.
Dist. LEXIS 2037, *21-22 (E.D. Cal. 2010); Sawyer v.
Mortgage Elec. Registration Sys., Inc., 2010 WL
996768, at *3 (N.D. Tex. Feb. 1, 2010); Santarose v.
18
i
l
Auruora Bank FSB, 2010 U.S. Dist. LEXIS 78007, *12
(S.D. Tex. 2010); McGinnis v. GMAC Mortgage Corp.,
2010 U.S. Dist. LEXIS 90286, *7-8 (D. Utah 2010);
Pantoja v. Countrywide Horne Loans, Inc., 640 F. Supp.
2d 1177, 1189 (N.D. Cal. 2009); Elias v. HorneEQ Serv.,
2009 U. S. Dist. LEXIS 14907 at *1 (D. Nev. 2009);
Gomez v. Countrywide Bank, FSB, 2009 U.S. Dist. LEXIS
108292, *7-8 (D. Nev. 2009); In re Smith, 366 B.R.
149, 151 (Bankr. D. Col. 2007); Gomes v. Countrywide
Horne Loans, Inc., 121 Cal. Rptr. 3d 819 (Cal. App. 4th
Dist. 2011); Mortgage Elec. Registration Sys., Inc. v.
Azize, 965 So.2d 151, 153 (Fla. Dist. 2d Ct. App.
2007); Jackson v. Mortgage Elec. Registration Sys.,
Inc., 770 N.W. 2d 487, 503 (Minn. 2009); Mortgage
Elec. Registration Sys. v. Ventura, 2006 Conn. Super.
LEXIS 1154, *3-4 (Conn. Super. Ct. 2006). While there
are a few minority cases that rule that MERS cannot
foreclose, those cases are distinguishable because
they are based on different state statutes, involve
different facts, or are simply incorrectly decided.
19
D. The Minority Decisions Cited by the
Galiastros are Distinguishable and/or
Inconsistent with Massachusetts law.
Notwithstanding the wealth of state and federal
case law validating MERS' authority and standing to
foreclose, the Galiastros cite to minority decisions
questioning MERS' authority. See App. Brief P. 31.
These cases are either distinguishable, inconsistent
with Massachusetts law, or both.
The Galiastros cite to the Kansas Supreme Court
decision in Landmark Bank v. Kessler to support their
argument that MERS lacks standing to foreclose. 289
Kan. 528 (Kan. 2009). Kessler, however, was not a
challenge to MERS' authority to foreclose. Kessler
merely decided whether MERS was a "contingently
necessary party" entitled to set aside a default
entered in a mortgage foreclosure action where it was
the nominee for a second priority lender and had not
been given notice of a judicial foreclosure action.
Id. The Kansas Supreme Court specifically stated that
it was not deciding whether MERS was entitled to be a
party to the initial foreclosure action. Id. at 542.
since MERS was acting as a nominee and the record
lender was given actual notice of the suit, the court
refused to treat MERS as a contingently necessary
20
I
"l
l
l
party and refused to remove the default. To be
certain that the holding of Kessler did not go
further, the Kansas Bankruptcy Court, which would be
bound to follow Kansas' highest court, subsequently
found that MERS has standing to foreclose and
specifically discussed why Kessler did not compel a
different result. See In re Martinez, 444 B.R. at
204-05 (distinguishing Kessler) .
The Galiastros also cite to a recent decision by
the Court of Appeals of Michigan in Residential
Funding Co, LLC v. Saurman, 2011 Mich. App. LEXIS 719
(Mich. Ct. App. Apr. 21, 2011). Saurman is a prime
example of why the specific state statute governs
MERS' authority. Michigan's foreclosure statute,
unlike Massachusetts' statute, expressly requires that
the foreclosing party is "the owner of the
indebtedness ... " Id. at *7-8 (citing MCL
600.3204(1) (d)). Since MERS was admittedly not the
"owner of the indebtedness," the court ruled that MERS
could not foreclose under Michigan law.
9
The court,
however, contrasted Michigan's foreclosure statute
9
Defendants do not concede that Saurman was
rightly decided. The dissenting opinion of Justice
Kurtis T. Wilder reflects a more rational, well-
reasoned analysis.
21
with Minnesota's foreclosure statute because Minnesota
had decided the same issue in MERS' favor. Id. (citing
Jackson v. Mortgage Elec. Registration Sys., Inc., 770
N.W.2d 487 (Minn. 2009). The Court noted that
Minnesota's foreclosure statute specifically permitted
foreclosures by a nominee "in the exact position of
MERS." Id. (noting "the Minnesota statute   revolves
around the mortgage, unlike MCL 600.3204(1) (d), which
uses the term indebtedness, which   is a reference to
the note, not the mortgage"). The Massachusetts
statute is more akin to the Minnesota statute (and
different from the Michigan statute) because it
focuses on the mortgage, not the note, and permits
agents and others to foreclose.
The Galiastros also rely on the Supreme Judicial
Court of Maine's decision in Mortgage Elec.
Registration Sys., Inc. v. Saunders, 2010 Me. 79
(2010) holding that MERS lacks standing to judicially
foreclose. In holding that MERS could not foreclose,
the Maine Supreme Court distinguished its judicial
foreclosure scheme from the non-judicial foreclosure
scheme of other states (like Massachusetts) noting
that "in other jurisdictions utilizing non-judicial
foreclosure, MERS has been able to institute
22
foreclosure proceedings based on its designation in
the mortgage as the 'mortgagee of record.'" The court
specifically cites the Massachusetts bankruptcy court
decision In re Huggins as an example of a non-judicial
foreclosure state where MERS may foreclose.
Finally, the Galiastros cite Bellistri v. Ocwen
Loan Serv., 284 S.W.3d 619 {Mo. Ct. App. 2009 ) . In
Bellistri, the Missouri Court of Appeals denied
summary judgment to a mortgagee in a quiet title
action because the assignee of the mortgage was not
the assignee of the note. In reaching its decision,
the court relied on two rules both of which do not
apply in Massachusetts. First, Missouri follows the
rule that the note follows the mortgage. Id. at 623
{"when the holder of the promissory note assigns or
transfers the note, the deed of trust is also
transferred.") Massachusetts does not. See Ibanez,
458 Mass. at 652 ( ... "the assignment of the note does
not carry with it the assignment of the mortgage.")
Second, in Missouri, the note and mortgage are
"inseparable." Id. at 623. In Massachusetts, they
are separable. See Ibanez, at 652-53 {commenting the
holder of the mortgage "holds the mortgage in trust
for the purchaser of the note"). Thus, the facts of
23
Bellistri would yield a different outcome in
Massachusetts.
III. MASSACHUSETTS' NON-JUDICIAL FORECLOSURE STATUTE
DOES NOT REQUIRE THE FORECLOSING PARTY TO HOLD OR
PRODUCE THE NOTE.
Massachusetts is a non-judicial foreclosure
state. See U.S. Bank Nat'l Assoc. v. Ibanez, 458
Mass. 637, 645-46 (2011). A mortgage holder can
foreclose without judicial action by exercise of the
statutory power of sale set forth in G.L. c. 183, § 21
consistent with the procedural requirements of G.L.
c. 244, § 14. Id. Because of the substantial power
inherent in Massachusetts' non-judicial foreclosure
scheme, the law requires strict compliance with the
letter of the non-judicial foreclosure statute. Id.
at 646. Nowhere in either the statutory power of
sale, G.L. c. 183, § 21, or foreclosure under the
power of sale, G.L. c. 244, § 14, is there any
requirement that the foreclosing party hold the note.
Since Massachusetts requires strict compliance with
the letter of the foreclosure statute, and there is
nothing in the letter of the statute requiring the
note, there can be no requirement that a foreclosing
mortgagee hold the note.
24
Massachusetts state and federal courts, until one
recent decision,
10
had been in complete agreement that
Massachusetts does not require the foreclosing party
to hold or produce the note. See Adamson, 28 Mass. L.
Rptr. at *4 ("As mortgagee, MERS was not required to
hold the Note at the time of foreclosure sale.")
Aliberti v. GMAC Mortgage, LLC, 2011 U.S. Dist. LEXIS
45858 (D. Mass. Apr. 28, 2011) ("Plaintiffs
incorrectly assert that the mortgagee must also hold
the note in order to foreclose."); Valerio v. U.S.
Bank, N.A., 716 F. Supp. 2d 124, 128 (D. Mass. 2010)
(noting statute governing statutory power of sale is
addressed to mortgagees rather than note holders);
McKenna v. Wells Fargo Bank, N.A., 2011 U.S. Dist.
LEXIS 28719, *7-8 (D. Mass. Mar. 21, 2011) ("Under
Massachusetts law, the current record mortgagee and
holder of the mortgage is the proper party to
foreclose upon a property. The Massachusetts statute
10
Eaton v. Fed. Natn'l Mortgage Assoc., Docket
No. 11-01382 (Suffolk Sup. Ct. June 17, 2011),
petition for interlocutory appeal pending, (discussed
below at Part III(A-D).
25
'I
governing foreclosures makes no mention of note
holders.") .
11
Any question about who is authorized to foreclose
appeared to be finally decided by the SJC in Ibanez.
Ibanez, 458 Mass. at 651. In Ibanez, the SJC held that
only a valid mortgage holder can foreclose a mortgage
under Massachusetts law. Id. Ibanez rejected the idea
that being the note holder had any bearing on the
right to foreclose. Ibanez, at 652-653 (noting
Massachusetts, unlike other states, does not follow
the mortgage follows the note rule) . This is because
the note and the mortgage are separate instruments
each affording a distinct remedy. See Jeffrey v.
Rosenfeld, 179 Mass. 506, 509 (1901) ("[t]he mortgage
is a separate instrument from the note. At law and in
equity the holder can enforce his remedy upon the
11
California, which also has non-judicial
foreclosure, has also rejected claims that foreclosing
entities must hold the note to foreclose. See Gardner
v. Am. Home Mortgage Serv., Inc., 2010 U.S. Dist.
LEXIS 12068 (E.D. Cal. 2010) ("[C]ontrary to
Plaintiff's assertions, the party initiating the
foreclosure process need not be in possession of the
note"); Quintero Family Trust v. Onewest Bank, F.B.B.,
2010 U.S. Dist. LEXIS 6618, *6 (S.D. Cal. 2010)
("[U]nder California law there is no requirement for
production of the original note to initiate non-
judicial foreclosure proceedings."). Massachusetts,
like California, has no statutory requirement to
produce a note as a prerequisite for foreclosure.
26
L
mortgage independently of or concurrently with that on
the note"). Thus, the mortgage and the note may be
held by different persons. Ibanez, at 652-53; Lamson &
Co., Inc. v. Abrams, 305 Mass. 238, 245 (1940). When
the note and mortgage are held by separate persons,
the holder of the mortgage is deemed to hold the
mortgage in trust for the benefit of the owner of the
note. Ibanez, at 652. "[T]he mortgagee retains legal
title _ with a fiduciary duty to act on behalf of the
owner of the note_" In re Marron, at *11. Therefore,
the mortgage holder may still foreclose when the note
is held separately. It does so for the benefit of the
note holder.
A. The Galiastros' Reliance on Eaton v. Fed
Nat'l Mortgage Assoc. is Misplaced.
In Eaton v. Fed. Nat'l Mortgage Assoc., Docket
No. 11-0138 (Suffolk Sup. Ct. June 17. 2011) the
Suffolk Superior Court (Mcintyre, J.) preliminarily
enjoined the post-foreclosure eviction of a former
borrower because, although the foreclosing entity was
the record holder of the mortgage, it was not the
27
~   ~ ...................... .
holder of the underlying promissory note.
12
Id. at 9.
Eaton obtained a mortgage loan from Bank United and
signed a promissory note to Bank united. Id. at 1.
The loan was secured by a mortgage granted by
Plaintiff to "Mortgage Electronic Registration
Systems, Inc. ("MERS") acting as nominee for Bank
United." Id.
13
MERS assigned the mortgage to Green
Tree Servicing, LLC. Green Tree was the highest
bidder at its duly noticed foreclosure auction. Id.
at 2. Green Tree assigned its winning bid to Federal
National Mortgage Association (FNMA) who brought an
eviction action in the Boston Housing Court. Id.
Eaton filed a separate case and injunction motion in
Superior Court to enjoin the housing court eviction.
Green Tree provided the Superior Court with a copy of
the promissory note that had been indorsed in blank,
but stipulated that Green Tree "did not hold the Note
when the foreclosure occurred." Id.
The Eaton court granted the injunction on the
unprecedented legal theory that Massachusetts' common
12
,Eaton is now pending before a full panel of
the Appeals Court. See Appeals Court Docket No. 2011-
J-0311.
13
The Court does not reference the standard
MERS language that MERS acts "solely as nominee for
the Lender and the Lender's successors and assigns."
28
L
law requires a foreclosing mortgagee to not only be a
valid assignee of the mortgage, but also be the holder
of the promissory note. Id. at 3-4. The Eaton Court,
like the Galiastros, relied on dated decisions from
the 1800s and early 1900s. Based on these decisions,
the Eaton court interpreted the term "mortgagee" in
G.L. c. 244, § 14 to include and mean "note holder."
B. Eaton Does Not Analyze the Statutory Power
of Sale And the Alternative Statutory
Authorities to Foreclose Provided in G.L.
c. 244, § 14.
While Eaton focuses on the term "mortgagee" in
G.L. c. 244, § 14, it ignores section 14's alternative
foreclosure authority. Section 14 also allows a
person authorized by the power of sale to foreclose.
Here, the Galiastros granted MERS the statutory
power of sale. Thus, regardless of whether Eaton
correctly interpreted the term "mortgagee" to include
a requirement that a foreclosing party also be the
holder of note, section 14 specifically provides that
the person granted the statutory power of sale may
foreclose. There is no possible interpretation of the
phrase "a person authorized by the power of sale" that
could conceivably include a requirement that the
person with the power of sale must also hold the note.
29
----------................. ..
Therefore, MERS, which has the power of sale, is
expressly authorized by statute and the parties'
contract to foreclose.
The "power of sale" language in G.L. c. 244, § 14
is also important in highlighting another problem in
Eaton's reasoning. The authority to foreclose under
the power of sale was not included in the version of
the foreclosure statute that Eaton uses as support for
its interpretation of the term "mortgagee." In Eaton,
the court rejected the defendant's argument that the
current non-judicial foreclosure statute, G.L. c. 244,
§ 14, supplanted any common law rule that there must
be unity of the note and mortgage at the time of
foreclosure. The Court cited and quoted St. 1857,
c. 229, § 1 (Add. 4), a predecessor foreclosure
statute similar to, but fundamentally different than,
G.L. c. 244, § 14. Eaton reasoned that since dated
common law cases required unity of the note and
mortgage to foreclose (a point which is itself not
accurate) and these cases were decided after the
enactment of the statute, the legislature must have
intended that the word "mortgagee" to mean that the
foreclosing party also had to be the note holder.
30
The 1857 version of the statute, however, did not
give the person granted the power of sale the specific
authority to foreclose. The statutes are materially
different:
St. 1857, c. 229, § 1 G • L • c . 2 4 4 I § 14
In all cases, in which a The mortgagee or person
power of sale is contained having his estate in the
in a mortgage deed of real land mortgaged, or a
property, the mortgagee, person authorized by the
or any person having his power of sale, or the
estate therein, or in or attorney duly authorized
by such power authorized by a writing under seal,
to act in the premises, or the legal guardian or
may ... conservator of such
mortgagee or person acting
the name of such mortgagee
or person, may ...
Unlike the 1857 statute, several different persons are
given the statutory power to foreclose under the
current foreclosure statute including those that may
or may not be the note holder. The current statute
explicitly contemplates persons other than the note
holder because if "a person authorized by the power of
sale" was always going to be the mortgagee (or the
note holder) then the statute would be redundant and
the power of sale provision would be meaningless.
There would be no reason to twice give the same person
31
, I
the power to foreclose unless someone other than the
mortgagee or note holder could foreclose.
14
c. G.L. c. 244 is Unambiguous and Eaton Should
Not Have Gone Beyond the Literal Meaning.
The term "mortgagee" is not ambiguous and there
is no basis to go beyond the literal meaning of the
statute to create additional foreclosure requirements.
"It is a fundamental canon of statutory construction
that 'statutory language should be given effect
consistent with its plain meaning and in light of the
aim of the Legislature unless to do so would achieve
an illogical result.'" Boston Hous. Auth. v. National
Conference of Firemen and Oilers, Local 3, 458 Mass.
155, 162 (Mass. 2010) (quoting Sullivan v. Brookline,
435 Mass. 353, 360 (2001). "Words are to be accorded
their ordinary meaning and approved usage [and ... w] here,
as here, the language of a statute is unambiguous, it
is conclusive as to the intent of the Legislature."
14
In addition, the predecessor statute was a
part of a judicial foreclosure process. See St. 1857,
c. 229, § 1 (stating, "In all cases_") The current
statute is a non-judicial process. See G.L. c. 244,
§ 14 (removing "In all cases ... " and adding " ... and
without action" to statute) . If there was a
requirement that the foreclosing party be the note
holder then there would have to be a procedure in
place explaining when and where the note must be
produced. There is none.
32
l I
Id. The Court does "- not look to extrinsic sources to
vary the meaning of an unambiguous statute unless a
literal construction would yield an absurd or
unworkable result. Id. (citing Dept. of Comm. Affairs
v. Mass. State Cell. Bldg. Auth., 378 Mass. 418, 427
(1979).
Notwithstanding that the term "mortgagee" is
clearly defined as "one to whom property is
mortgaged ... " (see Black's Law Dictionary, 9th ed. 2009),
Eaton went beyond the plain meaning of the statute to
add requirements that are inconsistent with the
statutory scheme. G.L. c. 244, § 14 deals with the
power of sale contained in mortgages granted by G.L.
c. 183, § 21. Both statutes effect the transfer of
property interest through the power of sale. Neither
includes any language regarding the note or underlying
debt obligation; neither even references G.L. c. 106,
§ 3-101 et   (the statute governing negotiable
instruments); and neither has any requirement that a
foreclosing party possess the note.
33
D. The So-Called Common Law cases Cited in
Eaton Pre-Date the Modern Foreclosure
Statute and Do Not support the Supposed
Requirement that There Be Unity of the Note
and Mortgage.
In Eaton, the court acknowledges that the note
and mortgage may be held by separate persons, but then
says that "as this court reads the common law, the two
instruments must be re-united in order to effectively
foreclose the mortgagor's right to redeem the
property." Eaton, at 4. The case law cited for that
authority is not compelling. The Superior Court cites
Wolcott v. Winchester, 81 Mass. 461, 465 (1860) and
Crowley v. Adams, 226 Mass. 582, 585 (1917). At best,
however, these cases are dicta. Neither case involved
a borrower's challenge to foreclose.
Wolcott involved a question of priority between
two people each claiming to be an assignee of the same
mortgage. As between the two claimants, the Court
found in favor of the one that held both the
underlying debt and the mortgage (as opposed to the
one that held just an assignment of the mortgage)
because the other should have known that the debt was
essential to his interest. The Court held only that
the party that held both the debt and mortgage had a
superior property interest. The Court distinguishes
34
i
l
Wolcott from a situation where a party holds the debt
and seeks to foreclose without legal title in the
mortgage. Id. at 465-66.
Crowley involved a person attempting to foreclose
on a mortgage where the underlying debt had already
been paid off. The Court merely held that where the
debt has been satisfied, there is no right to
foreclose. Id. at 244. Neither Crowley or Wolcott
support the broad conclusion urged by the Galiastros
or stated in Eaton.
IV. THE GALIASTROS' TORT CLAIMS FAIL BECAUSE THERE
HAS NOT BEEN A FORECLOSURE SALE AND, THEREFORE,
THEY HAVE NO DAMAGES.
The Superior Court correctly dismissed the
Galiastros' conspiracy, fraud, and other tort-based
claims because the Galiastros have not suffered any
harm or damages. In order to state a tort claim, a
party must have and allege damages. See Barrett
Assoc., Inc. v. Aronson, 346 Mass. 150, 152-53 (1963)
(listing damages as element of fraud claim); McAuslan
Nutting, Inc. v. Futurity Thread Co., 254 Mass. 216,
218 (1926) (stating conspiracy claim must allege
35
damages) .
15
Here, the alleged foreclosure sale was not
completed. Therefore, the Galiastros did not sustain
any harm and the Superior Court correctly dismissed
the tort claims.
V. THE GALIASTROS WAIVED ANY APPEAL OF THE DISMISSAL
OF THEIR 93A CLAIMS AGAINST MERS.
The Galiastros waived any appeal of the dismissal
of their Chapter 93A claim because they did not argue
it in their brief. In fact, G.L. c. 93A is not even
cited in their brief. The Massachusetts Rules of
Appellate Procedure make clear that a party wishing to
bring a claim before the court must address it in the
brief. See Haser v. Wright, 65 Mass. App. Ct. 903,
904 (2 005) (citing Mass. R. A. P. 16 (a) ( 4) , as amended,
"the appellate court need not pass upon questions or
issues not argued in the brief"). Because the
Galiastros do not make any argument regarding the 93A
claim, they have waived their appeal of the dismissal
of that claim.
15
See also, Haley v. Elegen Home Lending LP,
2010 WL 1006664, *1-2 (D. Nev. Mar. 16, 2010) ("a claim
for wrongful foreclosure does not arrive until the
power of sale is exercised").
36
I
VI. THE GALIASTROS' 93A CLAIM FAILS BECAUSE MERS WAS
NEVER ENJOINED BY THE FREMONT INJUNCTION AND THE
LOAN DOES NOT MEET THE INJUNCTION CRITERIA.
Even assuming arguendo that the Galiastros did
not waive the 93A claim dismissal, they still failed
to plead facts sufficient to support a claim based on
the Fremont injunction because MERS was not subject to
the injunction. Further, the Galiastros' loan does
not meet two of the four factors required in Fremont.
Thus, the Galiastros' insinuation that MERS'
foreclosure was designed to "circumvent" the Fremont
injunction is wholly speculative and misplaced. The
Superior Court correctly dismissed the 93A claim
because neither MERS nor this Loan were subject to the
injunct ion.
16
A. The Fremont Injunction.
In Commonwealth v. Fremont Inv. & Loan, the
Massachusetts Attorney General brought a consumer
protection action under G.L. c. 93A against Fremont
Investment & Loan, the originator of various mortgage
loans, claiming that its loans were unfair. The
16
While it is outside the four corners of the
complaint, and, therefore, beyond the scope of a
motion to dismiss, MERS actually gave Attorney General
notice (even though it was not required to) and she
issued a "no objection" letter.
37
Superior Court issued a preliminary injunction
prohibiting Fremont from foreclosing on mortgages with
the following four characteristics without first
getting Attorney General approval:
(1) the loans were adjustable rate
mortgages with an introductory rate
period of three years or less;
(2) the loans featured an introductory rate
for the initial period that was at
least three percent below the fully
indexed rate;
(3) the loans were made to borrowers for
whom the debt-to-income ratio would
have exceeded fifty percent had Fremont
measured the borrower's debt by the
monthly payments that would be due at
the fully indexed rate rather than
under the introductory rate; and
(4) the loan-to-value ratio was one hundred
percent, or the loan featured a
substantial prepayment penalty (defined
by the judge as greater than the
"conventional prepayment penalty"
defined in G.L. c. 183C, § 2) or a
prepayment penalty that extended beyond
the introductory rate period.
On appeal, the SJC affirmed the injunction noting
that loans with all four of the characteristics are
unfair because a borrower could not reasonably be
expected to repay the loan or obtain refinancing.
Fremont, 452 Mass. 733, 743 (2008). Neither the
Superior Court's Order nor the SJC's holding meant (as
the Galiastros contend) that all Fremont originated
loans are presumptively unfair. Indeed, the SJC noted
38
that of the 14,578 loans issued by Fremont between
January 2004 and March 2007, only 50-60% of those
loans were sub-prime. Id. at 736. For loans that did
not have all four characteristics, Fremont only had to
give the Attorney General notice of intent to
foreclose. Id. at 740.
At the time of the injunction, Fremont only held
290 of the loans that it originated. It serviced
another 2,200. Id. at 736, n.6. In other words,
there were many loans originated by Fremont that were
not subject to the injunction because they had already
been transferred or assigned to another entity or they
had been discharged. When the Attorney General
learned that Fremont intended to sell its remaining
loans, she filed an emergency motion to modify the
injunction. On March 31, 2008, the Court revised the
injunction to prohibit Fremont from selling its loans
unless the purchaser agreed to be bound by the
injunction. See Commonwealth v. Fremont Inv. & Loan,
24 Mass. L. Rep. 12, 2008 Mass. Super. LEXIS 132, *17
(hereinafter "Fremont II") (Mass. Super. Ct. March 31,
2008) (modifying injunction to prevent Fremont from
transferring, assigning, or selling residential
mortgage unless assignees agree to be bound by
39
1 i
injunction) . The injunction had no retroactive
effect.
B. MERS Did Not Violate the Fremont Injunction
Because it Was Not Enjoined.
MERS was not a party to the Fremont case and it
was not enjoined or subject to the Fremont decision.
The Fremont injunction has absolutely no effect
whatsoever on mortgages transferred by Fremont before
the date of the injunction. As the Galiastros allege,
Fremont transferred the loan shortly after the
origination in 2006. (Comp. ,, 6-8). Since the
transfer was well before the 2008 injunction, neither
MERS nor the assignee of the loan could have been
enjoined.
17
Therefore, MERS could not have violated
the injunction by beginning the foreclosure process.
17
Even the Attorney General recognized this
problem. This is the reason that she moved to modify
the injunction to prevent Fremont from escaping the
injunction by selling its remaining loans to an entity
that would not be covered by the injunction. See
Fremont II, at *2-3. The Superior Court commented,
"[w]ithout the requested modification, Fremont could
simply sell those loans ... to third parties as if the
preliminary injunction did not exist_" Id. at *3.
40
c. The Galiastros' Loan Does Not Satisfy
Essential Fremont Factors.
Not only was MERS not enjoined, but the
Galiastros' Loan does not even meet the first two
required Fremont elements because it is not an
adjustable rate mortgage. The Loan had a fixed, never-
adjusting, interest rate of just 8.100%. Therefore,
the Galiastros' Loan was not presumptively unfair.
  e e ~ ~ Fazio v. Bank of Am., NA, 27 Mass. L. Rep.
81 (Mass. Super. Ct. May 13, 2010) (denying
preliminary injunction because Plaintiffs "failed to
show that their mortgage satisfied all four of the
criterian); Silva v. OneWest Bank, FSB, 2010 Mass.
Super. LEXIS 106, *9-10 (Mass. Super. Ct. May 19,
2010) (denying preliminary injunction because loan did
not have defined adjustable rate feature) ; see also
Latham v. Homecomings Fin., LLC, 2009 Mass. Super.
LEXIS 406, *16 (Mass. Super. 199) (granting summary
judgment where plaintiff's loan did not meet all four
Fremont criteria). Thus, even the Attorney General
would not have objected to the foreclosure.
Therefore, the Superior Court correctly dismissed any
claims based on the Fremont injunction.
41
VII. THE SUPERIOR COURT CORRECTLY DISMISSED THE
CONSPIRACY CLAIM BECAUSE THERE WAS NO UNDERLYING
WRONG.
Since the Galiastros did not state a valid
underlying cause of action, the claim for conspiracy
must fail as well. A plaintiff cannot prevail on a
conspiracy claim if there is no underlying tort. See
Iannacchino, 451 Mass. at 628 (noting dismissal of
conspiracy claim because underlying 93A claim failed) ;
Herbal v. Cannizzaro, 26 Mass. L. Rptr. 388, *6 (Mass.
Super. Ct. 2009) (quoting "it is well settled that
'(n)o action in tort lies for conspiracy to do
something unless the acts actually done, if done by
one person, would constitute a tort'"). Since the
Galiastros have not stated a valid underlying tort
claim against MERS, their conspiracy claim must also
fail.
VIII. THE SUPERIOR COURT CORRECTLY DISMISSED THE
CONSPIRACY CLAIM BECAUSE THE GALIASTROS FAILED
TO PLEAD SUFFICIENT FACTS TO SUPPORT THE CLAIM.
The Galiastros have not plead sufficient facts to
show a plausible entitlement to relief on their
conspiracy claim because it is based on unsupported
conclusions and a barebones recitation of elements
without alleging any actual facts. Reduced to its
42
______________ ........
core, the Galiastros allege; 1) that Harmon was legal
counsel to MERS; 2) that it prepared MERS' foreclosure
documents; and 3) that MERS could not foreclose on its
own. See Compl. ,, 49, 52, 74-76 (factual conspiracy
allegations). From this, the Galiastros conclude that
Harmon intentionally foreclosed when it was not
authorized to do so and that it intentionally evaded
the Fremont injunction. They conclude that this
"infers" an agreement between MERS and Harmon to
commit a wrongful act. Compl. , 76.
Essentially, the Galiastros argue that any time a
party is represented' by counsel and there is a
challenge to the validity of their legal conduct, a
conspiracy claim lies against the client and counsel.
Massachusetts law, however, does not recognize an
attorney-client conspiracy when an attorney acts only
to represent a client in a legal proceeding. See
Bliss Valley Prop., LLC v. Eliopulos, 2005 Mass.
Super. LEXIS 291, *16 (2005) (dismissing conspiracy
claim against attorneys noting " ... representing their
clients in various legal proceedings _ fell well
outside the conspiracy mold."). Here, Harmon acted
solely as counsel to MERS. Therefore, it cannot be a
co-conspirator.
43
Regardless of whether a client and attorney can
ever be co-conspirators, the Galiastros' civil
conspiracy claim still fails. Massachusetts
recognizes two different types of civil conspiracy.
Kurker v. Hill, 44 Mass. App. Ct. 184, 188-89 (1998).
First, there is a "very limited cause of action" for a
coercive type of civil conspiracy. Aetna Cas. Sur. Co.
v. P & B Autobody, 43 F.3d 1546, 1563 (1st Cir. 1994).
Second, there is a common law joint liability
conspiracy. Id. at 1564. This form of civil
conspiracy requires "a common design or an agreement,
although not necessarily express, between two or more
persons to do a wrongful act and, second, proof of
some tortious act in furtherance of the agreement."
Id. The Superior Court correctly rejected both types
of conspiracy.
A. The Galiastros Did Not State a Claim For
Coercive Civil Conspiracy.
To state a claim for coercive civil conspiracy,
the Galiastros must plead facts that establish "that
[all] defendants, acting in unison, had some peculiar
power of coercion over the plaintiff[s] that they
would not have had if they had been acting
independently." Jurgens v. Abraham 616 F. Supp. 1381,
44
1386 (D. Mass. 1985). The most common instance of a
coercive civil conspiracy is found "in the combined
action of groups of employees or employers, where
through the power of combination pressure is created
and results brought about different in kind from
anything that could have been accomplished by separate
individuals." Fleming v. Dane, 304 Mass. 46, 50
(1939). Outside of this and related scenarios,
instances of coercive conspiracy are rare and should
be added to with caution. Id.
The Galiastros' coercive conspiracy claim fails
because the Galiastros have not alleged any facts to
show that MERS and Harmon had any peculiar combined
power of coercion. To the contrary, MERS simply hired
local counsel to conduct a foreclosure. The
Galiastros did not allege any facts showing any out of
the ordinary power inherent in the MERS-Harmon
relationship nor did they allege that MERS "ganged up"
or used strength in numbers to coerce the Galiastros
to do anything. Therefore, the Superior Court
correctly rejected the Galiastros' coercive conspiracy
theory.
45
B. The Galiastros Cannot State a Claim for
Concerted Action Civil Conspiracy.
In order to state a "concerted action"
conspiracy, the Galiastros must allege that MERS
participated in concerted action and agreed with one
or more persons to do a wrongful act, and that MERS
committed some tortious act in furtherance of the
agreement. See Aetna Casualty Surety Co., 43 F.3d at
1564. The Superior Court correctly rejected this
theory because there was no "wrongful act."
In addition, the Galiastros have not alleged any
facts supporting a claimed agreement between Harmon
and MERS to do anything wrongful. The Galiastros also
do not allege that MERS committed any independent
tortious act in furtherance of any allege concerted
action. Harmon simply acted as legal counsel to MERS
in conducting a foreclosure following an undisputed
default. Not only was foreclosure not wrongful, but
it was the natural and proximate result of payment
default. In addition, it was conducted in the name of
the mortgagee. The Superior Court correctly dismissed
the conspiracy claim because the Galiastros failed to
meet their pleading burden.
46
CONCLUSION
For the reasons set forth herein, this Court
should affirm the Superior Court's dismissal of
Galiastros' Complaint against MERS because the
Galiastros have not plead facts demonstrating a
plausible entitlement to relief. MERS is authorized
to foreclose by the terms of the mortgage and the
Massachusetts foreclosure statute. MERS did not, and
could not, have violated the Fremont injunction
because it was not enjoined and the loan did not
satisfy the four facts. Therefore, this Court should
the Superior Court's dismissal of MERS.
Jeffrey S. Patterson (BBO # 671383)
jeffrey.patterson@nelsonmullins.com
David E. Fialkow (BBO # 666192)
david.fialkow@nelsonmullins.com
Nelson Mullins Riley & Scarborough LLP
One Post Office Square, 30th Floor
Boston, Massachusetts 02109
(617) 573-4700
( 617) 57 3-4 710 (fax)
Dated: September 1, 2011
47
ADDENDUM TABLE OF CONTENTS
M. G. L . c . 18 3 I § 21 ............................. Add . 1
M.G.L. c. 244, § 14 ............................. Add. 2
s t . 18 57 I c . 2 2 9 I § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . Add . 4
Commonwealth v. Fremont Inv. & Loan,
24 Mass. L. Rep. 12 (Mass. Sup. Ct.
March 31, 2008) ............................ Add. 5
Commonwealth v. Fremont,
23 Mass. L. Rptr. 567 (Mass. Super. Ct.
Feb . 2 6 , 2 0 0 8 ) ............................ Add . 11
Lyons v. Mortgage Elect. Registration Sys., Inc.,
2011 WL 61186 (Mass. Land. Ct.
Jan 4, 2011) .............................. Add. 28
Eaton v. Fed. Natn'l Mortgage Assoc.,
Docket No. 11-01382 (Suffolk Sup. Ct.
June 1 7 , 2 0 11) ............................ Add . 3 1
ANNOTATED LAWS OF MASSACHUSETTS
Copyright© 2011 Matthew Bender & Company, Inc.,
a member of the LexisNexis Group
All rights reserved
***Current through Act 92 of the 2011 Legislative Session***
PART II REAL AND PERSONAL PROPERTY AND DOMESTIC RELA TJONS
TITLE I TITLE TO REAL PROPERTY
Chapter 183 Alienation ofLand
GO TO MASSACHUSETTS CODE ARCHIVE DIRECTORY
ALMGL ch. 183, § 21 (2011)
§ 21. Statutory Forms- Statutory Power of Sale in Mortgage.
Page 1
The following "power" shall be known as the "Statutory Power of Sale", and may be incorporated in any mortgage by
reference:
(POWER)
But upon any default in the performance or observance of the foregoing or other condition, the mortgagee or his
executors, administrators, successors or assigns may sell the mortgaged premises or such portion thereof as may remain
subject to the mortgage in case of any partial release thereof, either as a whole or in parcels, together with all
improvements that may be thereon, by public auction on or near the premises then subject to the mortgage, or, if more
than one parcel is then subject thereto, on or near one of said parcels, or at such place as may be designated for that
purpose in the mortgage, first complying with the terms of the mortgage and with the statutes relating to the foreclosure
of mortgages by the exercise of a power of sale, and may convey the same by proper deed or deeds to the purchaser or
purchasers absolutely and in fee simple; and such sale shall forever bar the mortgagor and all persons claiming under
him from all right and interest in the mortgaged premises, whether at law or in equity.
Add. 1
ANNOTATED LAWS OF MASSACHUSETTS
Copyright© 2011 Matthew Bender & Company, Inc.,
a member of the LexisNexis Group
All rights reserved
***Current through Act 92 of the 2011 Legislative Session***
PART III COURTS, JUDICIAL OFFICERS AND PROCEEDINGS IN CIVIL CASES
TITLE III REMEDIES RELATING TO REAL PROPERTY
Chapter 244 Foreclosure and Redemption of Mortgages
GO TO MASSACHUSETTS CODE ARCHIVE DIRECTORY
ALMGL ch. 244, § 14 (2011)
§ 14. Procedure in Foreclosure Under Power of Sale; Form and Publication of Notice.
Page I
The mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the
attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or person
acting in the name of such mortgagee or person, may, upon breach of condition and without action, do all the acts
authorized or required by the power; but no sale under such power shall be effectual to foreclose a mortgage, unless,
previous to such sale, notice thereof has been published once in each of three successive weeks, the first publication to
be not less than twenty-one days before the day of sale, in a newspaper, if any, published in the town where the land lies
or in a newspaper with general circulation in the town where the land lies and notice thereof has been sent by registered
mail to the owner or owners of record of the equity of redemption as of thirty days prior to the date of sale, said notice
to be mailed at least fourteen days prior to the date of sale to said owner or owners to the address set forth in section
sixty-one of chapter one hundred and eighty-five, if the land is then registered or, in the case of unregistered land, to the
last address of the owner or owners of the equity of redemption appearing on the records of the holder of the mortgage,
if any, or if none, to the address of the owner or owners as given on his deed or on the petition for probate by which he
acquired title, if any, or if in either case no address appears, then to the address to which the tax collector last sent the
tax bill for the mortgaged premises to be sold, or if no tax bill has been sent for the last preceding three years, then to
the address of any of the parcels of property in the name of said owner of record which are to be sold under the power of
sale and unless a copy of said notice of sale has been sent by registered mail to all persons of record as of thirty days
prior to the date of sale holding an interest in the property junior to the mortgage being foreclosed, said notice to be
mailed at least fourteen days prior to the date of sale to each such person at the address of such person set forth in any
document evidencing the interest or to the last address of such person known to the mortgagee. Any person of record as
of thirty days prior to the date of sale holding an interest in the property junior to the mortgage being foreclosed may
waive at any time, whether prior or subsequent to the date of sale, the right to receive notice by mail to such person
under this section and such waiver shall be deemed to constitute compliance with such notice requirement for all
purposes. If no newspaper is published in such town, or if there is no newspaper with general circulation in the town
where the land lies, notice may be published in a newspaper published in the county where the land lies, and this
provision shall be implied in every power of sale mortgage in which it is not expressly set forth. A newspaper which by
its title page purports to be printed or published in such town, city or county, and having a circulation therein, shall be
sufficient for the purpose.
The following form of foreclosure notice may be used and may be altered as circumstances require; but nothing
herein shall be construed to prevent the use of other forms.
Click here to view form
Add.2
ALM GL ch. 244, § 14
Page 2
A notice of sale in the above fonn, published in accordance with the power in the mortgage and with this chapter,
together with such other or further notice, if any, as is required by the mortgage, shall be a sufficient notice of the sale;
and the premises shall be deemed to have been sold, and the deed thereunder shall convey the premises, subject to and
with the benefit of all restrictions, easements, improvements, outstanding tax titles, municipal or other public taxes,
assessments, liens or claims in the nature of liens, and existing encumbrances of record created prior to the mortgage,
whether or not reference to such restrictions, easements, improvements, liens or encumbrances is made in the deed; but
no purchaser at the sale shall be bound to complete the purchase if there are encumbrances, other than those named in
the mortgage and included in the notice of sale, which are not stated at the sale and included in the auctioneer's contract
with the purchaser.
Add.3
564
Cltap.22D
)lortsagce m:Ly,
llpfJU ltrcnct1 of
tbto C'OIJI1ition,
give uot..ica, &c.
1857.-CHAPTERS 229, 230.
of the acts of the rear hundred aud thirtv-eight,
entitled, "1\.n Act ·rolatin; to Divorce" is hereby repealed!
provided, that this act sbail not alfect a.;JY case or proceedings
now pending. [Approved lVlay 21}, 1857 .]
-----·-·-·--------·----··---......... _ .......... ····-···-·-·-..··--
.A:-. AcT t.o peJ·[If'tualt>. the E'·id,•nct< of Ti1.\c to Tl.t>al Property obtained
under l\Iortgagr containiug a Pow(H" of Salr.
Be it t'nclcte<l,   a.sfol/ou:s:
8r:cno:-; 1. In all cnses, in which u. power of sale is
conta.incd in a mortgage deed of real property, the mortgagee,
ot· n.uy person lwYing his est.·1tc iherein, or in or by such
power rwthorized to act in the premises. may, upon n. breach
of the euuditiou f.hcreof, give such uolices n.nd do all such
acts as are authorizrxl or required by such power: aud. he
shull, ·withiu t.ldrty dnys after selling snch real property, in
of such pni\Ter, file a copy of the notice and his
aflidavit, in the ollice of the registry of deeds in the county
m counties whe1·e such real property is sjtnated; which aili-
duvit shall fortlt his acts in the premises fully and
pu.rt.icula.J"!y. Such alliuavit and copy of notice shall be
recorded h.v the wit.h a note of reference thereto, on
the margi11 of the rc<.:ord of the mortgage deed. And if it
appear hy HIGh that ho has in all re.••pccts
complied with the requisitions of such power of sale; in
relalion to all thiugs to be done by him before selling such
rcnl pmporty, and has sold the same in the nHllllWr required
by mcl1 power or sale, the affidavit, or a duly certified office •·· ·
cupy of tlte record thereof, sha.ll be admitted evidence
that the pow·er of sn.lc was dnly executed.
s.1. nmy h:.r .u SECTION 2. H the mortgage deed >Yas executed lJy a man
duiw or ..tower. h[lving ;1t that time 110 lawful wlfe, or if being married, t.he
wife of the morlgagoe joined h1 such deed, iu token of her
release. nf dower, sut!h sale shall be effectual to bar all claim
and possibility of dower in such real property. [
Jl'ltr.y 21), 1 7. J
Chap. '230 AcT in ar\ilition to an Act to in(:orporate the West Rc•xbury Railroad.·.
Company. ··
Be it enacted, as follows:
1. The \Vest Roxbury Railroad Company is hereby
n.ntltot·ized to lay n. track or tracks, front the liue separating.tlle
town o!' W e;-;t 1\oxl.mry, and the city of Roxbury, on Centre
Steeet, throngh alld orcr Centre, Lowell, and 'l're:-
mont Street:;, i 11 the eit.y of Roxbury, and oYer Tremont Str'eet.
in tltc city of Bosto11 ; and to connect said track or tracks w:ith
the track or trade; of the Railroad Company,
Add.4
West law
Page I
Not Reported in N.E.2d, 24 Mass.L.Rptr. 12, 2008 WL 1913940 (Mass.Supcr.)
(Cite as: 2008 WL 1913940 (Mass.Super.))
H
Superior Court of Massachusetts,
Suffolk County.
COMMONWEALTH of Massachusetts, Plaintiff
v.
FREMONT INVESTMENT & LOAN, and Fremont
General Corporation, Defendants.
No. 07-4373-BLSI.
March 31, 2008.
lJIEUORANDUM AND ORDER ON COMMON-
WEALTH'S MOTION TO MODIFY THE PRE-
LIMINARY INJUNCTION
RALPH D. CiA:-ns, Justice.
*1 On February 25, 2008, this Court, after
making findings of fact and conclusions of law on
the Commonwealth's motion for a preliminary in-
junction, issued a preliminary injunction ordering
the defendant Fremont Investment & Loan
("Fremont" or the "Bank") as follows:
I. Before initiating or advancing a foreclosure on
any mortgage loan originated by Fremont that is
(a) NOT presumptively unfair, because it does
not possess each of the four characteristics identi-
fied above, or (b) NOT secured by the borrower's
principal dwelling, or (c) that is secured by a
dwelling that is vacant or uninhabitable, Fremont
shall first give the Attorney General 30 days ad-
vance written notice so that the Attorney General
can verify that the proposed foreclosure falls out-
side the scope of this Preliminary Injunction. If
the Attorney General has not given written notice
of an objection to Fremont by the 30th day, based
on her finding that the loan is presumptively un-
fair and is secured by the borrower's principal
dwelling and that the dwelling is both inhabited
and inhabitable, Fremont may proceed with the
foreclosure. If the Attorney General has given
written notice of an objection, Fremont shall pro-
ceed in accordance with paragraph 2 below.
2. Before initiating or advancing a foreclosure on
any mortgage loan originated by Fremont ( 1 )(a)
that is presumptively unfair, because it possesses
each of the four characteristics identified above,
and (b) secured by the borrower's principal
dwelling, and (c) where the dwelling is neither
vacant nor uninhabitable, or (2) in which the At-
torney General has provided a written objection
in accordance with paragraph 1 above, Fremont
shall give the Attorney General 45 days advance
written notice of the proposed foreclosure, identi-
fying the reasons why foreclosure is reasonable
under the circumstances and/or why the Attorney
General's written objection under paragraph 1
above is in error. If the Attorney General has not
given written notice of an objection to Fremont
by the 45th day, Fremont may proceed with the
foreclosure.
3. If the Attorney General has timely given a
written objection under paragraph 2 above, the
Attorney General and Fremont shall within the
next 15 days attempt to resolve their differences
regarding the foreclosure. If these differences
have been resolved, the Attorney General will no-
tify Fremont in writing that she has withdrawn
her written objection. If these differences arc not
resolved, Fremont may proceed with the foreclos-
ure only with the prior approval of this Court (or
a special master appointed by this Court), which
it may seek on the 16th day.
4. In considering whether to approve the foreclos-
ure, this Court will determine (a) whether the
loan is actually unfair and is actually secured by
the borrower's primary residence that is both in-
habited and inhabitable, (b) whether Fremont has
taken reasonable steps to "work out" the loan and
avoid foreclosure, and (c) whether there is any
fair or reasonable alternative to foreclosure. This
Court will seek to expedite these decisions but, if
the number of such matters grows too large, this
Court may need to appoint a special master to as-
sist the Court..
Add.S
© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 2
Not Reported in N.E.2d, 24 Mass.L.Rptr. 12, 2008 WL 1913940 (M s )
. ass. uper.
(Cite as: 2008 WL 1913940 (Mass.Super.))
*2 Findings of Fact and Conclusions of Law on
Plaintiffs Motion for a Preliminary Injunction
("Preliminary Injunction Decision") at pp. 28-29.
On March 20, 2008, Fremont issued a press re-
lease announcing that it had entered into an Asset
Purchase Agreement ("the Agreement") with Car-
rington Mortgage Services, LLC ("Carrington") to
sell Fremont's rights to service mortgage loans cur-
rently owned by certain securitization trusts
sponsored by Carrington's corporate parent. Under
this Agreement, roughly 300 of the 2,200 mortgage
loans in Massachusetts that are currently being ser-
viced by Fremont (but are not owned by Fremont)
will be sold to Carrington upon the scheduled clos-
ing on April I, 2008. The Agreement provides that
Carrington will perfonn the Assumed Liabilities,
but those Assumed Liabilities as defined in the
Agreement include only those arising from any
''action, event, obligation, circumstance or condi-
tion occurring or existing after the Closing Date" of
April I, 2008. Agreement at §§ 1.1 & 2.3. The
Agreement takes pains to add, "For the avoidance
of doubt, [Carrington] will not assume or have any
Liability or responsibility with respect to any Liab-
ility of any nature or kind whatsoever relating to
[Fremont's] business or the Purchased Assets that
exist or arises out of the operation or ownership of
[Fremont's] business or the Purchased Assets prior
to the closing .... " Agreement at § 2.3. In short, un-
der this Agreement, Carrington expressly does not
agree to accept the obligations imposed upon Fre-
mont with regard to these loans under this Court's
February 25, 2008 preliminary injunction.
When the Commonwealth learned of this
Agreement, the Commonwealth promptly moved to
modify the preliminary injunction to prevent Fre-
mont from assigning the ownership rights or servi-
cing obligations of the mortgage loans governed by
this preliminary injunction unless the obligations of
the Court's Order were assigned with these loans
and the assignee agreed to accept those obligations.
After hearing, the Commonwealth's motion for a
modification of the preliminary injunction is AL-
LOWED in part.
DISCUSSION
Fremont correctly observes that the Attorney
General asked this Court in her initial motion to en-
join the assignment of Fremont's Massachusetts
loans, and this Court chose not to include such a
prohibition in its preliminary injunction. While this
Court did not wish to prohibit Fremont from exiting
the subprime mortgage business, which Fremont
had said was its plan, this Court did not anticipate
that Fremont would think that, without prior court
approval, it could assign any of the loans covered
by the preliminary injunction without making any
such assignment subject to the obligations in the
preliminary injunction, that is, without assigning
those obligations along with the loans. This Court
plainly erred in failing to anticipate that possibility.
The Court's failure to anticipate this possibility,
however, is of little consequence for two reasons.
First, no closing has yet occurred with respect to
the assignment of any of these loans, so this Court
still has the opportunity to prevent any such assign-
ment if it finds it appropriate to do so. Second, it is
of no legal consequence whether the Common-
wealth moves to modify the preliminary injunction
to prohibit any such assignment (as it has done), or
if Fremont moves to clarify the preliminary injunc-
tion to ensure that it does not bar such an assign-
ment (which it did not do), since the legal standard
for considering either motion is the same. As the
Commonwealth correctly observes, in considering
whether to modify a preliminary injunction issued
under G. L. c. 93 ·'\.   4, this Court, having already
determined that the Commonwealth is likely to pre-
vail, should focus on whether the grant of the modi-
fled relief will promote or adversely affect the pub-
lic interest. Ci.L. c. 93/\,   4; CommomFeolrh 1'.
/'vfass. CRJNC, 392 IV!ass. 79, 89-90 ( 19S4).
*3 In all but the most unusual circumstances,
this Court agrees with the Commonwealth that the
modification it seeks is necessary to prevent Fre-
mont from escaping the obligations imposed under
the preliminary injunction by assigning these loans
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Not Reported in N.E.2d, 24 Mass.L.Rptr. 12,2008 WL 1913940 (Mass.Super.)
(Cite as: 2008 WL 1913940 (Mass.Super.))
or the servicing rights to these loans to third parties
without also expressly requiring those third parties
to abide by those obligations. Without the requested
moditication, Fremont could simply sell those loans
or servicing rights to third parties as if the prelimin-
ary injunction did not exist, because the assignment
need not require the assignee to agree to be bound
by the obligations in the preliminary injunction.
This Court cannot permit so simple an "end run"
. FNl
around Its orders.
FN l. All parties agree that the servicing
rights that Fremont's exercises with respect
to the loans it services but does not own
give Fremont broad discretion in determin-
ing what should be done in the event the
borrower defaults, including the power to
waive, modify, or vary any term of the
loan, postpone strict compliance with the
terms of the loan, or grant an indulgence to
the borrower. In effect, the servicer of the
loan has essentially the same authority to
"work-out" the loan as an owner of the
loan would have had if it had not delegated
the servicing of the loan.
Fremont argues that, pragmatically, if this
Court were to require any assignee to accept the ob-
ligations of the preliminary injunction, the effect of
such a requirement would be to prohibit any assign-
ment of these loans or servicing rights, because no
mortgage institution would agree to an assignment
carrying that ''baggage." This Court does not find
Fremont's reasoning persuasive. While Fremont for
purposes of its interlocutory appeal may wish to
characterize this Court's preliminary injunction as
extraordinarily burdensome, perhaps even draconi-
an, it is expressly intended to be rather modest in its
scope. Indeed, this Court notes that in many ways
the relief granted by the Court   ~ narrower in scope
than the Term Sheet letter agreement that Fremont
voluntarily entered into with the Attorney General
on July I 0, 2007. The spirit of the preliminary in-
junction, as this Court expressly noted in its de-
cision, is that "Fremont, having helped borrowers
get into this mess, now must take reasonable steps
to help them get out of it." Preliminary Injunction
Decision at 28. All that the preliminary injunction
does is ensure that Fremont take all reasonable
steps to help borrowers avoid foreclosure on unfair
loans it issued, and explore fair and reasonable al-
ternatives to foreclosure. !d. at 28-29. If Fremont
has taken such reasonable steps (which Fremont
contends it routinely takes), then this Court will ap-
prove the foreclosure.
It is noteworthy that Fremont has chosen not to
test the procedure the Court put in place-since the
issuance of the Preliminary Injunction Decision,
Fremont has failed to notify the Attorney General
of its intent to proceed with any foreclosure of a
Massachusetts loan. This Court is confident that, if
Fremont were to employ the procedure rather than
rail against it, it would find that the procedure is far
from onerous. If it turns out to be onerous, this
Court will modify it as needed. Consequently,
while this Court understands that third parties may
be wary of purchasing loans or servicing obliga-
tions that require them to accept the obligations in
the Preliminary Injunction Decision, this Court is
confident that they will be increasingly willing to
do so once they see that the obligations are emin-
ently workable.
*4 To be sure, assignees may require Fremont
to discount the price for these loans or servicing
rights to induce them to accept these obligations
with the assignment, but that discount is simply the
price that Fremont must pay for having entered into
the unfair loans in the first place. Therefore, when
Fremont argues that it will be unable to assign its
loans or servicing rights if the assignee were re-
quired to accept the obligations in the preliminary
injunction, all that it credibly says is that (I) poten-
tial assignees will be wary of the burden imposed
by these obligations, a wariness that is greater be-
cause of their uncertainty as to how these obliga-
tions will be applied in practice, and (2) it will re-
ceive less for these assignments than it otherwise
would because assignees will demand a discounted
Add.7
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Not Reported in N.E.2d, 24 Mass.L.Rptr. 12,2008 WL 1913940 (Mass.Super.)
(Cite as: 2008 WL 1913940 (Mass.Super.))
price in return for accepting these obligations. The
first concern wi11 diminish over time, when all will
see that the obligations are less burdensome in
practice than feared. The second concern is simply
the unhappy consequence that Fremont deserves for
having unfairly issued loans that borrowers could
not be expected to afford if they could not refin-
F\J2
ance.
FN2. This Court also notes that the only
persons who provided affidavits attesting
to the impossibility of assigning these
loans or servicing rights if they were sub-
ject to the preliminary injunction are Fre-
mont's own officers. The record contains
no affidavit from any impartial expert in
the mortgage industry.
Therefore, if there were not unusual circum-
stances, this Court would simply modify the pre-
liminary injunction as requested by the Attorney
General and enjoin the closing on the Agreement
with Carrington unless the Agreement were modi-
fied so that Carrington agreed to abide by the pro-
cedure in the preliminary injunction. There are,
however, unusual circumstances in this case---on
March 26, 2008, the Federal Deposit Insurance
Corporation issued a Supervisory Prompt Correct-
ive Action Directive against Fremont ("the FDIC
Directive"). The FDIC Directive observes that, in a
letter dated May 24, 2007, the FDIC notified Fre-
mont that it was undercapitalized and required Fre-
mont to submit an acceptable capital restoration
plan by July 9, 2007. The plan submitted by Fre-
mont on August 9, 2007 was found unacceptable by
the FDIC. Fremont submitted a revised capital res-
toration plan on November 9, 2007, but Fremont
stated the plan was obsolete on March 17, 2008.
Since Fremont had failed to submit an acceptable
capital restoration plan and failed to comply with
its capital maintenance provisions, and since the
financial condition of its parent, Fremont General
Corporation, continued to deteriorate, the FDIC
ordered Fremont and/or its parent to take one of
two alternative courses of action within 60 days: (I)
either Fremont "shall sell enough voting shares or
obligations of the Bank so that the Bank will be ad-
equately capitalized after the sale and/or" (2) Fre-
mont shall accept an offer to be acquired by another
bank and its corporate parents shall divest them-
selves of the Bank. FDIC Directive at 3.
Fremont contends that its sale to Carrington of
the rights to service mortgage loans owned by Car-
rington is part of its effort to return to adequate
capitalization mandated by the FDIC. Fremont ob-
serves that the Massachusetts loans comprise only a
small fraction of the loans whose servicing rights
arc being sold, and that this sale is essential if Fre-
mont is to meet the FDIC's 60-day deadline. Fre-
mont also notes that, if this Court were to enjoin the
sale unless Carrington agreed to abide by the oblig-
ations in the preliminary injunction, the Asset Pur-
chase Agreement could not close on April I and it
is uncertain whether Carrington would agree to pro-
ceed with the sale at a later date, since Carrington
took pains to include language in the Agreement
making clear that the only liabilities it was assum-
ing were those that arose after the closing. This
Court preliminarily finds each of these assertions to
be accurate. Therefore, this Court must deal with
the probability that enjoining the sale of the 300
Massachusetts loans whose servicing rights would
be sold under the terms of the Asset Purchase
Agreement would prevent the Agreement from
closing on April I, and the significant possibility
that this modification of the preliminary injunction
may prevent this Agreement from closing within
the 60 day deadline set by the FDIC.
*5 The Attorney General and Fremont agree
that, if Fremont were to fail to meet the conditions
set by the FDIC Directive within the 60-day dead-
line, the almost certain result would be that the FD-
IC would place Fremont under FDIC receivership.
Being placed under receivership would constitute
an Event of Default under the Pooling and Service
Agreements that govern the Carrington loans which
Fremont is presently servicing, and that Default
would permit the Trustee for these loans (which ap-
Add.S
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Not Reponed in N.E.2d, 24 Mass.L.Rptr. 12,2008 WL 1913940 (Mass.Super.)
(Cite as: 2008 WL 1913940 (Mass.Super.))
parently is Deutsche Bank) to terminate all of Fre-
mont's rights to service these loans and transfer
those servicing rights to another entity. Therefore,
this Court must also deal with the possibility that, if
it seeks to protect the 300 Massachusetts borrowers
at issue by enjoining Fremont from entering into
the Asset Purchase Agreement, it may increase the
likelihood that Fremont would fall into receiver-
ship, which would result in the termination of its
servicing rights over these Carrington loans, which
would mean that these loans would ultimately be
serviced by a third party entity not governed by the
preliminary injunction. In short, if this Court at-
tempts to protect those 300 Massachusetts borrow-
ers by enjoining the Carrington sale unless the As-
set Purchase Agreement is revised to be subject to
the preliminary injunction, the attempt may help to
push Fremont into receivership and, by doing so,
would fail to protect those Massachusetts borrow-
ers.
As a result, this Court is left with two poor
choices-enjoin Fremont from entering into the As-
set Purchase Agreement and accept the risk that the
preliminary injunction would ultimately still not
help the 300 Massachusetts borrowers at issue if
Fremont falls into receivership, or permit Fremont
to proceed with the sale under the terms of the
Agreement and allow the servicing rights to be as-
signed to a third party not bound by the preliminary
injunction. This Court finds that the second poor al-
temative better protects the public interest, largely
because this Court does not find it to be in the pub-
lic interest for Fremont to fall into FDIC receiver-
ship, especially since a receivership would make it
even more difficult to protect the interests of the re-
maining 2,200 borrowers whose loans Fremont will
. . FNi
conttnuc to own or service. · -
F\:3. This Court's balancing of interests in
favor of allowing the Carrington sale to
close is reinforced by a letter sent by Car-
rington this morning to the Attorney Gen-
eral which offers two proposals in keeping
with the spirit (albeit not the letter) of this
Court's preliminary injunction. Those al-
ternative proposals invite the Department
of Banking or the Attorney General to vet
Carrington's foreclosure decisions before
any foreclosure is instituted.
While that painful balancing means that this
Court will not enjoin the closing of the Asset Pur-
chase Agreement with Carrington, it docs not mean
that this Coun will not modify the preliminary in-
junction as requested by the Attorney General. Fre-
mont has advised the Coun that there are no other
assignments on the cusp of being entered into that
would affect the Massachusetts borrowers, so this
Coun is not faced with the same dilemma as to the
other loans that it faces with the Carrington loans.
While the public interest balancing of risks may tilt
in favor of Fremont as to the Carrington loans, it
tilts in favor of the Attorney General as to the re-
maining 300 loans that Fremont owns and the I ,900
loans that it services but does not own. F"J
4
There-
fore, this Coun hereby modifies the preliminary in-
junction to add a fifth term to the four already in
the pre! iminary injunction:
FN4. This Court acknowledges the risk of
confusion that arises from the fact that Fre-
mont services 300 loans owned by Car-
rington and also owns 300 loans that it also
services. The former 300 loans are being
assigned to Carrington under the Asset
Purchase Agreement; the latter 300 loans
are not affected by the Agreement.
*6 5. Pending final adjLtdication of this action or
further order of this Court, Fremont shall not sell,
transfer, or assign (i) any mortgage loan origin-
ated by Fremont that is secured by any residential
property in Massachusetts, or (ii) the legal oblig-
ation to service any mortgage loan origiHatcd by
Fremont that is secured by any residential prop-
erty in Massachusetts, unless:
a. Fremont gives the Massachusetts Attorney
General written notice of its intent to enter into
such an assignment, including a copy of the pro-
Add.9
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Page 6
posed agreement, at least five business days be-
fore executing the purchase agreement,
b. the obligations of this Court's Preliminary In-
junction, including but not limited to this restric-
tion upon further sale, transfer. or assignment, are
also assigned with the sale or assignment of the
loans or servicing rights,
c. the assignee agrees in the written assignment to
be governed by the tem1s of the Preliminary In-
junction and its obligations, and
d. a copy of the executed written assignment is
provided within five business days of its execu-
tion to the Attorney General.
Notwithstanding this modification. Fremont is
not enjoined from closing on the Asset Purchase
Agreement entered into with Carrington on
March 17, 2008, provided this Agreement closes
before May 25, 2008 (the 60-day deadline estab-
lished in the FDIC Directive).
ORDER
For the reasons stated above, this Court hereby
ALLOWS the Attorney General's motion to modify
the preliminary injunction to the extent that,
pending final adjudication of this action or further
order of this Court, this Court ORDERS as follows:
I. Pending final adjudication of this action or
further order of this Court, Fremont shall not sell,
transfer, or assign (i) any mortgage loan originated
by Fremont that is secured by any residential prop-
erty in Massachusetts, or (ii) the legal obi igation to
service any mortgage loan originated by Fremont
that is secured by any residential property in Mas-
sachusetts, unless:
a. Fremont gives the Massachusetts Attorney
General written notice of its intent to enter into
such an assignment, including a copy of the pro-
posed agreement, at least five business days be-
fore executing the purchase agreement,
b. the obligations of this Court's Preliminary In-
junction, including but not limited to this restric-
tion upon further sale, transfer, or assignment, are
also assigned with the sale or assignment of the
loans or servicing rights,
c. the assignee agrees in the written assignment to
be governed by the terms of the Preliminary In-
junction and its obligations, and
d. a copy of the executed written assignment is
provided within five business days of its execu-
tion to the Attorney General.
2 Notwithstanding this modification, Fremont
is not enjoined from closing on the Asset Purchase
Agreement entered into with Carrington on March
17, 2008, provided this Agreement closes before
May 25, 2008.
Mass.Super.,2008.
Com. v. Fremont Tnv. & Loan
Not Reported in N.E.2d, 24 Mass.L.Rptr. 12, 2008
WL 1913940 (Mass.Super.)
END OF DOCUMENT
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Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 517279 (Mass. Super.)
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Superior Court of Massachusetts,
Suffolk County.
COMMONWEALTH of Massachusetts, Plaintiff
v.
FREMONT INVESTMENT & LOAN, and Fremont
General Corporation, Defendants.
NO. 07-4373-BLS I.
Feb. 26, 2008.
FINDINGS OF FACT AND CONCLUSIONS OF
LAW ON PLAINTIFF'S MOTION FOR A PRE-
LIMINARY INJUNCTION
R.ALPH D. Justice.
*1 The defendant Fremont Investment & Loan
(''Fremont" or the "Bank") is a California state-
chartered industrial bank that, between January
2004 and March 2007, originated 14,578 loans to
Massachusetts residents secured by mortgages on
owner-occupied homes. Of those loans, only
roughly 3,000 remain active; roughly 2,500 contin-
ue to be serviced by Fremont Most of these loans
were made in what has become known as the
"sub-prime" market, in which customers who gen-
erally would not have qualified for traditional
prime mortgages were provided loans at higher
rates of interest. Not surprisingly, in these times, a
significant number of these loans are in default and
Fremont seeks to foreclose on some of them. On
October 4, 2007, the Commonwealth of Massachu-
setts, acting through the Massachusetts Attorney
General, filed the instant complaint alleging that
Fremont, in its past lending practices in the sub-
prime market, has engaged in unfair and deceptive
acts or practices in violation of G.L. c. 2.
The Attorney General now moves for a preliminary
injunction that would bar Fremont, during the pen-
dency of this action, from initiating or advancing
any foreclosure on any residential mortgage loan in
Massachusetts without the written consent of the
Attorney General's Office.
BACKGROUND
On March 7, 2007, after having being advised
of charges of unsound banking practices brought
against it by the Federal Deposit Insurance Corpor-
ation ("FDIC"), Fremont, without admitting the al-
leged charges, entered into a Stipulation and Con-
sent to the Issuance of an Order to Cease and Desist
("Consent Agreement"). Under the Consent Agree-
ment, Fremont was ordered to cease and desist
from, inter alia:
• (b) "operating the Bank without effective risk
management policies and procedures in place in
relation to the Bank's primary line of business of
brokered subprime mortgage lending;"
• (d) "operating with inadequate underwriting cri-
teria and excessive risk in relation to the kind and
quality of assets held by the Bank;"
• (f) "operating with a large volume of poor qual-
ity loans;"
• (g) ''engaging in unsatisfactory lending prac-
tices;"
• (l) "marketing and extending adjustable-rate
mortgage ("ARM") products to subprime borrow-
ers in an unsafe and unsound manner that greatly
increases the risk that borrowers will default on
the loans or otherwise cause losses to the Bank,
including ARM products with one or more of the
following characteristics:
(i) qualifying borrowers for loans with low initial
payments on an introductory or "start" rate that
will expire after an initial period, without an ad-
equate analysis of the borrower's ability to repay
the debt at the fuliy-indcxed rate;
(ii) approving borrowers without considering ap-
propriate documentation andior verification of
their income;
(iii) containing product features likely to require
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Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 517279 (Mass.Super.)
(Cite as: 2008 WL 517279 (Mass.Super.))
frequent refinancing to maintain an affordable
monthly payment and/or to avoid foreclosure;
*2 (iv) including substantial prepayment penal-
tics and/or prepayment penalties that extend bey-
ond the initial interest rate adjustment period;
( v) providing borrowers with inadequate andior
confusing information relative to product
choices, material loan terms and product risks,
prepayment penalties, and the bonower's obliga-
tions for property taxes and insurance;
(vi) approving bonowers for loans with inad-
equate debt-to-income analyses that do not prop-
erly consider the borrowers' ability to meet their
overall level indebtedness and common housing
expenses; and/or
(vii) approving loans or 'piggyback' loan ar-
rangements with loan-to-value ratios approaching
or exceeding 1 00 percent of the value of the col-
lateral;" and
• (m) making mortgage loans without adequately
considering the borrower's ability to repay the
mortgage according to its terms."
FNl
Consent Agreement at 2-4.
FN I. As has already been noted by the
Court, this Consent Agreement was a set-
tlement of the charges brought by the FD-
IC, without any admission of wrongdoing
by Fremont. As a result, this Court docs
not consider this Consent Agreement to be
evidence that Fremont had engaged in any
of the conduct it agreed to "cease and de-
sist" from doing in the future. This Court
discusses the Consent Agreement, not be-
cause it is evidence of Fremont's past con-
duct (which it is not), but because it is too
important a part of the background and
context of this action to be ignored.
On or about July 10, 2007, Fremont and the
Massachusetts Attorney General entered into a
Term Sheet letter agreement ("Term Sheet") that
set forth a procedure that Fremont agreed to follow
before foreclosing on any of the Massachusetts res-
idential mortgage loans it continued to own or ser-
vice. In a nutshell, under the Term Sheet, Fremont
agreed to provide the Attorney General with the
Loan Documentation regarding a troubled loan at
least 90 d   r ~ ~ e f o r e commencing any .foreclosure
proceeding. · ~ During that 90 day penod, the At-
torney General could object to the foreclosure, and
state her reasons for doing so. If there were an ob-
jection, Fremont agreed not to proceed with the
foreclosure and instead to negotiate in good faith to
resolve the Attorney General's objection, perhaps
by agreeing to revise the terms of the loan or arran-
ging for replacement financing. If no resolution
could be reached, Fremont was free to proceed with
foreclosure, but only after giving the Attorney Gen-
eral fifteen days advance notice, which allowed her
time to determine whether she would seek to enjoin
the foreclosure.
FN2. Under certain conditions, Fremont
could ask the Attorney General to expedite
her review of the Loan Documentation and
wait only 45 days before commencing a
foreclosure proceeding.
Pursuant to this Term Sheet agreement, Fre-
mont sent the Attorney General the Loan Docu-
mentation for 119 loans subject to a 90 day review.
On October 4, 2007, the Chief of the Consumer
Protection Division of the Attorney General's Of-
fice wrote that the Attorney General objected to
foreclosure as to all of them. Fremont had also sent
the Attorney General the documentation for another
74 loans which it wished to foreclose upon, subject
to an expedited 45 day review. As to each of the 74
loans, Fremont represented that the homes to be
foreclosed upon were not owner-occupied and that
Fremont had been unable to contact the borrower,
despite repeated attempts to do so. As to these 74
loans, also on October 4, the Attorney General ob-
jected to foreclosure as to only one. In short, on Oc-
tober 4, 2007, the Attorney General objected to
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Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 5!7279 (Mass.Super.)
(Cite as: 2008 WL 517279 (Mass.Super.))
every foreclosure proposed by Fremont except as to
those loans where the home was not owner-occu-
pied and Fremont had been unable to contact the
borrower. That same day, it filed the complaint in
the instant action.
*3 The Tenn Sheet agreement was terminable
at will by either party. On December 10, 2007, Fre-
mont exercised its right to terminate in a letter to
the Attorney General, writing that "it is now appar-
ent that the Attorney General has no intention of
engaging in a meaningful review process on a bor-
rower-by-borrower basis, but rather is seeking
wholesale discontinuance of all foreclosure refer-
rals and sales." In that same letter of termination,
Fremont stated that it was committed to continue to
attempt loan modifications and other means of
"workout" to avoid foreclosure, and would continue
to provide the Attorney General with a loan file pri-
or to referring the loan for foreclosure.
With the Term Sheet agreement no longer in
force, the Attorney General asks this Court to en-
join Fremont from initiating or advancing any fore-
closure without the Attorney General's written con-
sent. Alternatively, she proposes a more limited
preliminary injunction in which Fremont would be
enjoined from initiating or advancing any foreclos-
ure of what she characterizes as "Presumptively
Unfair Loans," which she defines as ARMs with a
low introductory rate of three years or less in which
either (a) the combined loan-to-value ratio was 90
percent or higher, (b) the loan was approved on a
"stated income" basis. meaning that Fremont essen-
tially ac<.:epted the borrower's statement of income
without requiring verification, or (c) the loan had a
prepayment penalty. However, the Attorney Gener-
al offered one exception to the prohibition on fore-
closure of Presumptively Unfair Loans-Fremont
could proceed with the foreclosure if it could
demonstrate the presence of one of three Mitigating
Factors: (I) the borrower consented in writing to
the foreclosure, (2) the property was vacant and un-
inhabitable, or (3) the property was a vacant invest-
ment property. The Attorney General would have
45 days to verify the existence of the Mitigating
Factor and determine whether to dispute it. If she
did dispute it, Fremont would need the approval of
the Court to proceed with the foreclosure. As to
loans that were not Presumptively Unfair, under the
alternative proposed by the Attorney General, Fre-
mont would be required, as under the Term Sheet
agreement, to provide the Attorney General with
loan documentation at least 90 days prior to initiat-
ing the foreclosure and, if she objected to the fore-
closure, Fremont would need court approval before
proceeding with the foreclosure.
FINDINGS OF FACT
"By definition, a preliminary injunction must
be granted or denied after an abbreviated presenta-
tion of the facts and the law." Packaging Industries
Group, !11c. ,. Cheney JKO 1\fass. 609, 61 (J (I 9XO).
In other words, in finding the facts on a motion for
preliminary injunction, this Court must "play the
cards it is dealt," which may be a t ~   r more modest
deck than it may be dealt at trial, after discovery
has been completed. Consequently, the pre! iminary
findings of fact below are based on the affidavits
and attached exhibits furnished by the parties, as
well as reasonable inferences from that evidence.
*4 During the relevant time period in question-
January 2004 to March 2007, when Fremont
stopped originating residential mortgage loans-
Fremont was a substantial lender in the sub-prime
mortgage market. ft is difficult to ascertain from
this record what percentage of Fremont's residential
loans could fairly be characterized as sub-prime
loans, but this Court estimates that it was between
F'l3
50-60 percent. · In all (or virtually all) of these
loans, Fremont did not interact directly with the
borrower. Rather, these loans were brought to Fre-
mont by mortgage brokers who were independent
contractors, compensated through a broker's fee
that was paid upon the closing of the loan. Typic-
ally, the broker would contact one of Fremont's ac-
count executives to request a certain loan product
and provide the borrower's credit report and Joan
application. The account executive would determ-
Add. 13
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ine if the prospective borrower was "prequalified"
and, if so, send the broker a non-binding interest
rate quote on the requested loan product, and set
forth the conditions the borrower needed to meet to
obtain the loan. Once the borrower had agreed to
proceed with the loan, the broker would send the
account executive the documentation necessary to
satisfy the prequalification conditions, generally the
appraisal of the property, the required disclosures,
and documentation regarding employment and in-
come. All of this information was then sent to an
account manager at one of Fremont's operation cen-
ters, where it would be examined by the underwrit-
ing department for final approval. If approved, the
loan would proceed to closing, with the Bank re-
taining an attorney to protect its interests at the
closing.
F\13. 38.4 percent of the loans were fixed
rate loans, which this Court assumes were
generally not sub-prime. This Court infers
that the vast majority of the 64 percent of
loans that were ARMs were sub-prime, in
large part because a substantial percentage
of Fremont's loans-38.4%-were "stated in-
come" loans, and this Court expects that
all or virtually all of these "stated income"
loans were sub-prime ARMs.
As noted, 38.4 percent of these loans were
''stated-income" loans in which the borrower was
permitted to state his income without having to
provide the usual verifying documentation, such as
income tax returns, W-2s, or pay stubs. For these
loans, the only "underwriting" that Fremont did re-
garding the income stated was to compare the
salary stated with the salary typical for such an oc-
cupation in that geographic area, using data ob-
tained from salary.com. These loans were, in the-
ory, designed for those borrowers who could not
verify their income with income tax returns or who
had unreported income, but the extraordinarily high
percentage of these loans-38.4 percent-strongly
suggests that they were not limited to these rather
unusual circumstances. Since there was a substan-
tially greater risk that the borrower had inflated his
income with "stated-income" loans, the borrower
paid a higher interest rate than for documented
loans.
The very essence of a sub-prime mortgage loan
is that the bank is lending money to a borrower who
poses a greater than average credit risk, and de-
mands a higher rate of interest in return for that in-
creased risk. In order to reduce the interest rate, vir-
tually all Fremont sub-prime mortgages were
ARMs, with a low introductory rate (pejoratively
referred to as a "teaser rate") which would continue
generally for two or three years, at which time the
Joan would be adjusted to a variable rate based on a
market rate of interest-the 6-month London Interb-
ank Offered Rate ("LIBOR"), plus an additional
percentage to reflect the high risk of the loan
(known as the "rate add," e.g. LIBOR plus 5). The
introductory rate would be considerably lower than
the adjusted rate, so the amount of mortgage in-
terest would substantially increase once the adj us-
ted rate kicked in even if the LIBOR had not
changed or had even fallen (known as "payment
shock"). Most ARMs limit the extent of the pay-
ment shock by limiting the percentage increase that
may occur during each period of adjustment, so the
adjustable interest rate would increase with each
adjustment until it would reach the LIBOR plus the
rate add (but not exceed the maximum interest rate
cap). Most of the ARMs that Fremont provided
were 2/28 or 3/27, meaning they were 30 year loans
where the introductory rate remained for two or
three years, with adjustments every six months after
the introductory period. The lower the introductory
rate and the lower the limits on the interest rate in-
crease that may occur upon each adjustment, the
longer it would take for the actual interest rate to
reach the LIBOR plus the rate add. Once it reached
that level, the interest rate would increase or de-
crease based on changes in the market rate of in-
terest.
*5 In determining whether a borrower qualified
for the loan, Fremont's underwriting department
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generally looked at the debt-to-income ratio, that is,
the ratio between the borrower's monthly debt pay-
ments (including the applied-for mortgage) and his
monthly income. While there were exceptions, gen-
erally the borrower needed to have a debt-
to-income ratio less than or equal t.o 50 (sometimes
)
. d l'f I· N
4
I I I .
55 percent m or er to qua 1 y. · n ca cu atmg
the prospective borrower's monthly debt payments,
Fremont's underwriters used the monthly mortgage
payments for the introductory period, not the
monthly mortgage payment that would be due un-
der the "fully indexed rate," that is, the LIB OR at
the time of the inception of the Joan plus the rate
add. As a result, many marginal credit risks quali-
fied for ARMs based solely on the low introductory
rate, but would _not have qualified using the fully
f-N.,
indexed rate. · -
F!'J4. For all of Fremont's originated loans
during the relevant time period, which in-
cluded both fixed rate loans and ARMs,
the average debt-to-income ratio was 42.76
percent.
FN5. The evidence in the preliminary in-
junction record does not permit this Court
to infer the percentage of overall borrow-
ers who would fit into this category, or
their overall number. The evidence is suffi-
cient to infer that the number of these bor-
rowers was substantial, based on Fremont's
willingness to lend to poor credit risks and
the substantial difference between the debt
burden with the introductory rate vs. fully
indexed rate.
Even relying on the low introductory rate to de-
termine the debt-to-income ratio, there were still in-
terested borrowers who did not qualify. For these
borrowers, Fremont offered what it called an exten-
ded amortization option, which was essentially a 40
year note, with monthly payments reduced from the
30 year note because they were spread out over the
40 year period, with a balloon payment due at the
end of 30 years (since the loan would not be fully
amortized by that time). 12.2 percent of all Fre-
mont's originated loans contained this extended
amortization option with a balloon payment after 30
years.
Not surprisingly, the poor credit risks who
were the target audience for sub-prime mortgage
loans also often had little or no savings, so Fremont
offered borrowers mortgage loans that required
little or no down-payment, referred to in the lend-
ing industry as loans with a loan-to-value ratio
equal to or approaching I 00 percent. While some
first mortgages provided l 00 percent financing,
most I 00 percent financing was accomplished with
a first mortgage providing 80 percent financing and
a second mortgage providing the remaining 20 per-
cent financing, referred to in the industry as
"piggy-back loans."
The benefit to consumers from sub-prime mort-
gages was that they were eligible to obtain mort-
gages they would not otherwise have been eligible
to obtain, albeit at higher rates of interest, and
thereby could purchase homes they would not oth-
erwise have been able to purchase. Consumers ob-
taining sub-prime mortgages shared the same risks
that every person faced who stretched themselves
financially to purchase their home-the usual danger
of being unable to meet the mortgage payments be-
cause of a future reduction in income from the loss
of a job or a sudden increase in other expenses, per-
haps resulting from an illness in the family. These
risks were greatest for those borrowers with the
highest debt-to-income ratios and the fewest assets,
since they had no cushion to deal with financial ad-
versity. Some of these consumers, however, faced
an especially grave risk-those with 2/28 or 3/27
ARMs with low introductory rates, who qualified
for a mortgage only based on those low introduct-
ory rates and would not have otherwise qualified if
the fixed index rate had been used by Fremont's un-
derwriting department to determine eligibility. As
to these loan customers, when the payment shock
set in, their debt would exceed 50% of their in-
come, sometimes by a considerable amount, and
they foreseeably could no longer afford to pay the
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mortgage. These customers, often relying on the ad-
vice of their mortgage broker, generally understood
that they would need to refinance the loan at or be-
fore the date the introductory rate ended so that
they could continue to pay the low monthly pay-
ments provided by the so-called teaser rate and
avoid the payment shock that would force them into
foreclosure. However, what these customers often
did not understand was that, if they had purchased a
I 00 percent financing mortgage, whether through a
single loan or piggyback loans, they would only be
eligible for refinancing if the fair market value of
their property increased during those two or three
years of the introductory rate because, if it fell, they
would not be able to refinance their home for more
than it was worth. For these borrowers, unless their
income considerably increased, they would be
doomed to default and foreclosure if the housing
market fell (as, of course, it did).
*6 Consequently, it is hardly surpnsmg that
when the Attorney General looked carefully at the
Loan Documentation that Fremont provided on Au-
gust 30, 2007 regarding 98 loans that it proposed to
foreclose it found that:
• All 98 were ARMs. 93 had two year introduct-
ory rates, while four had a three year rate.
• All would produce payment shock when the in-
troductory rate period concluded. The introduct-
ory rate on these loans varied from 6.1 percent to
12.4 percent. The payment shock increase could
increase the interest rate 3 percent, with the po-
tential of another 1.5 percent interest hike every
six months.
• 90 percent o.f the 98 had a 1 00 percent loan-
. f,N6
to-value rallo.
r:N6. 30 of the 98 loans were structured to
amortize over 40 or 50 years, with a bal-
loon payment due on the 30th year. While
it is not surprising to find these loans in
trouble, the record sheds no light as to
whether extended amortization loans were
more difficult to refinance.
14 of the 98 loans had a prepayment penalty, in
which the borrower was required to pay up to six
months worth of interest if he paid off the note
(through sale or refinancing) before a designated
period. For 13 of these 14, the prepayment penal i   ~
I
. d I d . h . d . d J· :'-Jt
app 1e on y unng t e mtro uctory peno ;
for one, it extended through the first year of the
payment shock period. Consequently, for these bor-
rowers who were eligible for the loan only because
the teaser rate was used to calculate the debt-in-
come ratio, the timing of refinancing was critical-
they could not afford to pay the mortgage after pay-
ment shock set in but they would pay a substantial
prepayment penalty if they refinanced during the
introductory period. Consequently, these borrowers
had little real discretion as to when to refinance; for
all practical purposes, it was essential that they
close on the refinanced loan right when the intro-
ductory rate ended. If they were unable to refinance
during this brief window, they would be unable to
afford the mortgage payments, which would plal:e
them in default, which would increase the amount
needed to refinance, which would make it even
harder to qualify for the refinancing.
J:N7. 12 imposed prepayment penalties
over two years; 1 imposed it only for the
first year of the loan.
All of the dangers this Court has cited are
present even if the loan application accurately
states the borrower's income. All of these dangers
obviously are exacerbated if the loan application
wrongly inflates the borrower's income or assets,
because then the debt-to-income ratio used by un-
derwriting to determine whether the prospective
borrower qualifies for the Juan is based on an in-
flated income figure. It is too strong to say that
''stated income" loans invite the borrower to com-
mit such fraud, because the borrower is required to
state his income on the loan application under the
pains and penalties of perjury. However, it is fair to
infer that "stated income" loans present a far great-
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cr risk of fraud than full documentation loans, be-
cause not only is the lender for these loans not re-
quiring any documentation of the borrower's in-
come, expenses, or employment but the lender is
also implicitly telling the borrower that it will not
verify the borrower's statements on the loan applic-
ation by looking at these documents. Not surpris-
ingly, 50 of the 98 loans in the Attorney General's
sample of loans targeted by F,rpmont for foreclosure
,, d. "1 J·NX
were state mcome oans.
F N ~   The affidavit of the Attorney Gener-
al's financial investigator who conducted
this analysis is unclear as to whether the
actual number of the ''stated income" loans
was 50 or 60. This Court has chosen the
lower number, thereby giving Fremont the
benefit of the ambiguity.
*7 The preliminary injunction record reflects
that, at least in a few of these mortgage loans, the
loan application falsely described the borrower's
occupation and substantially inflated the borrower's
income. Specifically, the Attorney General submit-
ted eight affidavits from lenders facing foreclosure.
In six of these applications, the borrower's stated
income was substantially inflated on the loan ap-
plication. In each of these six false loan applica-
tions, this Court finds that the mortgage broker
either prepared the loan application and inflated the
income without the borrower's knowledge or per-
mission (even though each borrower signed the
loan application under the pains and penalties of
perjury) or acted in complicity with the borrower in
misrepresenting the borrower's income in order for
the borrower to qualify for the loan. There is no
evidence that Fremont knew of these misrepresenta-
tions. Nor is there any evidence that Fremont will-
fully blinded itself to the fact that some of the mort-
gage brokers who brought loans to it were know-
ingly int1ating the borrower's income. Nor does this
Court find, based on this record, that Fremont reck-
lessly supervised its brokers by continuing to do
business with them after Fremont learned that the
brokers had a pattern or practice of inflating the
borrower's income on the loan applications they had
submitted. In short, with respect to the falsified
loan applications, the evidence in the record reflects
that Fremont was a victim of these misrepresenta-
tions and did not encourage or tolerate them.
Nor does this record reflect that Fremont made
false representations to borrowers regarding the
terms of their Joan. From the few closing docu-
ments that are before the Court, there is no evid-
ence that the terms were concealed or misrepresen-
ted in the closing documents. Nor is there any evid-
ence that Fremont representatives made such mis-
representations. Indeed, apart from the closing at-
torney that Fremont retained, the borrowers who
submitted affidavits did not appear to speak directly
with any Fremont representative; they spoke only
with their mortgage broker. To be sure, there is
evidence that, in some of the loan transactions, the
brokers had mischaracterized the loan terms and
made vague promises of refinancing that they
reneged upon when the time for refinancing arose,
but there is no evidence that Fremont joined in
making any of these misrepresentations or baseless
promises or even knew of them. There is also evid-
ence that at least some ofthe borrowers either did
not read the closing documents or did not truly un-
derstand their terms, but this Court does not find
Fremont responsible for that misunderstanding, es-
pecially since many of the loan documents are
forms required under federal law.
The remaining question, then, for this Court is
whether the Attorney General is likely to prevail in
proving that certain of the sub-prime mortgage
loans offered by Fremont were, as the Attorney
General describes it, "structurally unfair," whose is-
suance was an unfair act or practice in violation of
G.L. c. tJ3A. * 2. This Court will address that ques-
tion in its Conclusions of Law.
CONCLUSIONS OF LAW
*8 G.L. c. 93:\. ~ 2(a) makes unlawful any
"[u]nfair or deceptive acts or practices in the con-
duct of any trade or commerce."(; L c. 93A. ~ 2
(a). The Supreme Judicial Court has stated "that the
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Page 8
following arc 'considerations to be used in detem1-
ining whether a practice is to be deemed unfair: (I)
whether the practice ... is within at least the penum-
bra of some common-law, statutory, or other estab-
lished concept of unfairness; 2) whether it is im-
moral, unethical, oppressive, or unscrupulous; (3)
whether it causes substantial injury to consumers
(or competitors or other businessmen).' " Dara-
cumm lnter(uce, Inc. \'. Comp11rent orld, inc, Jl)6
Mass. 7o0, 778 ( l n6) quoting PMP .·1s.wcs., inc. v.
(1/ohe Newspaper Co., 366 M   593, 590 ( 1975 ),
quoting 29 Fed.Reg. 8325, 8355 (I 964). An act or
practice that is deceptive or fraudulent may be
found ro be unfair, but an act or practice need not
be deceptive or fraudulent to be unfair. See Atas-
sachuserrs Farm Bureau Federation, Inc. l'. Blue
('nJ\'S of Mossachusetts. Inc .. 403   722. 720
( )cJK<J). An act may be unfair even if it docs not vi-
olate a statute, or a regulation issued under c;. L. c.
0.\1\, 2. See Sclmhoch t•. ffuli.ldi!J!d Fmuno·
Co1p., 375 Mas:;. 133, 137 (1978) ("We reject the
argument that an act or practice which is authorized
by statute can never be an unfair or deceptive act or
practice 2(al or G.L. c. 03A."). "[WJhether
an act or practice violates a statute or rule promul-
gated under G.L. c. 93A, § 2, is but one of several
factors to be applied to all the circumstances of the
transaction ... in determining whether it is unfair or
dcccpti ve." H il /ingham \'. Uornemann. 5 :'i
!Vlas:-. App.Ct. 166, l7(J (2002). Similarly, as the Su-
preme Judicial Court has made clear, an act may vi-
olate Chapter 03A without constituting a cause of
action under any common Jaw tort:
Chapter 93A is "a statute of broad impact which
creates new substantive rights and provides new
procedural devices for the enforcement of those
rights." Slone\' r. We.I'{H'ood Auto, Inc., 366 Mass.
  693 (I 075). The relief available under c.
03!\ is "sui generis. It is neither wholly tortious
nor wholly contractual in nature, and is not sub-
ject to the traditional limitations of preexisting
causes of action." /d. at 704. It "mak[es] conduct
unlawful which was not unlawful under the com-
mon law or any prior statute." CotJ/11/onwe,drh v.
fJeCuris, 3<i(l l'vfass. 234. 244 n. k ( 1974 ). Thus, a
cause of action under c. <J3i\ is ''not dependent on
traditional tort or contract law concepts for its
definition." !Idler 1. Silvah/'(/nch Con,·Tr. Corp.,
376 Mass. 621. 62(, ( 197S). See Nei , .. Burle1:,
3illi Ma,s. 307. 313 ( 1983) ("[AJnalogies
between common law claims for breach of con-
tract, fraud, or deceit and claims under c. 9 3/\ arc
inappropriate because c. 93A dispenses with the
need to prove many of the essential elements of
those common law claims").
Ka!tar v. Dcmoulos, 433 Mass. I. 12-13 (2000)
*9 Here, at the time that Fremont issued the
mortgage loans at issue in this motion, there was no
federal or Massachusetts statute or regulation ap-
plicable to all mortgage loans that expressly prohib-
ited Fremont from issuing adjustable rate mortgage
loans, loans with a loan-to-value ratio of 100 per-
cent, "stated income" loans, or loans with a prepay-
ment penalty. Nor was there any federal or Mas-
sachusetts statute or regulation applicable to all
mortgage loans that provided that a borrower could
not qualify for a mortgage loan if his debt-
to-income ratio exceeded 50 percent or some other
percentage ceiling. Nor was there any federal or
Massachusetts statute or regulation applicable to all
mortgage loans that prohibited these practices from
occurring together-that is, there was no federal or
Massachusetts statute or regulation that expressly
declared that a bank could not issue a 2/28 ARM,
stated income loan with a loan-to-value ratio of I 00
percent and a prepayment penalty for the early pay-
off of that loan (through sale or refinancing) to a
borrower with a debt-to-income ratio exceeding 60
percent. Nor is there any indication from the record
that it was unusual for sub-prime lenders to engage
in any or all of these practices.
There were, however, Massachusetts statutes
and regulations that prohibited many of these prac-
tices in "high cost mortgage loans," defined as a
loan secured by the borrower's principal dwelling in
which:
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• for a first mortgage, the interest rate exceeded
by more than 8 percentage points the yield on
United States Treasury securities having compar·
able maturity periods, or
• the total points and. fees were greater than 5 per-
cent of the total loan or $400, excluding up to 2
·'bona fide loan discount points" paid by the bor-
rower to lower the benchmark rate of interest.
G.L c. I   2. The Predatory Home Loan
Practices Act ("the Act"), enacted on August 9,
2004 and made effective on November 7, 2004,
prohibited lenders from making a "high cost mort·
gage loan" "unless the lender reasonably believes at
the time the loan is consummated that I or more of
the obligors will be able to make the scheduled pay-
ments to repay the home loan based upon a consid-
eration of the obligor's current and expected in-
come, current and expected obligations, employ-
ment status, and other financial resources other than
the borrower's equity in the dwelling which secures
repayment of the loan." G.L. c. 183C. 4. The Act
provided lenders with a safe harbor in making a
reasonable determination regarding the borrower's
ability to repay-if the borrower's debt-to-loan ratio
was 50 percent or less, the borrower was presumed
able to make the scheduled payments. Id. Sec also
209 Cl\1R 3 2.34(c) (same). The Act also prohibited
lenders from adding prepayment fees or penalties to
high cost mortgage loans. Id. at § 5. A violation of
the Act was deemed a violation of 9JA. Id.
at § 18(a).
The spirit of the Act is that a lender engages in
predatory lending, which is an unfair act in viola-
tion of Chapter 93A, when it makes a loan charging
either high points, fees, or interest to a borrower
whom the lender reasonably believes will be unable
to make the scheduled payments and will therefore
face the likelihood of foreclosure. It is noteworthy
that the issuance of such a loan is deemed to be un-
fair under Clwptcr 93A even if the lender provides
fair and complete disclosure of the terms of the
loan and the borrower is fully informed of the risks
he faces in accepting the loan. The unfairness,
therefore, does not rest in deception but in the
equities between the parties. See Swanson 1·.
Ba11kc:rs Lifi· c·o. 3S9 Mass. ,;45, 349 (!91\3) ("In
determining whether an act or practice is unfair, as
opposed to deceptive, we must evaluate the equities
between the parties"). The Legislature plainly
deemed it predatory and, thus, unfair for a lender to
make a high cost home loan, quickly reap the finan-
cial rewards from the high points, fees, or interest,
and then collect the balance of the debt by foreclos-
ing on the borrower when, as the lender reasonably
should have foreseen, he cannot meet the scheduled
payments. The Legislature, equally plainly, was
disturbed by mortgage foreclosures of the borrow-
er's principal dwelling, and thought it unfair for a
lender to issue a mortgage loan that the lender reas-
onably believes will result in foreclosure of the bor-
rower's home, even if the high cost of the loan
fairly reflects the risk of the loan ..
*10 The Attorney General has not alleged or
sought to prove that the loans at issue in this case
were "high cost mortgage loans" governed by the
Act. Yet, it is reasonable for this Court to consider
whether the loans at issue in this case fall within
the "penumbra" of the concept of unfairness reflec-
ted in the Act. This Court finds that, as to some
types of loans, they do. Under the Act, it was unfair
to issue a mortgage loan when the lender reason-
ably believed that the borrower could not meet the
scheduled payments. In the instant case, for those
home mortgage loans which:
1. were adjustable rate loans with an introductory
period of three years or less (generally, a 2/28 or
3/27 ARM);
2. with an introductory or "teaser" rate for the
initial period that was significantly lower than the
''fully· indexed rate " that is at least 3 percent be-
' ' FN9
low the "fully indexed rate;" ·
FN9. As an example, if the teaser rate is 7
percent, but the rate will reset to the six-
month LIBOR plus a margin of 6 percent,
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Page 10
the fully indexed rate will be 11 percent if
the six-month LIBOR at the time of the
loan origination is 5 percent.
3. where the debt-to-income ratio would have ex-
ceeded 50 percent had Fremont's underwriters
measured the debt, not by the debt due under the
teaser rate, but by the debt that would be due at
the ''fully indexed rate,"
the lender reasonably should have recognized (in
the absence of significant liquid or easily liquid-
ated assets) that the borrower would not be able
to meet the scheduled payments once the "teaser"
rate expired at the close of the introductory peri-
od. Loans with these three characteristics, there-
fore, were doomed to foreclosure unless the bor-
rower was able to refinance the loan at or around
the close of the introductory period. Tf housing
prices declined, however, refinancing was not
reasonably likely for these loans if they bore a
fourth characteristic-a loan-to-value ratio of 100
percent or a substantial prepayment penalty (that
is, a prepayment penalty beyond the
''conventional prepayment     defined in
h ' 1 I'" C' ' 2) I· N I J
t e Act, G .. -· c. "·' . , or a prepay-
ment penalty that extended beyond the introduct-
ory period.
FN I 0. The Act defines a "conventional
prepayment penalty" as "any prepayment
penalty or fee that may be collected or
charged in a home loan, and that is author-
ized by law other than this chapter,
provided the home loan (1) does not have
an annual percentage rate that exceeds the
conventional mortgage rate by more than 2
percentage points; and (2) does not permit
any prepayment fees or penalties that ex-
ceed 2 per cent of the amount prepaid."
G .. L. c. i 1\JC, 2.
Consequently, for loans with these four charac-
teristics, the lender reasonably should have recog-
nized that, after the introductory period, the bor-
rower would be unlikely to make the scheduled
mortgage payments and the loan was doomed to
foreclosure unless the fair market value of the prop-
erty had increased, thereby enabling the borrower
to refinance the loan and obtain a new "teaser" rate
for the introductory period. Given the fluctuations
in the housing market and the inherent uncertainties
as to how that market will fluctuate over time, this
Court finds that it is unfair for a lender to issue a
home mortgage loan secured by the borrower's
principal dwelling that the lender reasonably ex-
pects will fall into default once the introductory
period ends unless the fair market value of the
home has increased at the close of the introductory
period. To issue a home mortgage loan whose suc-
cess relies on the hope that the fair market value of
the home will increase during the introductory peri-
od is as unfair as issuing a home mortgage loan
whose success depends on the hope that the bor-
rower's income will increase during that same peri-
FNll
od.
FN 11. While the fair market value of hous-
ing in Massachusetts has risen 603% from
1980 to the third quarter of 2007
(compared to inflation of slightly over
250% during that period), its long-term in-
vestment value docs not mean that these
prices can reliably be expected to increase
each year. Office of Federal Housing En-
terprise Oversight, Change in OFHEO
State House Price Indexes (2007 Q3 Data);
Consumer Price Index, Int1ation Calculat-
or. Over the past 20 years, housing prices
in Massachusetts have fallen twice, in
1989-1992 and 2006-2007. See Kristopher
Gerardi, Adam Hale Shapiro, and Paul
Willen, ''Subprime Outcomes: Risky Mort-
gages, Homcownership Experiences, and
Foreclosures," Working Papers: Federal
Reserve Bank of Boston,
www.bos.frb.org/economiclwp!index. htm at
48. Similarly, the New York Stock Ex-
change's Dow Jones Index increased
I ,678% between the beginning of 1980 and
the end of the third quarter of 2007, but it,
too, experienced three significant periods
Add.20
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I

Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 517279 (Mass.Super.)
(Cite as: 2008 WL 517279 (Mass.Super.))
Page II
of negative and/or stagnant growth, in
1978-1982, 1987-199!, and 2001-03. Dow
Jones Industrial Average, viewed at fin-
ance.yahoo.com/echarts. While in hind-
sight these price drops may be seen as pre-
dictable, considering, in the words of
former Federal Reserve Board Chief Alan
Greenspan, the "irrational exuberance" of
these markets, they are rarely reliably pre-
dicted before they happen and do not occur
in easily predictable cycles.
The empirical data in the Federal Re-
serve Bank Working Paper cited above
demonstrate the extraordinary impact of
falling housing prices on foreclosures.
The study estimated that, over the past
12 years, 18 percent of borrowers who
purchased their homes with sub-prime
mortgages suffered a foreclosure, as
compared to only 3 percent who pur-
chased their homes with prime mort-
gages. Subprime Outcomes at 2. The
study found that:
[H]ouse price appreciation plays a dom-
inant role in generating foreclosures:
homeowners who have suffered a 20 per-
cent or greater fall in house prices are
about fourteen times more likely to de-
fault on a mortgage compared to
homeowners who have enjoyed a 20 per-
cent increase. We attribute most of the
dramatic rise in foreclosures in 2006 and
2007 in Massachusetts to the decline in
house prices that began in the summer of
2005. Subprime lending played a role
but that role was in creating a class of
homeowners who were particularly sens-
itive to declining house price appreci-
ation, rather than, as is commonly be-
lieved, by placing people in inherently
problematic mortgages.
!d. at I. The study also determined that
rates of foreclosure "are highly sensit-
ive," not only to house prices, but "to the
initial combined loan-to-value ratio at
origination .... " !d. at 2. The authors
wrote:
Subprirne lenders created a group of bor-
rowers that were much more likely to de-
fault for at least two reasons. First, while
they did not invent zero-equity borrow-
ing, they did allow a much larger frac-
tion of borrowers to start homeowner-
ship with no cushion against negative
[house price appreciation]. Second,
subprime lenders allowed borrowers
with a history of cash flow problems and
with monthly payments that exceeded
fifty percent of current income to enter
homeownership.
!d. at 4. In short, the study confirms the
extraordinarily high risk of foreclosure
that arises in a volatile housing market
when subprime lenders approve loans
with the four characteristics identified
above.
* 1 I Therefore, just as a high cost mortgage
loan is treated as structurally unfair under the Act if
the lender reasonably believed at the time the loan
was issued that the borrower would be unable to
make the scheduled payments, this Court finds that
it is within the penumbra of that concept of unfair-
ness that any mortgage loan secured by the borrow-
er's principal dwelling should be presumed to be
structurally unfair if the loan possesses the four
characteristics described above:
!. The loan is an ARM with an introductory peri-
od ofthree years or less;
2. The loan has an introductory or "teaser" rate
for the initial period that is at least 3 percent
lower than the fully indexed rate;
3. The borrower has a debt-to-income ratio that
would have exceeded 50 percent if the lender's
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Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 5
(Cite as· 2008 WL 51727
9
(M S 17279 {Mass.Super.)
• ass. uper.))
underwriters had measured the debt, not by the
debt due under the teaser rate, but by the debt due
under the fully indexed rate; and
4. The loan-to-value ratio is 100 percent or the
loan carries a substantial prepayment penalty or a
prepayment penalty that extends beyond the in-
troductory period.
The effect of the presumption is to shift the
burden of production to the lender to demonstrate
that .the loan was not actually unfair, perhaps by s
howmg that the borrower had other assets that real-
istically could have enabled the borrower to meet
the scheduled payments and avoid foreclosure, or
other reasonable means of obtaining refinancing
even if the fair market price of the mortgaged home
had fallen. This presumption would not change the
burden of proving a Chapter 93.1\ violation; the bur-
den of proving that the loan was unfair remains
with the plaintiff borrower.
The Attorney General justly may ask why
"stated income" applications loans are not included
among the characteristics used to determine wheth-
er a loan is presumptively unfair, since "stated in-
come" loans are so prone to foreclosure. The reason
is that ''stated income" loans are no more prone to
foreclosure than full documentation loans if the
statements in the application are accurate; they be-
come more prone to foreclosure only if the applic-
ant (or the broker with the acquiescence or ignor-
ance of the applicant) falsely inflates his income or
assets. While such loans may not be prudent for a
bank to issue because they fail to protect the bank
from the risk of fraud, they cannot be said to be un-
fair to the borrower for this reason. ln other words
a borrower may not fairly complain that a bank w   ~
unfair to him by giving him an opportunity to lie on
his loan application without any meaningful risk of
getting caught.
Fremont justly may ask why this Court is ex-
tending to all home mortgage loans this principle-
that it is unfair for a lender to approve a home
mortgage loan secured by the borrower's principal
residence when the lender reasonably should have
recognized that the Joan is doomed to foreclosure
unless the borrower's income or the fair market
value of the residence increases-when the Legis-
lature declared this to be an unfair act only for high
cost mortgage loans. The reason is that this Court
does not believe the Legislature believed this prac-
tice to be tolerable for mortgage loans that did not
meet the definition of high cost mortgage loans.
Rather, this Court believes that the Legislature
thought it sufficient to focus on high cost mortgage
loans because it did not imagine that lenders would
issue loans with this degree of risk unless they were
high cost mortgage loans. What has changed since
the Legislature promulgated the Act is the increas-
ing prevalence of mortgage-backed securities,
which enabled lenders such as Fremont to assign
large quantities of their high-risk mortgages, take a
quick, profit, and avoid the risks inherent in the
f-NP
loan. - Consequently, since those purchasing
the mortgages to package them as mortgage-backed
securities were careless in evaluating the risks of
these loans, lenders such as Fremont could profit
from sub-prime mortgages that fell below the defin-
ition of high risk mortgage loans. As the mortgage
market changes, so, too, must the understanding of
what lending conduct is unfair.
FN 12. See Interagency Guidance on
Subprime Lending, issued by the United
States Office of the Comptroller of the
Currency, the Board of Governors of the
Federal Reserve Board, the FDIC, and the
Office of Thrift Supervision, March I,
1999 at 6 ("Strong demand from investors
and favorable accounting rules often allow
securitization pools to be sold at a gain,
providing further incentive for lenders to
expand their subprime lending program.).
* l 2 Fremont also justly may observe that the
lending conduct this Court describes as unfair was
not generally recognized in the industry to be unfair
at the time these loans were made. Yet, for at least
three reasons, this does not mean it is inappropriate
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Page 13
Not Reported in N.E.2d, 23 Mass.L.Rptr. 567,2008 WL 517279 (Mass. Super.)
(Cite as: 2008 WL 517279 (Mass.Super.))
for this Court to find its conduct to be unfair. First,
as noted earlier, the meaning of unfairness under
Chapter 93A is not fixed in stone; nor is it limited
to conduct that is unlawful under the common law
or prior statutes. Sec Karrar l'. Demuulos, 433
\ < 1 • t s ~   at I 2-1 3. Rather, it is forever evolving, not
only to adapt to changing social, economic, and
technological circumstances, but also to reflect
what we have learned to be unfair from our experi-
ence as a commonwealth. Sec Ad v. Bw!ev. 38X
Mass. 307. 3 13 ( !91\3) ("This flexible set of
guidelines as to what should be considered lawful
or unlawful under c. 93/\ suggests that the Legis-
lature intended the terms 'unfair and deceptive' to
grow and change with the times."); Lo\t'e/l Gas Co.
v. A f(umey General, 3 77 Mass. 3 7. 51 ( 1979 J
(citations omitted) (quoting Judge Learned Hand's
view that part of the Federal Trade Commission's
duty is "to discover and make explicit those unex-
pressed standards of fair dealing which the con-
science of the community may progressively devel-
op.")
Second, Fremont had more than fair warning of
the dangers posed by the loans bearing the four
characteristics identified above. On October 8,
1999, in its Interagency Guidance on High LTV
Residential Real Estate Lending, issued by the
United States Office of the Comptroller of the Cur-
rency, the Board of Governors of the Federal Re-
serve Board, the FDIC, and the Office of Thrift Su-
pervision, lending institutions were warned:
Recent studies indicate that the frequency of de-
fault and the severity of losses on high LTV
[loan-to-value] loans far surpass those associated
with traditional mortgages and home equity
loans. The higher frequency of default may indic-
ate weaknesses in credit risk selection andior
credit underwriting practices, while the increased
severity of loss results from deficient collateral
protection. In addition, the performance of high
LTV borrowers has not been tested during an
economic downturn when defaults and losses
may increase.
!d. at 2 (footnote omitted). In this report, a high
LTV real estate loan was defined as a loan on a res-
idential property that equaled or exceeded 90 per-
cent of the real estate's appraised value, unless the
loan had appropriate credit support, such as mort-
gage insurance or other readily marketable collater-
al. !d. at I. It was reasonable to expect that the fre-
quency of default and the severity of losses would
be even greater as the LTV approached 100 per-
cent. Indeed, an Office of the Comptroller of the
Currency Advisory Letter (AL 2003-2), issued by
the Deputy Comptroller for Compliance, dated Feb-
ruary 21, 2003 forewarned that it may be found un-
fair to extend loans bearing the four characteristics
identified by this Court:
*13 The terms 'abusive lending' or 'predatory
lending' arc most frequently defined by reference
to a variety of lending practices. Although it is
generally necessary to consider the totality of the
circumstances to assess whether a Joan is predat-
ory, a fundamental characteristic of predatory
lending is the aggressive marketing of credit to
prospective borrowers who simply cannot afford
the credit on the terms being offered. Typically,
such credit is underwritten predominantly on the
basis of the liquidation value of the collateral,
without regard to the borrower's ability to service
and repay the loan according to its terms absent
resorting to that collateral.... When a Joan has
been made based on the foreclosure value of the
collateral, rather than on a determination that the
borrower has the capacity to make the scheduled
payments under the terms of the loan, based on
the borrower's current and expected income, cur-
rent obligations, employment status, and other
relevant financial resources, the lender is effect-
ively counting on its ability to seize the borrow-
er's equity in the collateral to satisfy the obliga-
tion and to recover the typically high fees associ-
ated with such credit. Not surprisingly, such cred-
its experience foreclosure rates higher than the
norm.
Jd at 2.
Add.23
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Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 517279 (Mass.Super.)
(Cite as: 2008 WL 517279 (Mass.Super.))
Page 14
Third, even the federal agencies whose failure
to monitor lending practices contributed to the cur-
rent sub-prime lending crisis now recognize that
mortgage loans bearing these four characteristics
generally are imprudent and present an unaccept-
able risk of foreclosure. The most recent Statement
on Subprime Mortgage Lending issued on July I 0,
2007 by the United States Office of the Comptroller
of the Currency, the Board of Governors of the
Federal Reserve Board, the FDIC, the Office of
Thrift Supervision, and the National Credit Union
Administration recognizes the "substantial risks to
both consumers and lenders" of sub-prime ARM
loans bearing certain characteristics, including low
teaser rates. Federal Register, Vol. .72, No I 31,
37569 (July 10, 2007) at 37572. Specifically, the
Statement declares:
Prudent qualifying standards recognize the poten-
tial effect of payment shock in evaluating a bor-
rower's ability to service debt. An institution's
analysis of a borrower's repayment capacity
should include an evaluation of the borrower's
ability to repay the debt by its final maturity at
the fully indexed rate, assuming a fully amortiz-
ing repayment schedule.
ld at 37573. Although this Statement did not
address specifically whether it would be unfair un-
der consumer protection principles for a lender to
approve a loan that the borrower could not afford to
repay at the fully indexed rate, the Statement did
characterize as a "fundamental consumer protection
principle" that loans should be approved "based on
the borrower's ability to repay the loan according to
its terms." !d. at 37574. In essence, now that the
foreseeable perils of these sub-prime lending prac-
tices have been experienced, to the great detriment
of homeowners, financial institutions, the securities
market, and the overall economy, these federal
agencies have belatedly recognized that it is both
imprudent and unfair to approve a mortgage loan
that the borrower cannot reasonably be expected to
repay if housing prices were to fall. Just because
we, as a society, failed earlier to recognize that
loans with these four characteristics were generally
unfair docs not mean that we should ignore their
tragic consequences and fail now to recognize their
unfairness. In short, approval of loans bearing these
four characteristics, in the absence of other liquid
or easily liquidated assets or special circumstances,
was unfair before and it is unfair today, even if we
were too blind earlier to recognize its unfairness.
* 14 To be sure, the fact that Fremont's loans
bearing these four characteristics were not gener-
ally recognized to be unfair at the time these loans
originated is not irrelevant to this Court's considera-
tion of this case. This Court will certainly take that
factor into account in determining what preliminary
injunctive remedy is appropriate to address the un-
fairness.
Moreover, even if a Fremont loan were to be
preliminarily found unfair (rather than simply pre-
sumptively unfair), that finding does not mean that
the borrower is released from his obligation to re-
pay this debt. The borrower received the money
that was lent pursuant to a written loan agreement
and presumptively is expected to repay the loan.
The impact of this preliminary injunction will be nil
upon a borrower who can afford to repay the Joan;
its impact will be felt only by those who cannot af-
ford to repay the loan in full and now face the risk
of foreclosure. The reason is that the unfairness of
these loans rests in their vulnerability to foreclos-
ure, not in the rate of interest charged or their lend-
ing terms.
In determining whether to grant a preliminary
injunction, this Court must perform the three-part
balancing test articulated in f>ackuging lnduslries
Group, Inc. l'. Chenev, 3 80 Mass. 609, (> 16-(J I 7
( 1980). First, the court must evaluate the moving
party's claim of injury and its likelihood of success
on the merits. ld at 617. Second, it must detennine
whether failing to issue a preliminary injunction
would subject the moving party to irreparable in-
jury-losses that cannot be repaired or adequately
compensated upon final judgment. ld at 617 & n.
I l. Third, "[i]f the judge is convinced that failure to
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Page 15
Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 517279 (Mass.Super.)
(Cite as: 2008 WL 517279 (Mass.Super.))
issue the injunction would subject the moving party
to a substantial risk of irreparable harm, the judge
must then balance this risk against any similar risk
of irreparable harm which granting the injunction
would create for the opposing party." 1d at 617. In
balancing these factors, "[w]hat matters as to each
party is not the raw amount of irreparable harm the
party might conceivably suffer, but rather the risk
of such harm in light of the party's chance of suc-
cess on the merits. Only where the balance between
these risks cuts in favor of the moving party may a
preliminary injunction properly issue." !d. When
the preliminary injunction is sought by the Attorney
General, this Court must also consider whether a
preliminary injunction would serve the public in-
terest. Communwealrh v. ELM t\fedi('(J/ l.ahurator-
ws. /r,, .. , 3.1 Mass.App.Ct. 71, (1992). See also
JJruuf.:lil!e 1'. (1uldsrein. 3l)X \1ass. 44.1. 447 ( 1983).
This Court finds that the Attorney General is
likely to prevail in proving that many of the mort-
gage loans issued by Fremont secured by the bor-
rower's primary residence that bear the four charac-
teristics outlined above are not merely pre-
sumptively unfair but actually unfair under    
93 A. This Court also finds that, with a carefully
measured preliminary injunction, the balance of
harms favors the Attorney General. This Court re-
cognizes that an overly broad preliminary injunc-
tion may not achieve a balance of harms that favors
the Attorney General.
*IS The Court's preliminary injunction shall re-
quire the following procedure before Fremont initi-
ates a foreclosure proceeding:
I. Before initiating or advancing a foreclosure on
any mortgage loan originated by Fremont that is
(a) NOT presumptively unfair, because it does
not possess each of the four characteristics identi-
fied above, or (b) NOT secured by the borrower's
principal dwelling, or (c) that is secured by a
dwelling that is vacant or uninhabitable, Fremont
shall first give the Attorney General 30 days ad-
vance written notice so that the Attorney General
can verify that the proposed foreclosure falls out-
side the scope of this Preliminary Injunction. If
the Attorney General has not given written notice
of an objection to Fremont by the 30th day, based
on her finding that the loan is presumptively un-
fair and is secured by the borrower's principal
dwelling and that the dwelling is both inhabited
and inhabitable, Fremont may proceed with the
foreclosure. If the Attorney General has given
written notice of an objection, Fremont shall pro-
ceed in accordance with paragraph 2 below.
2. Before initiating or advancing a foreclosure on
any mortgage loan originated by Fremont ( 1 )(a)
that is presumptively unfair, because it possesses
each of the four characteristics identified above,
and (b) secured by the borrower's principal
dwelling, and (c) where the dwelling is neither
vacant nor uninhabitable, or (2) in which the At-
torney General has provided a written objection
in accordance with paragraph 1 above, Fremont
shall give the Attorney General 45 days advance
written notice of the proposed foreclosure, identi-
fying the reasons why foreclosure is reasonable
under the circumstances and/or why the Attorney
General's written objection under paragraph I
above is in error. If the Attorney General has not
given written notice of an objection to Fremont
by the 45th day, Fremont may proceed with the
foreclosure.
3. If the Attorney General has timely given a
written objection under paragraph 2 above, the
Attorney General and Fremont shall within the
next 15 days attempt to resolve their differences
regarding the foreclosure. If these differences
have been resolved, the Attorney General will no-
tify Fremont in writing that she has withdrawn
her written objection. If these differences are not
resolved, Fremont may proceed with the foreclos-
ure only with the prior approval of this Court (or
a special master appointed by this Court), which
it may seek on the 16th day.
4. In considering whether to approve the foreclos-
ure, this Court will determine (a) whether the
loan is actually unfair and is actually secured by
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Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 517279 (Mass.Supcr.)
(Cite as: 2008 WL 517279 (Mass.Super.))
the borrower's primary residence that is both in-
habited and inhabitable, (b) whether Fremont has
taken reasonable steps to "work out" the loan and
avoid foreclosure, and (c) whether there is any
fair or reasonable alternative to foreclosure. This
Court will seek to expedite these decisions but, if
the number of such matters grows too large, this
Court may need to appoint a special master to as-
sist the Court.
* 16 In designing this preliminary injunction,
this Court anticipates that Fremont will act respons-
ibly in attempting to "work out" mortgage loans
prior to instituting foreclosure, and that the Attor-
ney General will act judiciously in determining
which loans do not warrant foreclosure. This Court
also recognizes that, while it can establish a process
that will permit the parties to resolve the vast ma-
jority of these issues, it cannot delegate to any party
the power ultimately to determine whether a mort-
gage loan is actually unfair or whether foreclosure
is the proper last resort.
Nothing in this Preliminary Injunction is inten-
ded in any way to interfere with or be inconsistent
with the FDIC's Consent Agreement with Fremont.
That Consent Agreement expressly declares that its
provisions do not bar a state Attorney General from
seeking further remedies against Fremont for unfair
or deceptive practices. Consent Agreement at 23.
Implicitly, if the Attorney General were to prevail,
preliminary injunctive relief ordered by a court to
ameliorate the adverse consequences of Fremont's
unfair practices are also not barred by the Consent
Agrl'ement. Nor are the terms of this Preliminary
Injunction so harsh as to interfere with the FDJC's
objective of restoring Fremont to firmer financial
footing through the restoration of sound banking
practices.
Finally, this Court emphasizes that borrowers
who have received presumptively unfair loans from
Fremont should not interpret this preliminary in-
junction to mean that they have been released from
their obligation to repay these loans. They have not
been given any such release. Borrowers share with
Fremont the responsibility for having entered into a
mortgage loan that they now cannot repay. The
spirit of this decision is simply that Fremont, hav-
ing helped borrowers get into this mess, now must
take reasonable steps to help them get out of it.
ORDER
For the reasons stated above, this Court hereby
ALLOWS the Attorney General's motion for a pre-
liminary injunction to the extent that, pending final
adjudication or further orderr of this Court, this
Court ORDERS as follows:
I. Before initiating or advancing a foreclosure
on any mortgage loan originated by Fremont that is
(a) NOT presumptively unfair, because it does not
possess each of the four characteristics identified
above, or (b) NOT secured by the borrower's prin-
cipal dwelling, or (c) that is secured by a dwelling
that is vacant or uninhabitable, Fremont shall first
give the Attorney General 30 days advance written
notice so that the Attorney General can verify that
the proposed foreclosure falls outside the scope of
this Preliminary Injunction. If the Attorney General
has not given written notice of an objection to Fre-
mont by the 30th day, based on her finding that the
loan is presumptively unfair and is secured by the
borrower's principal dwelling and that the dwelling
is both inhabited and inhabitable, Fremont may pro-
ceed with the foreclosure. If the Attorney General
has given written notice of an objection, Fremont
shall proceed in accordance with paragraph 2 be-
low.
*17 2. Before initiating or advancing a fore-
closure on any mortgage loan originated by Fre-
mont (I )(a) that is presumptively unfair, because it
possesses each of the four characteristics identified
above, and (b) secured by the borrower's principal
dwelling, and (c) where the dwelling is neither va-
cant nor uninhabitable, or (2) in which the Attorney
General has provided a written objection in accord-
ance with paragraph I above, Fremont shall give
the Attorney General 45 days advance written no-
tice of the proposed foreclosure, identifying the
reasons why foreclosure is reasonable under the cir-
Add.26
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r
Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008 WL 517279 (Mass.Super.)
(Cite as: 2008 WL 517279 (Mass.Super.))
cumstances and/or why the Attorney General's writ-
ten objection under paragraph l above is in error. If
the Attorney General has not given written notice
of an objection to Fremont by the 45th day, Fre-
mont may proceed with the foreclosure.
3. If the Attorney General has timely given a
written objection under paragraph 2 above, the At-
torney General and Fremont shall within the next
15 days attempt to resolve their differences regard-
ing the foreclosure. If these differences have been
resolved, the Attorney General will notify Fremont
in writing that she has withdrawn her written objec-
tion. If these differences are not resolved, Fremont
may proceed with the foreclosure only with the pri-
or approval of this Court (or a special master ap-
pointed by this Court), which it may seek on the
16th day.
4. In considering whether to approve the fore-
closure, this Court will determine (a) whether the
loan is actually unfair and is actually secured by the
borrower's primary residence that is both inhabited
and inhabitable, (b) whether Fremont has taken
reasonable steps to ''work out" the loan and avoid
foreclosure, and (c) whether there is any fair or
reasonable alternative to foreclosure. This Court
will seek to expedite these decisions but, if the
number of such matters grows too large, this Court
may need to appoint a special master to assist the
Court ..
Mass.Super.,2008.
Commonwealth v. Fremont lnv. & Loan
Not Reported in N.E.2d, 23 Mass.L.Rptr. 567, 2008
WL 5 l 7279 (Mass. Super.)
END OF DOCUMENT
Add.27
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Page 17
..
Westlaw
Not Reponed in N.E.2d, 2011 WL 61186 (Mass.Land Ct.)
(Cite as: 2011 WL 61186 (Mass.Lund Ct.))
H
Only the Westlaw citation is currently available.
Massachusetts Land Court.
Department of the Trial Court, Worcester County.
Daniel J. LYONS et ux, Plaintiff,
V.
MORTGAGE ELECTRONIC REGTSTRATION
SYSTEMS, INC.,
and
Countrywide Home Loans, Inc., its Successors and
Assigns, Defendants.
No. 09 MISC. 416377(JCC).
Jan. 4, 20! 1.
DECISION ALLOWING DEFENDANTS' MO-
TION TO DISMISS THE COMPLAINT UN-
DER MASS. R. CJV. J>. 12(B)(6)
JUDITH C. CUTLER, Justice.
*1 In this action, Plaintiffs Daniel J. Lyons and
Tammy A. Lyons challenge the validity of a fore-
closure deed issued for property at 2 J Chapin Street
in Northborough, Massachusetts (the ''Property").
Defendant Mortgage Registration Systems, Inc.
("MERS") as nominee for Defendant Countrywide
Home Loans, Inc.   issued said
Foreclosure Deed to a third party · after con-
ducting a foreclosure sale on October 26, 2009. In
their Verified Complaint, the Plaintiffs assert that
MERS did not have proper authority to conduct the
foreclosure sale and that, therefore, the sale was
void as a matter of law. The Plaintiffs claim that,
because the foreclosure sale was conducted by a
party lacking the statutory power of sale under the
mortgage, there is a cloud on the Plaintiffs' title to
the Property. Finally, the Plaintiffs assert that only
the lender, as the holder of the note, has the right to
execute the power of sale under the mortgage until,
and unless, it has assigned that mortgage. The
Plaintiffs contend that there is no such assignment
of record here, and seck cancellation of any unre-
corded assignments which may have been made.
Page 1
F:--J t. Said foreclosure deed was issued to
the Bank of New York Mellon flk/a The
Bank of New York as Trustee for the Cer-
tificate Holders CW ABS, Inc. Asset-
Backed Certificates Series 2005-17.
On February 9, 2010, Defendants MERS and
Countrywide filed a Motion to Dismiss Plaintiffs'
Complaint, under Mass. R. Civ. P. t 2(b)(6). On
February 26, 2010, the Plaintiffs filed their Opposi-
tion thereto. A hearing on the Motion was held on
June 9, 2010, at which time the court invited the
parties to submit certain supplemental documenta-
tion referenced in, and/or n;:lied upon, in the
Plaintiffs' Verified Complaint.!-· NZ The Defendants
submitted additional documents on June 21 and
June 23, 201 0; the Plaintiffs submitted additional
documents on June 22, 20 l 0.
FN2. An evaluation under 12(b)(6) can
properly include the entirety of documents
integral to, referenced in, or explicitly re-
lied upon in the complaint, even if they
were not attached to said complaint. See.
e.g., Juhn\tun 1'. l3ox. 453 569, 5K3
and i\-lonam v. Kohricf; 0/l\hore
Fund. Ud. 442 43, 45, 11. 4 (2004),
and cases cited therein.
After considering the documents which are ref-
erenced in, or are integral to, the Complaint
(including the Plaintiffs' Certificate of Title to the
Property, the Note and Mortgage, and the Foreclos-
ure Deed and Affidavit), the parties' written
memoranda of law, and representations made dur-
ing the hearing on the Defendants' Motion to Dis-
miss, I conclude that the Plaintiffs are not entitled
to relief under any of the theories advanced in their
Complaint. The Defendants' Motion to Dismiss is
ALLOWED.
The salient facts in this case are not disputed.
The Plaintiffs arc listed as owners of the Property
on Transfer Certificate of Title No. 14907, issued
Add.28
© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.
Not Reported in N.E.2d, 2011 WL 61186 (Mass.Land Ct.)
(Cite as: 201 I WL 61186 (Mass.Land Ct.))
by the Worcester County District Registry of the
FN3
Land Court on May 7, 2003. · · On November 22,
2005, the Plaintiffs executed a note in favor of
Countrywide in the amount of $200,000 (the
"Note"). On the same day, the Plaintiffs granted a
mortgage on the Property, to secure the Note. Said
mortgage was registered on November 30, 2005 in
the Worcester County Registry District of the Land
Court as Document No. 89!53 (the "Mongage"),
and noted as an encumbrance on the Plaintiffs' Cer-
tificate of Title to the Property. There are no as-
signments of the Mortgage (to MERS or any other
party) noted on Certificate ofTitle No. 14907.
FN3. Prior to the issuance of said Certific-
ate, the Plaintiffs had acquired fractional
interests in the Property under Transfer
Certificate No. 14789. Said Certificate No.
14789 was cancelled when Transfer Certi-
ficate No. 14907 was issued to the
Plaintiffs.
*2 The Mortgage executed by the Plaintiffs
identifies Countrywide as the "Lender" and MERS
as the mortgagee. The Mortgage states that
MERS is a separate corporation that is acting
solely as nominee for Lender and Lender's suc-
cessors and assigns. MERS is the mortgagee un-
der this Security Instrument.
The Mortgage further provides, under the head-
ing "POWER OF SALE," that
[t]his Security Instrument secures to the Lender:
(i) the repayment of the Loan, and all renewals,
extensions and modifications of the Note; and (ii)
the performance of Borrower's covenants and
agreements under this Security Instrument and
the Note. For this purpose, Borrower does hereby
mortgage, grant, and conve.v to lv!ERS (solely as
nominee for Lender and Lender's successors and
assigns) and to the successors and assigns of
MERS, with power of sale, the following de-
scribed property ... 21 Chapin Street, Northbor-
ough Massachusetts. (Emphasis added).
Page 2
In their Motion to Dismiss, the Defendants as-
sert that MERS, as designated mortgagee under the
express terms of the Mortgage, was entitled, upon
breach of the Mortgage conditions, to execute the
power of sale contained in the Mortgage, by con-
ducting a foreclosure auction pursuant to Ci. L.c.
244. § 14. In the   Opposition to the Mo-
tion, they do not deny that they were in default of
their obligations under the Mortgage prior to the
foreclosure sale. Nor do the Plaintiffs argue that the
foreclosure sale was not conducted in accordance
with statutory procedures for notice and advert-
ising. Rather, the Plaintiffs contest the authority of
MERS to foreclose on the Property and conduct the
foreclosure sale, by asserting that only Country-
wide, as Lender, was authorized do so where there
is no record that the Mortgage was ever assigned to
MERS. The Plaintiffs, moreover, contest the legal-
ity of the "MERS as nominee" for Lender arrange-
ment specified in the Mortgage, asserting that such
an arrangement unlawfully separates the note and
the mortgage.
The Mortgage expressly designates MERS as
the mortgagee (solely as nominee for the Lender,
and its successors and assigns). Moreover, for the
purpose of securing the Borrowers' performance
under the Mortgage and the Note, the Mortgage in-
cludes the Lyons' express grant and conveyance of
the Property, with the power of sale, to M ERS as
nominee in said capacity.
There is no viable basis for the Plaintiffs' claim
that the foreclosure sale of the Property should be
invalidated because MERS foreclosed on the Prop-
erty as nominee for Countrywide. The Mortgage it-
self specifically names MERS (as nominee for the
Lender) as the "mortgagee," and expressly grants
the power of sale to MERS as nominee. I find noth-
ing in G.L. c. 244, 0 14 which would obviate these
. FN4 ,
nghts.
FN4. Section 14 of Cha plc..:r 244, entitled
"Procedure in Foreclosure Under Power of
Sale; Form and Publication of Notice,"
provides, in relevant part that "[t]he mort-
Add.29
t'l 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.
Not Reported in N.E.2d, 2011 WL 61186 (Mass.Land Ct.)
(Cite as: 2011 WL 61186 (Mass.Land Ct.))
gagee ... , or a person authorized by the
power of sale ... may, upon breach of con-
dition and without action, do all the acts
authorized or required by the power ...
(Emphasis added).
The U.S. Bankruptcy Court's decision in In re
l!uggins, 357 B.R. !80 ( Bankr.D.Mass.2006), also
illuminates the fallacy in the arguments
that MERS lacked authority to foreclose as the
Lender's "nominee" because such an arrangem,ent
I , II h d J·:\JS
un awtu y separates t e note an mortgage.
Addressing circumstances strikingly similar to
those in the instant case, the Bankruptcy Court
ruled in Huggins that ''MERS as the mortgagee
named in a recorded mortgage (albeit in a nominee
capacity)" was authorized under 244, 14 to
exercise the power of sale. In re   357 B.R.
at I 03. The Bankruptcy Court also found no discon-
nection between the note and the mortgage where
MERS was acting as nominee for the lender which
held the note, and that
FN5. The cases cited by the Plaintiffs to
support their arguments are either not rel-
evant to question of whether a lender's
nominee may exercise the power of sale, or
arc not controlling because the cases arc
from another jurisdiction.
*3 the logic of a denial of MERS's foreclosure
right as mortgagee would lead to anomalous and
perhaps inequitable results, to wit, if MERS can-
not foreclose though named as mortgagee, then
either fthe lender] can foreclose though not
named as mortgagee or no one can foreclose, out-
comes not reasonably or demonstrably intended
by the parties.
In r,· llztggills, 357 B.H .. at I l-\4.
Here, too, the Plaintiffs expressly granted the
Mortgage to MERS (as nominee for the Lender),
with the power of sale. As a result of this grant,
MERS needed no assignment. Where such an ar-
rangement is entirely consistent with the express
terms of the Mortgage, as well as with Massachu-
Page 3
sctts law, the Plaintiffs' complaint docs not
"plausibly suggest an entitlement to relief." fun-
nacchino l'. Ford Motor Company. 45 I Mass. 623,
636 (200R). Accordingly, Judgment shall enter dis-
missing the Plaintiffs' Complaint, with prejudice.
Mass.Land Ct.,20ll.
Lyons v. Mortgage Elec. Registration Systems, Inc.
Not Reported in N.E.2d, 2011 WL 61 I 86
(Mass.Land Ct.)
END OF DOCUMENT
Add.30
:g 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.
\'
---
' . l ' '
SUFFOLK, ss.
COM;v10NWEAL TH OF MASSACHlJSETfS
IIE1\'RIETTA EATON
vs.
SliPF:RIOR COURT
CIVIL ACTION
'i 0 J
// -;Ji)-'
FEDERAL NATIONAL ,\40RTCAGE ASSOClATION & anothcr
1
MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF'S MOTIOI\
v:.·:: F()J{ PI<EI ..JMINl\llY INJtJNCrfJ()N
The plaintiff Henrietta Eaton ("Eaton") brought this action against defendants
Fdcral National Mortgage Association ("Fannie Mac") and Green Tree Servicing, LLC
("Green Tree") (collectively, "Defendants"). The matter is before the court on Eaton's
motion for a preliminary injunction to enjoin Fannie Mae from prosecuting a summary
process eviction ca.<;e brought against Eaton in the Boston Housing Court. for the
reasons discussed below, Eaton's morion f'ur a preliminary injunction is ALLOWED.
BACKGROUND
On September 12,2007, Eaton executed a note in f<1vor of BankUnitcd, FSB in
the amount of $145,000 (the "Note"). To secure that obligation, Eaton
contemporaneously granted a mongage on her home to Mortgage:: Electronic Registration
Systems, Inc. ("MERS") acting a.'> nominee for Bank United, FSB (the "Mortgage").
MEI(S subsequently assigned the Mortgage to Green the does not
reference the Note.
--····-·--·-·- ·--·-·------
i (in:en Tree Servicing, LLC
Add.31
Due to Eaton's nti!un: to make payments on the Note. Green Tree moved to
foreclose on her horne. On November 24. 2009, Green Tree conducted a foreclosure
auction where it.submitl<..:d the highest hid of $170.185.89. CJrcen Tree later assigned its
rights to the winning bid ro Fannie Mae.
On January 25, 10 I 0, Fannie Mac commenced a summary process action in
Boston Housing Court to evict Eaton. In response, Satan filed a counterclaim,
contending that the foreclosure was invalid. Eaton maintained that because Green Tree
did not possess the Note at the time of the foreclosure, it did not have the authority to
enforce the Note through the foreclosure process. After oral argument and hearing on the
issue, the Housing Court granted a stay of the summary process action allowing Eaton to
seck relief in the Superior Court. Eaton now seeks a preliminar:v injunction to prevent the
eviction action from proceeding further.
The Defendants hnve produced a photocopy of the Note. It is endorsed in blank
:md does not bear an allonge indicating when it was endorsed or who held it at the time of
the forcdosure. For the purposes of this motion only, Defendants stipulate that Green
Tree did not hold the Note when the foreclosure occurred.
DISCUSSION
To obtain iqjunctivc relief a plaintiff must demonstrate that: ( 1) she is·tikely to
succeed on the merits of her claim; (2) irreparable harm will result absent the injunction;
and (3) the irreparable ham1 outweighs any harm the defendant will sutter if the
injunction is granted. t.?s:1agi!lgJQdus. Gr,n., Inc. v.   3RO Mass. 609, 617 (1980).
2
Add.32
A. Jf an if1.iynctiotillnot_granted. Eaton will sutler tl.ill!
QU!wcighs atl):__Qotcnti<ll ham1 to the Defendants.
Eaton has clearly demonstrated that she will suffer irreparable harm without an
injunction and that such harm outweighs any harm Fannie :'viae rnay if an
injunction is granted. Absent an injunction, Fannie Mae will proceed \\ith its eviction
action against Eaton and she >viii lose her horne. The loss of one's property is a
considerable ham1. See Strm:.l9n v. (hm!m.i9.D Mo.r_tg.JJn re   ](iO B.R. 8. II
(Ban.kr. D. Mass. 2007) (in granting injunction based on debtor's claim of invalid
foreclosure, finding that "the loss of the [d)ebtor's home would constitute an irreparable
harm"). Fannie Mae, conversely. is likely to face only financial loss if an injunction is
granted. Significantly, any such loss will be mitigated by momhly use and occupancy
payments which have been ordered hy the Housing Court during the pendency ot this
action
Eaton argues that the of her home was invalid because Green Tree did
not hold the Note when the foreclosure occurred. The Defendants. however, contend that
because Green Tree possessed the Mortgage, it had sufficient authority to foreclose on
Eaton's horne. This court tinds that is likely to succeed on the merits of her claim.
I. Under the common law, both mortga,;e und mortgage note must he
held by the foreclosing entity to validly.fim·dose.
In the course of commerce, the two instmments acquired hy a lender when a
mortgage loan is funded may then.:afler be separately transferred or assigned; the
promissory note (evidencinr,, the deht) and the mortgage note (securing the debt) may
travel independently. !:<:HnSQLL& Co.J.nc. v. Abrams, 305 Mass. 238, 245 (1940); M.G.I..
3
Add.33
\"'
'
2!8 s. 28. But as th1s court rc:ads the common law, two instruments must be re-united
in order to effectively foreclose the mortgagor's right ro redeem 1 he property. See
Wg!gll v. IS I Mass. 4() J, 465 ( 1860) (''the posst·ssion of the debt [is)
essential to an effective mongage ... withow it (one cannot] maintain an action ro
foreclose the mortgage."): 226 Mass. 582.585 (1917) ("possession of
the note I is j essential to an enforceable mortgage without wh 1ch I no) mortgage could
effectively be foreclosed . .''j It appears that this possession must be actual and physical.
See Qeffen v. Paletz, 3 12 1\-Liss. 48, 54 ( 1942) ( .. the {assignee of the mortgage] never had
possession of the (promissory J note and consequently, is not a 'Holder' or 'Bearer").
Thus, as Eaton accurately points out, Massachusetts courts have historically held
that one must hold both the mortgage and the mortgage note before initiating foreclosure.
This rule 11ows from rhe tact that a mortgage, by definition, is simply a security IClr the
note. Private Lendi!]g_& Inc. v. Fir$J Afl1. Title lnLro .. 54 Mass. App. Ct.
532, 537 (2002). ft is "but an incident to the debt." v. 317 Mass. 538, 54!
(1945); set:     v . . Stem, 291 Mass. 86,89 (1935). Without the
mortgage note, a mortgagee holds nothing more than ''a mere technical interest" in tnJst
for the note holder. ':}/ olco_li. R l Mass. at 465; see Morris v. 123 Mass. 58, 59
( 1877) (mortgagee without mongage note holds "naked legal title" in trust); Young v.
MilJgr, 72 Mass. !52, 154 ( 1856) (mortgagee without mortgage note holds a "barren fee"
in trust); Sanger v. 78 Mass. 365, 367 (1859) ("A mortgage cannot be made
available without connecting it with the debt or duty secured thereby. To one who has
not the debt, it is of no value as property, as it could at most lx: only resorted to aS a trust
for the benefit of tl1e holder of the note."). The mortgage note has a pamsitic quality, in
4
Add.34
that its vitality depends on the promissory note. See at 54. (''iftht: debt itself
were not in existence, the assignee has ... at most a naked legal title to the mortgage.)
There is no inconsistency between this analysis and the recent decision in
U.S.Ban.k .. tlation:ll Association v. !bang, 458 Mass. 637 (2011). lQanez restated
common law of the Commonwealth to the effect thnt rhc assignment of a mortgage must
be efft:crive heforc l'orcclosurc in order tube valid. In ib!lncz. it was undisputed that the:
foreclosing entities were the note holders. The plaintiffs argued that, as note holder,<,.
they had a suflicicnt financial interest to foreclose. Not so, said the Court; as note
holders separated from the mortgage due to a lack of effective assignment, they h11d only
a beneficial interest in the mortgage note. The Court held that the power of snle statute.
by its tem1s, granted that authority to the mongagee, not to the owner of the
intcn:st.
2
The SJC did not address the authority of the assignee of the mortgage not in
possession of the note to foreclose.
Emphasizing the age ofthe Massachusetts appellate cases upon which Eaton
relies, Defendants argue that G. L. c. 244, § I 4 has supplanted the rule articulated in
Y/olcott. and related cases.
2. G. L. c. 24-/, .i\ 14 has no! superseded the common law.
General Laws c. 244, § 14 provides th<Jt:
The mortgagee or person having his estate in the land mortgaged, or a
person authorized by the power of sale, or the attorney duly authorized h)
a writing under seal, or the legal guardian or conservator of such
mortgagee or person acting in the name of such mortgagee or person, may,
upon hrcach of condition and \Vithout action, do all the acts authorized or
rcqlJired by lhe power (ofsalej ....
2
Such power can be rightfully exercised by "the or his executors,   nr
assigns.'' M .G.L c. I !D §21
Add.35
The Defendant:. observe thar that this ::,latute is directed solely to the mortgaxee without
reference to rhe hold,_,,. of tht: underlying note. They invite this coun to consider the plain
meaning of the statute. However, the plain meaning of morrgagee. as intended by the
legislature at enactment and the present day interpretation of the tem1, may \vell differ:'
Moreover. this court must be cautious bcfi)re interpreting a statute .. as effecting a
material change in or a repeal of the common law unless che intent to do so is cleurly
expressed." !3rear v. _Fagan, 447 Mass. 68, 72 (2006) (quoting v. :White, 320 Mass.
487,491 (1946)) (internal quotes omitted); see Wharf E. Condo. Ass'n v.
Waterfront   407 Mass. 123, 129 (!990) (court should not presume that
I .egislature intended ''a radical change in the common law without a clear expression of
such intent."). No showing has been made to date that the Legislature clearly intended to
modify the common law to accommodate the present interpretation.
4
The legislative history of G. L. c. 244, § 14 reveals no such intent. Chapter 244, §
14 has its roots in an 1857 statute, which also uses the term mortgagee wirhow reference
to tlw note holder. The 1857 stature stutes in relevant pan:
ln all cases, in which a power of sale is conwined in a mortgage deed of
real property, the mortgagee, or any person having his estate therein, or in
or by such power authorized to act in the premises, may, upon a breach of
the condition thereof, give such notices and do all such acts as are
authorized or required by such power ....
---------------
-' Black's Law Dictionary defined mortgagee as "he that takes or receives a mortgage" in the First rlm>Ugh
Fifth editions spanning 1891 to 1979. It was rendered gender-neutral in the Sixth edition. In 1999, the
term defined "one 10 whom property is mortgaged; the mortgage-creditor, or lender· ·also
mortgage- holtkr": rJris tt'mlinology is retained into the Ninth tx!ition. This is persuasive of the proposit1on
that, leaving aside conveyancers, those having reason to use the term in general legal discour;e intended
mortgagee w mean rlw holder of the note and the mungagc, <llld not the assignee of the mortgagr only
4
No appellate coun ofthe Commonwealth ha.\ mt1fied the Defendants' interpretation, although ir has heen
adopted by a nurnher of trial courts.
Add.36
St. 1857, c 229. §I. This statute was in effect when the Wolcott and Crov.lev couns
' ·---- --------
ohscrved that one must hold the note in order to enforce it through foreclosure. Thus. the
courts evident] y bel icved that the term mortgagee as used in the 1857 statute pre:;umes
that the mongage holder is also the holder of the mongage note. Because G. L. c. 244.
§ 14 is so similar 10 the 1857 statute. the assumption underlying the !857 statute must
exist in §14.
It is also apparent from the larger context of G. L. c. 244 that the Legislature
likely did not intend the word mortgagee to mean that one can initiate a  
without the note. General Laws c. 244. § 178 which deals with the deficiency after
foreclosure provides in relevant pan:
No action for a deficiency shall be brought after June thirtieth, nineteen
hundred and forty-six by the holder ofa mortgage nore or other obligation
secured by mortgage of real estate ajier a foreclosure sale by him taking
place after January first, nineteen hundred and forty-six unless a notice in
writing of the mortgagee's intention ro foreclose the mortgage has been
mailed, postage prepaid, by registered mail with return receipt requested,
to the defendant sought to be charged with the deficiency at his last
address then known to the morrgagee, together with a warning of liability
for the deficiency, in substantially the form below, not less than twenty-
one days before the date of the sale under the power in the mortgage, and
an affidavit has been signed and sworn to, within thirty days after the
foreclosure sale, of the mailing of such notice. A notice mailed as
aforesaid shall be a sufficient notice, and such an affidavit made within the
time specified shall be prima facie evidence in such action of the mailing
of such notice. (italics supplied.)
The section implicitly assumes that the holder of the mortgage is also the holder of the
mortgage note. It uses the tcnn mortgagee and holder <?fa note
interchangeably. The use ofthe tem1 mongage note when modem parlance would call
for promnsory note reflects a common understanding of generic terms, bad when the
7
Add.37
'
i!
_.JJ. j
statute was enacted. The phrase "foreclosure sale hy· him" in the first sentence refers to
the holder of the mortgage note. undcm1 ining De tendants · interpretation.
··Where two statutes deal with the same subject they should be interpreted
harmoniously to effectuate a consistent body of law." Boston Hous. AuJ.h: v. L.a(>QI
Rel_a_tions Comm 'n. J 98 Mass. 7 l 5. 718 ( 1986 ). Sections 14 and I 7B both address the
collection of a loan secured by a mortgage. In order for the two provisions within G. L.
c. 244 to be read harmoniously, the term morrgagee must refer to a party in possession of
both the mortgage and the note securing it.
5
To support their reading of mortgagee in G. L. c. 244, § 14, the Defendants rely
on a !\1assachusetts federal district court case and a Massachusetts Superior Court case
that rejected argumems similar to Eaton's based on the statute's language. See Valerio v.
U.S.J}ank. N.:\., 716 F. Supp. 2d 124, 128 (D. Mass. 2010) (noting statute governing
statutory power of sale is addressed to mortgagees rather than note holders); v.
Mor:tg§l.!e Elec.   2011 Mass. Super. LEXIS 32 at I 0 (Mass.
Super. 20 II) (same); see also v. 20 II U.S. Dist. LEX IS
45858 at* 15 (D. Mass. 20!!) (citing Valerio); Mcc..K<;nllli v. Wells Fargo Bank, N.A, U.S.
Dist. LEXIS 28719 at *7 (D. Mass. 2011) (same). These decisions were based on the
plaintiffs' failure to cite supporting authority. The court emphasized plaintilTs
failure to provide it any Massachusetts case law on the subject. 716 F. Supp. 2d at 128.

5
The Defendant's usage of"mortgagee" also renders the statute inconsistent witll G. L. c. I 06, § 3·30 I, a
statute passed after G. L c. 244, § 14. Subject to certain exceptions not relevant here, under§ 3-301, the
only person entitled to enforce a promissory note is the holder of the note. Citing Pemsteig v. Stimpson, 16
Mass. App. Ct. 2ll3 (1994), the Defendants argue that § 1-301 does not govern promissory notes. Pcmstc.m.
however, only stands for the proposition that Article 9 of the Massachusetts version of the Uniform
Commercial Code("{ JCC") does not apply to a guarantee contract. In contrast, First Nat. Bank of Cape
v. North     Sav. Bank suggests that Article 3 is applicable to mortgage notes. 7 Mass.
App. Ct. 790, 796 ( 1979) ("The Uniform Commercial Code continues to recogni7.e the negotiability of a
note which is secured by a real estate mortgage.").
Add.38
Likewise, in _t'\damson, the coun noted the "absence of authority" for rlaintiff's
proposition. 2011 Mass Super. LEXIS 32 at *9. In contrast. Eaton h:::; persuasively
cited Massachust!tts authority to support her argument
3. Sound reason supporrs requiring the mortgaxe and mongage note
to he umfied utj(·)/·cc!osure
In finding that Eaton is likely to succeed on her claim, the coun 1s d.lgnizant of
sound rt'ason that •.vould   historically supponed the common law rule requiring the
uniflcation of the promissory note and the mortgage note in the forcclosmg entity prior to
foreclosure. Allowing foreclosure by a mongagec not in possession of the rnongage now
is potentially unfair to the mortgagor. !\holder in due course of the promissory note
could seck to recover against the mortgagor, thus exposing her to double liability. See i:
,Slar MLm]t.. Inc. v. 940 F. Supp. 512,520 (D. E.D.N.Y. 1':>96); Cf.
v. f3ogas, 317 Mass. 341,344 (1944) (noting thataJlowing a creditor of the mortgagee to
reach and apply the interest of the debtor in the mongage itself would "leav[ e J the note
outstanding as a valid obligation of the mortgagor to the holder ofthe note who might
possibly be a person other than the mo11gagee. ").
CONCLUSION AND ORDER
For the reasons set forth above, Eaton's motion for preliminary in1unction is
ALLOWED. Fannie Mae is hereby enjoined until further ordn of this court from
proceeding with its previously commenced summary process action Court
Docket 2010-SP-0379 with respect to Eaton's residence at 141 Dd<>rcst Street,
Ro:))indale, Massachusetts, or l'rorn interfering with the Eaton's rossession and enjoyment
thcrcuf.
9
Add.39
Fannie Mae has requested the disposition of this case be accelerated due to the
delay interposed by Housing and Superior Court proceedings. For that reason, and
recognizing that the validity of foreclosure deeds is a matter of urgent concern, the case is
scheduled for a Rule 16 conference on June 29, 201 J at 2:00PM to establish the tracking
order.
June 17, 20!1
l(J
     
rrances A. ivlclntyre
Justice, Superior Court
Add.40
SUPPLEMENTAL APPENDIX TABLE OF CONTENTS
Clerk's Notice
Judgment on Motion to Dismiss
Mortgage
S.A. 1
S.A. 2
S.A. 3
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S .A. 21
I .
Commonwealth of Massachusetts
County of Worcester
The Superior Court
Civil Docket WOCV201 0-00678
RE: Gailiastro et al v Mortgage Electronic Registration Systems Inc et al
TO: David E Fialkow, Esquire
Nelson Mullins Riley & Scarborough LLP
1 Boston Place
Suite 4040
Boston, MA 021 08
CLERK'S NOTICE
This is to notify you that in the above referenced case the Court's action on 10/28/2010:
RE: Defendant Mortgage Electronic Registration systems Inc's
MOTION to Dismiss (MRCP 12b) Complaint or Anne- Marie Gailiastr0
1
Joseph A Galiastro ; Memo in support riled; Plaintiff's
Opposition ; Plaintiff's memo in support riled; Notice or riling
; rule 9A Document list
is as follows:
Motion (P#7) ALLOWED for reasons set forth in defendant's Memorandum and as
to all counts (JohnS McCann, Justice) Notices mailed 11/3/2010
Dated at Worcester, Massachusetts this 3rd day of November,
2010.
BY:
Telephone: 508-831-2360 (Session Clerk) or 508-831-2350
Copies mailed 11/03/2010
Dennis P. McManus, Esq.,
Clerk of the Courts
Joseph W. Spillane
Assistant Clerk
abled individuals who need handicap accommodations should contact the Administrative Office of the
1erior Court at (617) 788-8130 -- cwresu1t_2.wpd 1s73133 motallow jurgiel
Q A 1
Gailiastro et al,
VS
Commonwealth of Massachusetts
County of Worcester
The Superior Court
CIVIL DOCKET# WOCV201 0-00678
Plaintiff{s)
Mortgage Electronic Registration Systems Inc et al,
Defendant(s)
JUDGMENT ON MOTION TO DISMISS
(Mass.R.Civ.P. 12b)
This action came on for hearing before the Court, John McCann, Justice upon
the Defendant's, Mortgage Electronic Registration Systems Inc, Harmon Law Offices
PC, motion to dismiss pursuant to Mass. R.Civ.P. 12(b), and upon consideration
thereof,
It is ORDERED and ADJUDGED:
That the Complaint of the plaintiff (s}, Anne- Marie Gailiastro, Joseph A Galiastro
is hereby dismissed against the defendant (s), Mortgage Electronic Registration
Systems Inc, Harmon Law Offices PC, for the reasons set forth in the Defendant's
memorandum.
Dated at Worcester, Massachusetts this 19th day of January, 2011.
I I [,_ . .c?'
By: ....... ;............. ~ .......   ~ ............... .
Assistant Clerk
Entered:O..;J
Copies mailed 01/)a/2011
cvdjudl2b_l.wpd 1589247 judl2b spillane
Return To:
FREMONT INVESTMENT & LOAN
P.O. BOX 34078
FULLERTON, CA 92834-34078
Prepared By:
BARBARA LICON
7000210975
Bk: 39475 Pg: 285
Bk: 3&476 Pg; 28
F>•ge; I ot te c?
131
!,.,_Doc: MTG
•c..vv 10:63 AM
-----------I Space Abo .. Thlr Lint For Aocordinc Data}-----------
MORTGAGE I N ~       ~
DEFINmONS
Words used in multiple sections of this document are defined below and other words are defmed in Sections
3, It, 13, 18, 20 and 21. Certain rules regarding the usage of words used in this document are also provided
in Section 16.
(A) "Security Instrument" means this document, which is dated Ju I y Z6, 2006
togeuw with all Riders to this document.
(B) "Borrower" i.1 JOSEPH A. GALIASTRO AND ANNE-MARIE Ill. OALIASTRO
Borrower is U1e morq:agor under this Security Instrument.
(C) "MERS" is Mortgage Electtonic Registration Systems, Inc. MERS is a separate corporation that is acting
solely as a nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this
Security Instrument. I\1ERS is organized and existing under the laws of Delaware, and has an address and
telephone number of P.O. Box 2026, Flint, Ml 48501·2026, tel. (888) 679-MERS.
MASSACHUSETTS-Single Family-Fennle M .. /Futddle Meo UNIFORM INSTRUMENT WITH MERS
Form 3022 1101
S.A. 3
(D) "Lender" is FREMONT INVESTMENT ·& LDAN
Lender is a CORPORATION
organized and existing under the laws of CALrFDRNI A
Lender's address is
2727 E IMPERIAL HIGHWAY, BREA CA 92821
Bk: 39475 Pg: 286
(E) "Note" means the promissory note signed by Borrower and dated Ju I y 26, 2006
The Note states that Borrower owes Lender Four Hundred Th i rty-s 1 x Thousand and
No/100 ----------------------------------------------
(U.S.$ 4 36,000. 00 ) plus interest. Borrower has promised to pay this debt in regular Periodic
Payments and to pay the debt in full not later than August 1, 2036 .
(F) "Property" means the property that is dest.'ribed below under the heading "Transfer of Rights in the
Property."
(G) "Loan" means the debt evidenced by the Note, plus interest, any prepayment charges and late charges
due under the Note. and all sums due under this Security Instrument, plus intcresL ,
{H) "Riders" means all Riders to this Security Instrument that are executed by Borrower. The following
Riders are to be executed by Borrower [check box as applicable]:
0 Rate Rider 0 Rider . §Second Home Rider
CiJ Balloon RJder 0 Umt Rtder 1-4 Family Rider
0 VA Rtder 0 Btweekly Payment Rtder Other(s} (specify)
(I) "Applicable Law" means all controlling applicable federal, state. and local statutes, regulalions,
ordinances and adminiscrative rules and orders (that have the effect of law) as well as all applicable final,
non-appealable judicial opinions.
(J) "Community Association Dues, Fees, and Assessments" means all dues, fees, assessments and other
charges that are imposed on Borrower or the Property by a condominium association, homeowners
associauon or similar organization.
(K) "Electronic Funds Transfer" means any transfer of funds, other !han a transaction originated by check,
draft, or similar paper instrument. which is initiated through an electronic terminal, inscrument,
computer, or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an
accounl Such term includes, but is not limited to, point-of-sale ll'ansfers, automated teller machine
transactions, transfel'8 initiated by telephone, wire transfers, and automated clearinghouse ttansfers.
(L) "Escrow Items'' means those items that are described in Section 3.
{M) "Miscellaneous Proceeds" me.ms any compensation, settlement, award of damages, or proceeds paid by
any third party (other than insurance proceeds paid under the coverages described in Section 5) for. (i)
dan1age to, or desttuction of, !he Property: (ii) condemnation or other taking of all or any part of the Property;
(iii) conveyance in lieu of condemnation; or {iv) misrepresentations of, or omissions as to, the va1ue and/or
c:ondition of the Property.
(N) "Mortgage Insurance" means insurance protecting Lender agwnst the nonpayment of, or default on, the
Loan.
(0) "Periodic Payment" me.ms !he regularly scheduled amount due for (i) principal and interest under the
Note. plus (ii) any amounts under Section 3 of this Security lnsttument.
(P) "RESPA" means the Real Eswte Settlement Procedures Act (12 U.S.C. Section 2601 et seq.) and its
implementing regulation, Regulation X (24 C.F.R. Part 3500), llS they might be amended from time to time,
or any addiuonal or successor legislation or regulation that governs the same subject matter. As used
 
•·6A(MA) 1o•o'1
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Page 2 of 15 Form 3022 1/01
S.A. 4
Bk: 39475 Pg: 287
in lhis Security lnstrwnem. '"RESPA'" refers to all requirements and restrictions !hat are imposed in regard ro a
"federally related mortgage loan" even if 1M Loan not qualify as a "federally related mortgage Joan"
under RESPA.
(Q) "Successor in Interest of Borrower" means any party lhat has taken title ro lhe Property, whether or not
that party assumed Borrower's obligations under lhe Note and/or !his Security InsD'Ument.
TRANSFER OF RIGIITS IN TiiE PROPERTY
This Security Instrument secures ro Lender: (i} !he repayment of lhe Lean. and all renewals, extensions and
modifications of the Note; and (ii) the performance: of Borrower· s covenanu and agrec:mcnts under this
Security Instrument and lhe Note. For !his pwpose, Borrower does hereby mortgage, grant and convey 10
MERS (solely as nominee for Lender and Lender's successors and assigns) and to the successors
and assigns of MBRS, with power or sale. the following described property located in the
County ofNORFOLK
[Type of Rccordinr Jurisdiction) [Name of Rccordinc 1urisdic1i011l:
SEE LEGAL DESCRIPTION ATTACHED HERETO AND MADE APART THEREOF
Parcel ID Number: 367403885386850 which currently has !headdress of
23 CHRISTINA RD (Sucorl
MIL FORD !City! , Massachusetts 01757 !Zip Code!
{"Pro erty Address"):
    WITH all the improvements now or hereafter erected on the properly, and all easements,
appurtenances, and fixtures now or hereafter a part of the property. All replacements and additions shall also
be covered by this Security InsD'Ument. All of the foregoing is referred to in lhis Security Instrument as the
"Property.'' Borrower understands and &gTees that MERS holds only legal title 10 the interesrs granted by
Borrower in lhis Security Instrument. but, if necessary 10 comply with law or custom, MERS (as nominee for
Lender and Lender's successors and assigns) has the right: to any or all of those interests, including.
but not limited 10, lhe right 10 foreclose and sell the Property; and ro take any action required of Lender
including, but not limited to, releasing and canceling this Security Instrument.
BORROWER COVENANTS that Borrower is lawfully seised of the esrate hereby conveyed and has
the right 10 mortgage, grant and convey the Property and that the Properly is unencumbered, except for
encumbrances of record. Borrower warrants and will defend generd.lly the title ro the Property against all
claims and demands, subject tO any encumbrances of record.
THIS SECURITY INSTRUMENT combines uniform covenanu for national use and non-uniform
covenants wilh limited variations by jurisdiction to constitute a unifonn security instrument covering real
property.
G!·&A(MA) ID'Oll
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S.A. 5
Form 3022 1/01
Bk: 39475 Pg: 288
UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:
1. Payment of Principal, Interest, Escrow Items, Prepayment Charges, and Late Charge.,.
Borrower shall pay when due the principal of, and imerest on, the debt evidenced by the Note and any
prepayment Chlll'ges and late charges due under the Note. Borrower shall also pay funds for Escrow Irems
pursuant to Secuon 3. Payments due under the Note and this Securily Instrument shall be made in U.S.
currency. However, if any check or other insttument received by Lender as payment under the Note or
Security Instrument is returned to Lender unpaid, Lender may require that any or aU subsequent payments
due under the Note and this Security Instrument be made in one or more of the following forms, as selected
by Lender: (a) cash; (b) money order; (c) certified check, bank check, treasurer's check or cashier's check,
provided any such check is drawn upon an institution whose deposits are insured by a federal agency,
instrumentality, or entity; or (d) Electronic Funds Transfer. .
Payments are deemed • -9Y Lender when received the location designated in the Note or at
such other location as may be designated by Lender in accordance with the notice provisions in Section 15.
Lender may return any payment or partial payment if the payment or partial paymcniS are insuffiCient to bring
the Loan current. Lender may any payment or partial payment insuffiCient 10 bring the Loan currenr,
without waiver of any rights hereunder or prejudice to its rights to refuse such payment or partial paymenl8 in
the future, but Lender is not obligated 10 apply such payments at the time such payments are accepted. If each
Periodic Payment is applied as of its scheduled due date, then Lender need not pay interest on unapplied
funds_ Lender may hold such unapplied funds until Borrower makes payment to bring the Loan current. If
Borrower docs not do so within a reasonable period of time, Lender shall either apply such funds or return
them 10 Borrower. If not applied earlier. such funds will be applied 10 the outstanding principal balance under
!he Note immediately prior 10 foreclosure. No offset or claim which Borrower might have now or in the
future llgainst Lender shall relieve Borrower from making paymeniS due under the Note and this Security
Instrument or performing the covenants and agreemeniS secured by this Security Instrument.
l. Application of Payments or Proceeds. Except as otherwise described in this Section 2. all payments
accepted and applied by Lender shall be applied in the following order of priority: (a) interest due under the
Note; (b) principal due under the Note: (c) amounts due under Section 3. Such payments shall be applied to
each Periodic Payment in the order in which it became due. Any remaining amounrs shall be applied fiTSt to
fare charges. second to any other amounts due under this Security Instrument. and then to reduce the principal
balance of tht: Note.
H Lender receives a payment from Borrower for a delinquent Periodic Payment which includes a
sufficient amount to pay any late charge due, the payment may be applied 1.0 the delinquent payment and the
late charge. If more than one Periodic Payment is outstanding, Lender may apply any payment received from
Borrower to the repayment of the Periodic Payments if, and to the extent that, each payment can be paid in
full. To the extent that any excess exists after the payment is applied 10 the full payment of one or more
Periodic PQyments, such excess may be applied to any late charges due. Voluntary prepayments shall be
applied first to any prepayment charges and then as described in the Note.
Any application of payment&, insurance proceeds, or Miscellaneous Proceeds 10 principal due under the
Note shall not extend or postpone the due dare, or change the amount, of the Periodic Payments.
J. Funds for Escrow Items. Borrower shall pay 10 Lender on the day Periodic Payments are due under
the Note, until the Note is paid in full, a sum (the "Funds") 10 provide for payment of amounts due for: (a)
caxes and assessments and other items whic.:h can attain priority over this Security Instrument as a lien or
encumbrance on the Property; (b) leasehold payments or ground rents on the Property, if any; (c) premiums
for any and all insurance required by Lender under Section 5; and (d) Mortgage Insurance premiums, if any,
or any sums payable by Borrower to Lender in lieu of the payment of Mortgage Insunlllce premiums in
accordance with the provisions of Secuon 10. These items are called "Escrow Items." At origination or at any
time during the term of the Loan, Lender may require that Community Association Dues. Fees, and
Assessments, if any, be escrowed by Borrower, and such dues, fees and assessments shall be an Escrow Item.
Borrower shall promptly furnish to Lender all notices of amounts to be paid under this   Borrower
shall pay Lender the Funds for Escrow Items unless Lender waives Borrower's obligation to pay the Funds
for any or all Escrow Items. Lender may waive Borrower's obligation to pay to Lender Funds for any or all
Escrow Items at any bme. Any such waiver may only be in writing. In the event of such waiver, Borrower
··6A(MA) fO<OII
,.,
S.A. 6
Form 3022 1101
Bk: 39475 Pg: 289
shall pay direcUy, when and where payable, the amouniS due for any Escrow Items for which payment of
Funds has been waived by Lender and, if Lender requires, shall furnish 10 Lender receip!& evidencing such
payment within such time period as Lender may require. Borrower's obligation 10 make such paymen!& and
10 provide receipts shall for all purposes be deemed to be a covenant and agreement conlained in this Security
Instrumcnl. as the phrase "covenant and agru.ment" is used in Section 9. If Bonower is obligated 10 pay
~   c r o w Items directly, pursuant 10 a waiver. and Bomower fails 10 pay the amount due for an Escrow Item,
Lender may e:w-cise irs rights under Section 9 and pay such amount and Borrower shall then be obligated
under Section 9 10 repay to Lender any such amount. Lender may revoke Lhe waiver as 10 1111y or all ~ r o w
hems at any Lime by a notice given in accordance with Section 15 and, upon such revocation, Borrower shall
pay to Lender all Funds, and in such amounts. that are then required under this Section 3.
Lender may, at any time, collect and hold Funds in an amount (a) sufficient 10 permit Lender 10 apply
the Funds at the Lime specified under RESPA, and (b) not to exceed the maximum amount a lender can
require under RESPA. Lender shall estimate the amount of Funds due on the basis of cuJTCnt data and
reasonable estimates of expenditures of future Escrow Items or otherwise in accordance with Applicable Law.
The Funds shall be held in an institution whose deposits are insured by a federal agency, insttumen!ality,
or entity (including Lender, if Lender is an institution whose deposits are so insured) or in any Federal Home
Loan Bank. Lender shall apply the Funds to pay the Bscrow Irems no later than the time specified under
RESPA. Lender shall not charge Borrower for holding and applying the Funds, annually analyzing the
escrow ac;count, or verifying the Escrow I_tems, unless Lender pays Borrower interest on the Funds and
Applicable 1.-aw permits Lender to make such a charge. Unless an agreement is made in writing or Applicable
Law requires interest 10 be paid on the Funds, Lender shall not be required 10 pay Borrower any interest or
earnings on the Funds. Borrower and Lender c1111 a!,>ree in writing. however, that interest shall be paid on the
Funds. Lender shall give 10 Borrower, without chiiTge, an annual accounting of the Funds as required by
RESPA.
If there is a surplus of Funds held in escrow, as deftned under RESP A, Lender shall account to
Borrower for the excess funds in accordance with RESPA. If there is a shortage of Funds held in escrow, as
defined under RESPA, Lender shall notify Borrower as required by RESPA, and Borrower shall pay to
Lender the amount necessary to make up the shortage in accordance with RESPA. but in no more than 12
monLhly payments. If there is a deficiency of Funds held in escrow, as defined under RESPA, Lender shall
notify Borrower as required by RESPA, and Borrower shall pay 10 Lender the amount necC$sary 10 make up
the deficiency in accordance with RESPA, but in no moro than 12 monthly payments.
Upon payment in fuU of all sums secured by this Security Tnsttument, Lender shall promptly refund 10
Borrower any Funds held by Lender.
4. Ch11rges; Liens. Borrower shall pay aU taxes, assessments, charges, fines, and impositions
attributable ro the Property which can attain priority over this Security Instrument, leasehold payments or
ground rents on tl1e Property, if any, and Community AssociaLion Dues, Fees, and Assessments, if any. To tl1c
extent that these items are Escrow Items, Borrower shall pay them in the manner provided in Section 3.
Borrower shall promptly discharge any lien which has priority over this Security lnsttument unless
Borrower: (a) agrees in writing to the payment of the obligation secured by the lien in a manner acceptable 10
Lender, but only so long as Borrower is performing such agreement; (b) centesiS the lien in good faith by, or
defends against enforcement of the lien in,legal proceedings wh1ch in Lender's opinion operate to prevent the
enforcement of the lien while those proceedings are pendmg, but only until such proceedings are concluded;
or (c) secures from the holder of the lien 1111 agreement satisfactory to Lender subordinating the lien 10 this
Secunty Instrument. If Lender determines that any part of the Propeny is subject 10 a lien which can attain
priority over this Security fnscrument, Lender may give Borrower a notice identifying Lhe lien. Within I 0
··&A{MA) 10.011
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S.A. 7
Form 3022 1101
Bk: 39475 Pg: 290
days of the date on which that notice is given, Borrower shall satisfy the lien or take one or more of the
actions set forth above in Section 4.
Lender may require Borrower to pay a one-time charge for a real eslate tax verification and/or reporting
service used by Lender m connection with this Loan.
S. Property Insurance. Borrower shall keep the improvements now existing or hereafter erected on the
Property insured against loss by fire, hazards included within the tc:rm • extended coverage," and any other
hazards including, but not limited 10, earthquakes and floods, for which Lender requires insurance. This
insurance shall be maintained in the arnouniS (including deductible levels) and for the periods that Lender
requires. What Lender requires pursuant to the preceding sentences can change during the term of the Loan.
The msurance carrier providing the insurance shall be chosen by Borrower subject 10 Lender's right 10
disapprove Borrower's choice, which right shall not be exercised unreasonably. Lender may
Borrower to pay, in connection with this Loan, either: (a) a one·time charge for flood zone determination.
certification and services; or (b) a one· time charge for flood :tone determination and certifu:ation
services and subsequent charges each umc remappings or similar changes occur which reasoiUibly might
affect such detennination or certification. Borrower shall also be responsible for the payment of any fees
imposed by the Federal Emergency Management Agency in connection with the review of any flood zone
determination resulting from an objection by Borrower.
lf Borrower fails. to maintain any of the coverages described above, Lender may obtain insurance
coverage, at Lender's option and Borrower's ell.pense. Lender is under no obligation to purchase any
particular type or amount of coverage. Therefore, such coverage shall cover Lender, but might or might not
protect Borrower, Borrower's equity in the Property, or the contents of the Property, against any risk, hazard
or liabilit)' and might provide greater or lesser coverage than was previously in effect. Borrower
acknowledges that the cost of the insurance coverage so oblained mighL significantly exceed tile cost of
insurance !hat Borrower could have obtained. Any amounts disbursed by Lender under this Section 5 shall
become additional debt of Borrower secured by this Security Instrument. These amouniS shall bear   at
the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender
to Borrower requesting paymenL ·
All insurance policies required by Lender and renewals of such policies shall be subject to Lender's
right to disapprove such policies, shall include a standard mortgage clause, and shall name Lender as
mortgagee and/or as an additional loss payee. Lender shall have the right to hold the policies and renewal
certificates. If Lender requires, Borrower shall promptly give to Lender all receipts of paid premiums and
renewal notices. If Borrower obtains any form of insurance coverage, not otherwise required by Lender, for
damage to. or desa-uction of, !he Ptopeny, such policy shall include a standard mortgage clause and shall
name Lender as mortgagee and/or as an additional loss payee.
In the event of loss, Borrower shall give prompt notice to the insurance carrier and Lender. Lender may
make proof of loss if not made promptly by Borrower. Unless Lender and Borrower otherwise agree in
writing, any insurance proceeds, whether· or not the underlying insurance was required by Lender, shall be
applied to restoration or repair of the Property, if the restoration or repair is economically feasible and
Lender's security is not lessened. During such repair and restoration period, Lender shall have the right to
hold such insurance proceeds until Lender has had an opportunity ro inspect such Property 10 ensure lhe work
has been completed to Lender's satisfaction. provided that such inspection shall be undcrlaken promptly ..
Lender may disburse proceeds for the repairs and restoration in a single payment or in a series of progress
payments as !he work is completed. Unless an agreement is made in writing or Applicable Law requires
interest to be paid on ruch msurance proceeds, Lender shall n01 be required to pay Borrower any inlerest or
earninss on such proceeds. Fees for publtc or other third parties, retained by Borrower shall not be
paid out of the insurance proceeds and shall be the sole obligation of Borrower. If the restoration or repair is
not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to
the sums secured by this Security Instrument, whether or not then due, with the excess. if any. paid to
Borrower. Such insurance proceeds shall be applied in the order provided for in Section 2 .
!0<01l Pag•aot 15 ..... ,.,.,., ""
S.A. 8
Bk: 39475 Pg: 291
If B orrowcr abandons the Property. Lender may file, negotiate and settle any available insurance claim
and related If Borrower does not respond within 30 days to a notice [rom Lender that the insurance
carrier has offered 10 settle a claim, then Lender may negotiate and settle the claim. The 30-day period will
beg in when the notice ts given. In either event, or if Lender acquires the Property under Section 22 or
otherwise, Borrower hereby assigns to Lender (a) Borrower's rights to any insurance jm>ceeds in an amount
not to exceed the amoums unpai4 under the Note or this Security Inslrllment, and (b) any other of Borrower's
rights (other than the right to any refund of unearned premiums paid by Borrower) under all insurance
policies covering the Property, insofar as such rights are applicable to the coverage of the Property. Lender
may use the insurance proceeds either to repair or restore the Property or to pay amounts unpaid under the
Note or this Security lns!I'Ument, whether or not then due.
6. Occupancy. Borrower shall occupy, establish, and use the Property as Borrower's principal residence
within 60 days after the execution of this Security lnsttument and shall continue to occupy the Property as
Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise
agrees in writing. which consent shall not be unreasonably withheld, or unless ex\Cfluating cin:umstances
exist which are beyond Borrower's contJOI.
7. Preservation, Maintenance and ·Protection of the Property; Inspections. Borrower shall not
destroy. dam11ge or impair the Property, allow the Propeny to deteriorate or commit waste on the Property.
Whether or not Borrower residing in the Property, Borrower shall maintain the Property in order to prevent
the Propeny from deteriorating or decrcasin& in value due to its condition. Unless it is determined pursuant 10
Section 5 that repair or restoration is not economically feasible, Borrower shall promptly repair the Property if
damaged to avoid further deterioration or damage. rr insurance or condemnation proceeds are paid in
connection with damage 10. or the taking of, the Property, Borrower shall be responsible for repairing or
restoring the Property only if Lender has released proceeds for such purposes. Lender may disburse proceeds
for the repairs and restoration in a single payment or in a series of progress paymeniS as the work is
completed. If the insurance or condemnation proceeds are not sufficient 10 repair or restore the Property,
Borrower is not relieved of Borrower's obligation for the completion of such repair or restoration.
Lender or its agent may make reasonable enllies upon and inspections of the Property. If it has
reasonable cause, Lender may inspect the interior of the improvements on the Property. Lender shall give
Borrower notice at the time of or prior to suet\ an interior inspection specifying such reasonable cause.
8, Borrower's Loan Application. Borrower shall be in default if, during the Loan application process,
Borrower or any persons or entities acting at the direction of Borrower or with Borrower's knowledge or
consent gave materially false, misleading, or inaccurate information or statements to Lender (or failed to
provide Lender with material information) in connection with the Loan. Material representations include, but
are notlimited.to, representationS concerning Borrower's occupancy of the Property as Borrower's principal
residence.
9. Protection of Lertder's Interest in the Property and Rights Under this Security Instrument. If
(a) Borrower fails to perform the covenants and agreements conlained in this Security Insttument, (b) there is
a tegal proceeding that mighl significantly affect Lender's interest in the Property and/or rights under this
Security Instrument (such a proceeding in bankruptcy, probate, for condernnatwn or forfeiture, for
enforcement of a lien which may attain priority over this Security Instrument or to enforce laws or
regulations), or (c) Borrower has abandoned the Propeny, then Lender may do and pay for whatever is
or appropriate to protect Lender's interest in the Property and rights under this Security
TnstJument, including protecting and/or assessing the value of the Property, and securing and/or repairing
the Property. Lender's actions can include, but are not limited to: (a) paying any sums secured by a lien which
has priority over this Security Instrument; (b) appearing in court; and (c) paying reasonable
  iO<OI)

• 15 Form 3022 1/01
S.A. 9
attorneys' fees to prou:ct irs 1nteres1 in the Property and/or rights under !his Security Ins1rument, including its
secured posJIJon m a bankruptcy proceeding. Securing the Property includes. but is not limited to, cntenng the
Property to make repairs, cnange locks. replace or board up doors and windows, drain water from pipes,
eliminate building or olher code violations or dangerous conditions, and have utilities turned on or off.
Although Lender may lake action under this Section 9, Lender does not have to do so and is not under any
duty or obligation to do so. It is agreed lhat Lender incurs no liability for not laking any or all actions
authoriud under this Section 9.
Any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower
secured by this Security Instrumenl These amounts shall bear interest at the Note rate from the date of
disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting
payment
If this Security InsD'ument is on a leasehold, Borrower shall comply with all the provisions of the lease.
If Borrower acquises fee tille to the Property, the leasehold and the fee title shall not merge unless Lender
agrees 10 lhe merger jn writing.
10. Mortgage Insurance. If Lender required Mortgage Insurance as a condition of making the Loan,
Borrower shalf pay the premiums required 10 maimain the Mortgage Insurance in effect If, for any reason,
the Mortgage Insurance coverage required by Lender ceases to be available from lhe mortgage insurer lhat
previously provided such insurance and Borrower wa.s required 10. make separately designated paymeni.S
toward the premiums for Mortgage Insurance, Bon ower shall pay·lhe premiums required co obtain coverage
substantially equivalent to the Mortgage I nsurancc previously in effect, at a cost substantially equivalent to
the cost to Bonower of the Mortgage Insurance previously in effect, from an alternate mortgage insurer
selected hy Lender. Jf substantially equivalent Mortgage Insurance coverage is not available. Borrower shall
continue 10 pay 10 Lender the amount of the separately designated payments that were due when !he insurance
coverage ceased to be in effect. Lender will accepr, use and rclllin these payments as a non-refundable loss
reserve in lieu of Mortgage Insurance. Such loss reserve shall be non-refundable, notwithstanding the fact that
the Loan is uiUmately paid in full, and Lender shall not be required to pay Borrower any interest or earnings
on such loss reserve. Lender can no longer require loss reserve paymenlS if Mortgage lnsurill'lce coverage (in
the amount and for the period lhat Lender requires) provided by an insurer selected by Lender again becomes
available, is obtained, and Lender requires separately designated paymenlS toward the premiums for Mortgage
Insurance. lf Lender required Mortgage Insurance as a condition of making the Loan and Bonower was
required to make separately designated payments toward the premiums for Mortgage Insurance, Bonowcr
shill! pay the premiums required to maintain Mortgage Insurance in etlect, or to provide a non-refundable loss
reserve. until Lender's requirement for Mortgage Insurance ends in accordance with any writJen agreement
between Borrower and Lender providing for such termination or until ttrmination is required by Applicable
Law. Nothing in this Section 10 affects Borrower's obligation 10 pay interest at the rate provided in the Note.
Mongage lnsur1111cc reimburses Lender (or any entity lhat the Note) for certain losses it may
incur if Bonowcr does not repay !he Loan as agreed. Borrower is not a party 10 the Mortgage Insur1111ce.
Mongage insurers evaluate their tOtal risk on all such insurance in force from time to time, and may
enter into agrecmenlS with other par!i.Cil that share or modify their risk, or reduce losses. These are
on terms and condiuons that arc satisfactory to the mortgage insurer and the other party (or parties) lO these
agreemenLS. These ugreemenrs may require the mortgage insurer to make paymenl3 using any source of funds
!haL the mortgage insurer may have available (which may include funds obtained from Mortgage Insurance
premiums).
As a result of lhese agreements, Lender, any purchaser of the Note, another insurer, any reinsurer, any
other entity, or any affiliate of any of the foregoing, may receive (directly or indirectly) amounts that derive
from (or might be characterized as) a portion of Borrower's payments for Mortgage Insurance. in exchange
for sharing or modifying the mongagc insurer's risk, or reducing losses. If such agreement provides that an
affiliate of Lender takes a share of the insurer's risk: in exchange for a share of the premiums paid to the
insurer, the arrangement is often termed "captive reinsurance." Further:
(a) Any such agreements will not affect tbe amounts that Borrower has agreed to pay for
Mortgage Jnsurance, or any other terms of the Loan. Sucb agreements will not increase the amount
Borrower will owe for Mortgage Insurance, and they will not entitle Borrower to any refund.
(b) Any such agreements will not affect the rights Borrower has • ir any · with respect to the
  ro•o')

Form 3022 1101 Page 8 of 15
S.A. 10
Bk: 39475 Pg: 293
Mortgage Insurance under the Homeowners Protection Act of 1998 or any other law. These rights may
include the right to receive certain disdosures, to request and obtain cancellation of the Mortgage
Insurance, to have tbe Mortgage Insurance terminated automatically, and/or to receive a refund of any
Mortgage Insur11nce premiums that were unearned at the time of such cancellation or termination.
11. Assignment of Miscellaneous Proceeds; Forfeiture. Ali Miscellaneous Proceeds are hereby
assigned lO and shall be paid to Lender.
If the Property is damaged, such Miscellaneous Proceeds shall be applied to restoration or repair of the
Property, if lhe restoration or repair Js economically feasible and Lender's security is not lessened. During
$UCh repair and restoration period, Lender shall have the right to hold such Miscellaneous Proceeds until
Lender has had an opponunity to inspect such Property to ensure lhe work has been completed to Lender's
satisfaction, provided that such inspection shall be undertaken promptly. Lender may pay for the repairs and
restoration in a single disbursement or in a series of progress payments as the work is completed. Unless an
agreemem is made in writing or Applicable Law requires interest to be paid on such Miscellaneous Proceeds,
Lender not be required to pay Borrower any interest or earnings on such Miscellaneous Proceeds. If the
restoration or repair ts not economically feasible or Lender's security would be lessened. lhe Miscellaneous
Proceeds shall be applied to the sums secured by this Security Jnsaument, whether or not then due, with the
excess. if lillY, paid to Borrower. Such Miscellaneous Proceeds shall be applied in the order .provided for in
Section 2.
In the event of a total taking, destruction. or loss in value of lhe Propeny, lhe MisceUaneous Proceeds
shall be applied to the sums secured by this Security lnsaument, whether or not then due. with the excess, if
any. paid to Borrower.
In the event of a partial laking, desauclion, or loss in value of the Property in which the fair market
value of Ute Property immediately before the partial taking, destruction, or loss in value is equalro or greater
lhan the IUTIOunt of the sums secured by this Security Instrument immediately before the partial taking,
destruction, or loss in value, unless Borrower and Lender otherwise agree in writing, the sums secured by this
Security Inscrument shall be reduced by the amount of the Miscellaneous Proceeds multiplied by Lhe
lollowing fraction: (a) the total amount or the sums secured immediately before the partial laking, destruction,
or loss in value divided by (b) the fair market value of the Property immediately before the partial taking,
destruction, or loss in value. Any balance shall be paid to Borrower.
In the event of a parual Laking, destruction, or loss in value of the Properly in which the fair market
value of the Property immediately before the partial laking, descruction, or loss in value is less than Lhe
amount of the sums secured immediately before the partial taking, destruction, or loss in value. unless
Borrower and Lender otherwise agree in writing. the Miscellaneous Proceeds shall be applied to lhe sums
secured by this Security fnsllument whether or not the sums are then due.
If the Property is abandoned by Borrower, or if. after notice by Lender to Borrower that the Opposing
Party (as defined in the next sentence) offers to make an award to setlle a daim for damages. Borrower fails
to respond to Lender within 30 days after lhe date the notice is given, Lender is authorized to collect and
apply the Miscellaneous Proceeds either to restoration or repair of the Property or to the sums secured by
Security Instrument, whether or not then due. "Opposing Party" means the third party lhal owes Borrower
Miscellaneous Proceeds or the party against whom Borrower has a right of action in regard lO Miscellaneous
Proceeds.
Borrower shall be in default if any action or proceeding, whether civil or criminal, is begun that, in
Lender's judgment, could result in forfeiture of the Property or olher material impairment of Lender's interest
in the Property or righ!S under thts Securily Instrument. Borrower can cure such a default and, if acceleration
has occurred, reinstate as provided in Section 19, by causing the action qr proceeding to be dismissed with a
rubng !hal, in Lender's judgment, precludes forfeiture of the Property or other material impairment of
Lender's interest in lhe Property or rights under this Security Instrument. The proceeds of any award or claim
for damages that are attributable to the impairment of Lender's interest in the Property arc hereby assigned
and shall be paid to Lender.
All Miscellaneous Proceeds that are not applied to restoration or repair of lhe Property shall be applied
in the order provided for in Section 2.
12. Borrower Not Released; Forbearance fly Lender Not 11 Waiver. Extension of the time for
payment or modification of amortization of the sums secured by !llis Securny Instrument granted by Lender

  ID<DlJ Form 3022 1/01
S.A. 11
Bk: 39475 Pg: 294
to Borrower or any Successor in Interest of Borrower shall not operate to release chc liability of Borrower or
any Successors m interest of Borrower. Lenda shall not be required to commence proceedings against any
Successor tn Interest of Borrowa or 10 refuse to extend orne for payment or otherwise modify amortizJ!tion
of che sums secured by this Security lnsuumenl by reason of any demand made by the original Borrower or
any Successors m lmerest of Borrower: Any forbearance by Lender in exercising any right or remedy
tncludmg, wuhout hmu.auon, Lender's acceptance of payments from third persons, entities or Successors in
Interest of Borrower or m amounts less !han the amount then due, shall not be a waiver of or preclude the
exercise of any nght or remedy.
13. Joint and Several Liability; Co-signers; Successors and Assigns Bound. Borrower covenants and
agrees that. Borrower's obligations and liability shall be joint and several. However, any Borrower who
co-signs thts Secunty Instrument but does not execute the Note (a "co-signer"): (a) is co-signing this Security
Instrument only ro mortg.age, grant and convey the co-signer's interest in the Property under the c.enns of this
Secunry Instrument; (b) ts not personally obbgated to pay the sums secured by this Security Instrument; and
(c) agrees that Lender and any other Borrower can agree 10 extend, modify, forbear or make any
accommodations with regard to the terms of this Security Instrument or the Note without the co-signer's
consenl
Subject to the provisions of Section 18, any Successor in [nterest of Borrowec who assumes Borrower's
obligations under this Security Inslrument in writing, and is approved by Lender, shall obtain all of
Borrowe1's rights and benefits under this Security lnstrumenL Borrower shall not be released from
Borrower's obligations and liability under this Security lnsuument unless Lender agrees 10 such release in
wnting. The covenants and agreements of this Security Instrument shall bind (except as provided in Section
20) and benefit the successors and of Lender.
14. Loan Charges. Lender may charge Borrowa recs for services paformed in connection with
Borrower's default, for the purpose of protecting Lender's mterest in the Property and rights under this
Security Instrument, including, bul not limited to. at10meys' fees. property inspection and valuation fees. In
regard to any other fees, the absence of express authority in this Security Instrument 10 charge a specific feo
to Borrower shall not be construed as a prohibition on the charging of such fee. Lender may not charge fees
that liTe expressly prohibited by this Secunty Instrument or by Applicable Law.
If the Loan is subject to a law which sets maximum loan charges, and chat law is finally interpreted so
that the mterest or olher loan charges collected or to be collected in connection with the Loan exceed the
permllted limits, chen: (a) any such loan charge shall be reduced by the amount necessary to reduce the charge
to the permitted limit; and (b) any sums already collected from Borrower which exceeded permitted
will be refun·ded to Borrower. Lender may choose to make this refund by reducing che principal owed under
the Note or by making a direct payment 10 Borrower. If a refund reduces principal, the reduction will be
1reatcd as l!· partial prepayment without any prepayment charge (whethec or not a prepayment charge is
provided for under the Note). Borrower's acceptance of any such refund made by direct payment to Borrower
will constitute a waiver of any right of action Borrower might have arising out of such ovacharge.
15. Notices. All notices given by Borrower or Lender in connection wlth this Security Instrument must
be in writing. Any notice to Borrower in connection with this Security Instrument shall be deemed to have
been given to Borrower when mailed by fim class mail or when actually delivacd to Borrower's notice
address if sent by other means. Notice to any one Borrower shall constitute notice to all Borrowers unless
Applicable Law expressly requires otherwise. The nouce address shall be the Property Address unless
Borrower has desJgnated a substitute notice address by notice to Lender. Borrower shall promptly notify
Lender of Borrower's change of address. If Lender specifies a procedure for reporting Borrower's change of
address, chen Borrower shall only report a change of address through that specified procedure. There may be
only one designated notice address under this Secunty Instrument at any one time. Any notice to Lender shall
be given by delivering it or by mailing it by frrst class mail 10 Lender's address st.ated herein unless Lender
flas designated another address by notice to Borrower. Any notice in connection with this Security Instrument
shall not be deemed to have been given 10 Lender until actually received by Lender. If any notice required by
this Security Instrument is also required under Applicable Law, che Applicable Law requirement will satisfy
the corresponding requirement under thiS Security Instrument.
16. Governing Law; Severability; Rules of Construction. This Security Instrument shall be governed
by federal law anrl the law of the jurisdiction in which the Property is located. All nghts and obligations
··6A(MA) IO•Oil
,.,
         
(V
S.A. 12
Form 3022 1/01 r
l
j
Bk: 39475 Pg: 295
conlained in this Security Instrument are subject 10 any requiremeniS and limitations of Applicable Law.
Applicable Law might explicitly or implicitly allow l.he parties 10 agree by contract or it might be silent, but
such silence shall not be construed as a prohibition against agreement by con!l'act. In the event that any
provision or clause of this Security Instrument or the Note conflicts with Applicable Law, such conflict shall
not affect other provisions of tlus Secunty Ins!I'Ument or the Note which can be given effect without the
confiicung provision.
As used in this Security lnsttument: (a) words of the masculine gender shall mean and include
  neuter words or words of the feminine gender: (b) words in the singular shall mean and
include the plural and vice versa; and (c) the word "may" gives sole discretion without any obligation to take
any 11ction.
17. Borrower's Copy. Borrower shall be given one copy of the Note and of   Security Instrument
18. Transfer or the Property or a Beneficial Interest in Borrower. As used in this Section 18,
"Interest in the Propeny" means any legal or beneficial interest in the Property, including, but not limited to,
those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or eserow
agreement. the intent of which is the transfer of titie by Borrower at a future date 10 a purchaser.
If all or any part of the Property or any Interest in the Property is sold or a:ansferred (or if Borrower is
not a natural person and a beneficial interest in Borrower is sold or ttansferred) without Lender's prior written
consent, Lender may reqUire immediate payment in full of all sums secured by this Security Instrument.
However, this option shall not be exercised by Lender If such exercise is prohibited by Applicable Law.
If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall
provide a period of not less than 30 days from the date the notice is given in accordance with Section 15
within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails 10 pay these
sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security
lnsll'ument without further notice or demand on Borrower.
19. Borrower's Right to Reinstate Arter Acceleration. If Borrower meets certain conditions,
Borrower have the right to have enforcement of this Security Instrument discontinued at any time prior
to the earliest of: (a) five days before sale of the Property pursuant to any wwer of sale conlained in this
Security Instrument: (b) such other period as Applicable Law might specify for the termination of Borrower's
right to reinstate; or (c) en!ry of a judgment enforcing this Secunty Instrument Those conditions are that
Borrower: (a) pays Lender all sums which then would be due under this Security Inslrument and the Noll: as
if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all
expenses incurred in enforcing tl1is Security Instrument, including, but not limited to, reasonable auomeys'
fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender's
1ntcrcst in U1c Properly and rights under this Security Insttument: and (d) takes such action as Lender may
rei!Sonably require to assure that Lender's interest in the Property and rightS under this Security Instrument.
and Borrower's obligation to pay lhe sums secured by this Security Instrument, shall continue unchanged.
Lender may require !hat Borrower pay such reinstatement sums and expenses in one or more of the following
forms,   selected by Lender; (a) cash; (b) money order; (c) certified check, bank check, treasurer's check or
cashier's check, provided ·any such check is drawn upon an institution whose deposiiS are insured by a federal
agency, instrumentality or entity: or (d) Eleca:onic Funds Transfer. Upon reinstatement by Borrower, this
Security Instrument and obligations secured hereby shall remain fully effective as if no acceleration had
occuned. However, this right to reinstate shall not apply in the case of acceleration under Section 18.
20. Sale of Note; Change or Loan Servicer; Notice or Grievance. The Note or a partial inierest in the
Note (IOgether with this Security InslJumenl) can be sold one or more times without prior notice to Borrower.
A sale m1ght result in a change in the entity (known as the "Loan Servicer") that collects Periodic PaymentS
due under the Note and this Security lnsttument and performs other mortgage loan servicing obligations
.under the Note, this Security Instrument, and Applicable Law. There also might be one or more changes of
t11e Loan Servicer unrelated to a sale of the Note. If there i3 a change of the Loan Servicer, Borrower will be
given written notice of the change which will state the name and address of the new Loan Servicer, the
address to which payments should be made and any other information RESPA requires in connection
··6A(MA) fO<O'I
.$

Pape1to115
cv
S.A. 13
Form 3022 1101
Bk: 39475 Pg: 296
With a notice of lransfer of servicing. If the Note is sold and thereafter the Loan is serviced by a Loan
· Servicer other than the purchaser of the Note, the mongage loan &erVicing obligations to Borrower will
remain with the Loan Servicer or be transferred to a successor Loan Servicer and are not ossumed by the Note
purchaser unless otherwise provided by the Note purchaser.
Neither Borrower nor Lender may commence, join, or be joined to any judicial action (as either an
individual liugant or the member of a class) that arises from the other party's actions pursuant to this Security
Instrument or that a_llcges that the other party has breached any provision of, or any duty owed by reason of,
this Security Instrument, until such Borrower or l.eclder has notified the other pany (wilh such notice given in
compliance willl the requirements of Section 15) of such alleged breach and afforded !he other pany hereiO a
period after the giving of such notice 10 take corrective action. If Applicable Law provides a time
period which must elapse before cerl.ain action can be taken, !hat lime period will be deemed 10 be reasonable
for purposes of !his paragraph. The notice of acceleration and opportunity to cure given 10 Borrower pursuant
to Section 22 and lhe notice of acceleration given to Borrower 10 Section 18 shall be deemed to
satisfy lhe notice and opporrunity to talc.e corrective action provisions of lhis Section 20.
21. Ha7.ardous Substances. As used in lhis Section 21: (a) "Hazardous Substances" are those
substances defined as tollic or hazardous substances, pollutants, or wastes by Environmenlal Law and lhe
following subslatlces: gasoline, kerosene, olher flammable or toxic petroleum products, pesticides and
herbicides, volatile solvents, materials containing asbestos or formaldehyde, and radioactive ma!Mials; (b)
"Environmental Law" means federal laws and laws of !he jurisdiction where the Property is located that relate
10 heallh, safety or environmental protection; (c) ''Environmental Cleanup" inCludes any response action,
ren1edial action, or removal action, as defined in Environmenw Law; and {d) an "Environmenral Condition"
means a condition that can cause, contribute 10, or otherwise trigger an Environmental Cleanup.
Bom1wer not cause or permit the presence, use, disposal, storage, or release of any Hazardous
or threaten to release any Huardous Substances, on or in the Property. Borrower shall not do,
nor allow anyone else to do, anything affecting lhe Property (a) that is i.n violation of aqy Environmental
Law, (b) which creates an Environtnenla.l Condition, or (c) which, due 10 the presence, liSe, or release of a
Hazardous Substance, creates a condition that adversely affecl8 the value of the Properly. The preceding two
sentences shall not apply to the presence, use, or storage on the Property of small quantities of Hazardous
SubsLMces lhat are gener.illy recognized 10 be appropriate 10 normal residential uses and to maintcniiJlce of
the Property (including, but not limited to, hazardous substances in consumer products).
Borrower shall promptly give Lender wriuen notice of (a) any investigation, claim, demand, lawsuit or
other action by any governmcnla.l or regulatory agency or private party involving the Property and any
Hazardous Substance or Environmcnla.l Law of which Borrower has actual knowledge, (b) anr
Environmental Condition, mcluding but not limited 10, any spilling, leaking, discharge, release or threat of
release of any Hazardous Substance, and (c) any condition caused by the pxesence, use or release of a
Hazardous Substance which adversely affects the value of the Property. If Borrower learns, or is nolified by
ll.lly governmental or regulatory authority, or any private party, that any removal or other remediation of any
HaUU'dous Substance affet·ting the Property is necessary, Borrower shall prompr.Jy take all necessary remedial
actions in m:cordance with Environmental Law. Nolhing herein shall any obligation on Lender for an
Environmental Cle.-ulup.

Ga·6A(MA)   Form 3022 1/01
S.A. 14
Bk: 39475 Pg: 297
NDN·UNIFORM COVENANTS. Borrower and Lender further covenant and agree as follows:
22. Acceleration; Remedies. Lender shall give notice to Boi'TOwer prior to acceleration following
Borrower's breach of any covenant or agreement in this Security ID5trurnent (but not prior to
ucceleratiun under Section 18 unless Applicable Law provides otherwise}. The notice shaD spedf'y: (a)
the default; (b) the action required to cure the default; (c) a date, not las than 30 days from the date
the notice is ginn to Borrower, by which the default must be cured; and (d) that faUure 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 after acceleration and 'the right to bring a court action to asset! 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 pursuinr the remedies provided In this Section :Z2,
including, but not limited to,   attorneys' fees and costs or title evidence.
Ir Lender invokes the STATUTORY POWER OF SALE, Lender shall mail a copy of a notice of
sale to Borrower, and to other persons prescribed by Applicable Law, In the manner provided by
Applicable Law. Lender shall publish the notice of' sale, and the Property shall he sold in the manner
prescribed by Applicable Law. Lender or its designee may purchase the Property at any sale. Tbe
proceeds of the sale shall be applied in the following order: (a) to all expenses of the sale, including, but
uot limited to, reusonable 11ttorneys' fees: (b) to all sums secured by this Security Instrument; and (c)
any lu the person or persons legally entitled to it.
23. Release. Upon payment of all sums secured by this Security Inslrumenl, Lender shall discharge this
Security Instrument. Borrower shall pay any recordation cosiS. Lender may charge Borrower a fee for
releasing this Security Instrument, bul only if the fee is paid to a third party for services rendered and the
charging of tho fee is pennitted under Applicable Law.·
Z4. Waivers. Borrower waives all rights of homesiead exemption in the Property and relinquishes all
rights of cunesy and dower in the Property.
··6A(MA) 10<01)

Pao• 13 ol 16

Form 3022 1101
S.A. 15
Bk: 39475 Pg: 298
BY SIGNING BELOW, Borrower accep!S and agrees to the lcrms and covenants contained in this
Security Instrumenl and in any Rider executed by Borrower and recorded with il.
Wimesses:
(Seal)
·Bonower
----------------------<Sw)
·Borrower


..Borrower
___________________ (sw)
(Seal)
-Bom)wet ·Borrower
··6A(PtlA) to•o•J

P•o• 14   Form 3022 T /01
S.A. 16
Bk: 39475 Pg: 299
COMMONWEALTH OF MASSACHUSETTS,
Middlesex County ss:
On this 26th
personally appeared
day of July, 2006 , before me, the undersigned notary public,
Anne-Marie M. Galiastro and Joseph A. Galiastro
proved to me through saosfactory evidence of identification, which Was/were Mass. Drivers licenses
10 be !he person(s) whose name(s) is/are signed on the preceding document, and acknowledged 10 me that
he/she,lthey signed it volurnarily for its stated purpose.
My Commission Expires: 11/05/2010
(Seal)
··6A(MA) iO<Oli
"'
lnltlels: :d[!r--
  Form3022 1/01
S.A. 17

···· ···-------------·-·-····-····------Bk: 39475 Pg: 300···
t.xhiblt A
The land together with the Duildings thereon situated in Milford,
worcester County. Massachusetts Deinq described as LOT so located
on Christina rtoad, as shown en a plan of land entitled "'SOUTH
CENTP.AL ESTATES' 'Definitive• Plan of Land in MILFORD, MASS.
scale: 4 0 feet: to an Inch Date: August 16, 1.994, Guerriere &
  Inc., Engineering ' Land Surveying, 3 3 3 West Street I
Mi.lfcrd, Mass. Ol757", said plan recorded with the Worcester
District Registry of Oeeda, in Plan iook 688, Plan 17.
Said LOT SO containa 45,280 square feet more or less according to
said plan.
The premises are conveyed sul;)ject to a utility easement and.
temporary construction ea•ement as shown on said plan.
The premises are conveyed together with right to use streets as
shown on said plan in common with others entitled thereto for all
purpo1ea for which public ways may be used in the Town of Milford,
Mas•achuaett.a.
No conveyance of any fee in any rtreet or_wa.y ia made to grantees.
Tne premise• are conveyed subject to Covenant• dated November lS,
l994 and recorded with the Worcetter Di•triet Regi•tr¥ of Deeds in
Book 16737, Page 303, as amended in Book 16900, Page 28 and in Book
1712-t I Page :a;z 1 and in Book l8824, Page 184, as affected by
certificates of Performance recorded in Book 171241 .Page 214 and in
Book l8 4 3 0, Page 16 1 5'id in liD* 19'316 Page 173.
For Mortgagors' title see deed at Book 36740 Page 388.
S.A. 18
· ··--·-··-ek: 39475 Pg: 301 -
BALLOON PAYMENT RIDER
(FIXED RATE)
THIS BALLOON PAYMENT RIDER (the "Security Instrument Rider'1 is made this 26th
day of Ju I y, 2006 , and is incorporated into and shall be deemed to amend
  supplement !he Mortgage, Deed of Trust, or Security Deed (the "Security Tnstrument") of the
di!te given by the undersigned ("Borrower") to secure Borrower's Note (!he "Note") to
FA EMONT INVESTMENT & LOAN ("Lender") of the Slime date
anti covering tlle property described in the Security Instrument and located at:
23 CHRISTINA ROAD MILFORD, MA 01757
[Propeny Address)
THE NOTE IS PAYABLE IN FULL AT MATURITY. BORROWERMUST REPAY
THE ENTIRE UNPAID PRINCIPAL BALANCE OF THE NOTE, TOGETHER WITH
ALL UNPAID INTEREST AND LOAN CHARGES THEN DUE, IN A SINGLE
BALLOON PAYMENT. THE LENDER IS UNDER NO OBLIGATION TO
REFINANCE TIIE NOTE AT THAT TIME. BORROWER Wn..L, THEREFORE, BE
REQUIRED TO MAKE PAYMENT OUT OF OTIIER ASSETS THAT BORROWER
MAY OWN, OR BORROWER WILL HAVE TO FIND A LENDER, WHICH MAY
BE THE LENDER NAMED IN THE NOTE, WILLING TO LEND BORROWER THE
MONEY. IF BORROWER REFINANCES TilE NOTE AT MATURITY, BORROWER
MAY HAVE TO PAY IUGHER INTEREST RATES ON THE NEW WAN THAN
THE INTEREST RATE PAID ON THE NOTE. FURTHER, lF BORROWER
REFINANCES, BORROWER MAY HAVE TO-PAY SOME OR ALL OF Tim
CLOSING COSTS NORMALLY ASSOCIATED Wim A NEW LOAN EVEN IF
BORROWER OBTAINS REFINANCING FROM THE SAME LENDER.
ADDITIONAL
in the Security
follows:
1. Payments
COVENANTS. In addition to the covenants and agreements made
Instrument, Borrower and Le!lder further covenant and agree as
Borrower has executed a Balloon Payment Rider to Note (the "Note Rider") dated the !:alne
date this Security 1 nstrumenr Rider. The Note Rider modifies, ame:nds, and suppleme:nts Section 3
of' U1e Note to read, in its entirety, as follows;
llALFlXRD rg 1105/06 p. l of2
S.A. 19
Bk: 39475 Pg: 302
3. PAYMENTS
(A) Time and Place or Payments
(B)
I will pay principal and interest by making a payment every molllh.
l will my monthly payment on the fIrst day of each month
begiruling on September 1, 2006 . I will make these payments
every month until [ have paid of !he principal and interest and any other charges
described below that 1 may owe under this Note. Bach monthly payment will be
applied as of its scheduled due date and will be applied to interest before Principal.
On August 1, 2036 which is called the "Maturity
Date"), I will pay the entire unpaid Principal balance of this Note, together with all
accrued but unpaid interest and all charges due uuder this Note, in a single payment
(the "Balloon Payment"). I understand and acknowledge that the Balloon Paymmt
due on the Maturity Date will be much larger than a regular monthly payment and that
the Note Holder has no obligation to refinance the Balloon Payment.
I will make my monthly payments at 2727 E IMPERIAL HIGHWAY, BREA CA 92821
or at a different place if required by the Note Holder.
Amount of Monthly Payments
My monthly payment will be in the amount of U.S. S 3,064.33
z. Effect of No I.e Rider
The Note Rider contains the following provisions:
''This Note Rider moditie$, amends and supplements the Note. To the extent of any inconsistency
between t.he provisions of tllis Note Rider and the provisions of the Note, the provisions of this Note
Rider shall prevail over and supersede the inconsistent provisions of the Note. Ex.t:ept as modif1cd,
amended or supplemented by this N()te Rider, the Note shall remain in full force and effect."
BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants
contained in this Balloon Payment Rider.
    --::-(Seal)
-Bonower

-Borrower
-------------_,--<Seal)
-Borrower
------------__,.-(Seal)
-Borrower
--------------::--(.Seal)
-Borrower
[Sign Original Only]
13AI.FIXR2 rc 1105106 p. l ofl
ArnST: WORC. Anthony J. Vigliotti, Register
S.A. 20

NOTE
July 26, 2006
ID•Iel
BREA, CA 92821
[City!
23 CHRISTINA ROAD MILFORD, MA 01757
IPropeny Addreu)
I. BORROWER'S PROMISE TO PAY

·In return for a loan that I have received, 1 promise 10 pay U.S. S
plus interest, cp !he order of the Lender. The Lender is
436, 000. 00 (this amount is called "Principal").
FREMONT INVEStMENT & lOAN
I will make all paymenrs under this N01e in !he form of cll!h, check or money order.
I undcrsl81ld !hat the Lender may transfer this Note. The Lender or anyone who lakes this Note by transfer and who is entitled
to receive payments under this Note is called the "Note Holder. •
2. INTEREST
Interest will be on unpaid principal until the full amount of Principal has been paid. I will pay interest at a yearly rate
of 8. 1 DDO %. · ·
The interest rate required by this Section 2 is the rate I will pay both before and after any default described in Section 6(B) of
\his Note.
3. PAYMENTS u SEE BALLOON PAYMENT RIDER ATTACHED HERETO AND MADE A PART HEREOF ...
(A) Time and Place of Payments ·
I will pay principal and interest by making a payment every monlh .•
1 will make my monthly payment on the first day of each month beginning on Saptellb&r 1 , 2006 . 1 will
make these pllyment.s every month untill have paid all of the principal and intcrest and any other charges descnbed below that I
may owe under this Note. Eacll monthly payment will be applied as of its scheduled due date and will be i.Jl'Piicd 10 intereSt before
Principal. If, on August 1 , 203 6 . Tstill owe amounts under this Note, I will pay those amounts in full an
that date, which is called lhe "Maturity Date."
lwillmaltemymonlhlypaymentsat2727 E IMPERIAL HIGHWAY, BREA CA 92821
or at a different place if required by the Nort. Holder.
(8) Amount or Monthly Payments
My payment will be in the amount of U.S.$ 3, 064. 33·
4. BORROWER'S RIGHT TO PREPAY
1 have lhe rightiO make payments of Principal at any time before they are due. A payment of Principal only is known as a
"Prepayment." When I mlllce a Prepayment, I will tell the Note Holder in writing thai I am doing so. I may not designate a payment
as a Prepayment if I have not made all the monthly payments due under the Note.
I may make a full Prepayment or partial Pz:epayments without paying a Prepayment charge. The Note Holder will use my
Prepayments to reduce \he amount of Principal that I owe under this Note. However. the Nort. Holder may apply my Prepayment to
the accrued and unpaid interest on the Prepayment amount, before applying my Prepayment 10 reduce the Principal amount of the
Nort.. If I make a partial Prepayment, there will be no changes in the due date or in the amount of my monthly payment unless the
Note Holder agrees in writing to those changes.
MUL TISTATE FIXED RATE NOTE·Single Family·Fannl• lbe/Fredclle Mac UNIFORM INSTRUMENT
G ·SN !o<I05\.01 Form 3200 1/01
VMP   FORMS ·(I00)621·7U1 -
1111 11111111 Ill/
S.A. 21

5. LOAN CHARGES
If a Jaw, which applies to this loan and which sel! maximwn loan charges, is finally inwpreted so that !he or other
Joan charges collected or to be collecltd in connection with this loan exceed lhe pennilt£d limits, then: (a) any such loan charge
shall he reduUd by the amount necessary to reduce the charge to the pumiUed umil; and (b) any sums already collected from me
which exceeded permitted limits .will be refunded 10 me. The Note Holder may choose 10 make this refund by reducing the
Principal! owe under this Note or by making a direct payment to me. If a refund reduces Principal, the reduction will be treated as
11 partial Prepayment
6. BORROWER'S FAILURE TO PA \'AS REQUIRED
(A) Latr Charge for Overdue Paymenu
If the Note Holder has not received the full amount of any monthly payment by the end of 15
after the dare it is due, I will pay a late charge to the Note Holder. The amount of the charge wiU be 3 . 0
calendar days
%of
rny overdue payment of principal and interest. I will pay this late cbarge prompdy but onJ.y once on each lace payment.
(B) Default
If 1 do not pay the full amount of each monthly payment on the date it is due, J wlU be in default.
(C) Notice or Default
If I am in ·the Note Holder may send me a written notice telling me that if I do not pay the ovudue amount by il
certain date, the Note Holder may require me to pay immediately lhe full amount of Principal which has not been pllid and all the
interest that rowe on !hat amount That date must be at least 30 daya after the date on wh.ich the notice is mailed to me or delivered
by other means.
(D) No Wainr By Note Holder
Even if, at a time when I am in default, the Note Holda does not require me to pay immediately in full as described above,
the Note Holder will still have the right to do so if I am in default at a later time.
  Payment of Note Holder's Costs and El'penses
If the Note Holder has required me to pay immediately in full as doscribed above, the Note Holder will have the right to be
paid back by me for all of its costs 1111d expenses in enforcing !his Note to the extent not prohibited by applicable law. Those
expenses include, for example, attorneys' fees.
7. GIVING OF NOTICES
Unless applicable law requires a different method, any notice that must be given to me under this Note will be given by
delivering it or by mailing il by first class mail to me at the Property Addrets above or at a different address if I give the Note
Holder a notice of my different address.
Any notice that must be given to the Note Holder under this Note will be given by delivering it or by mailing it by fiiSt Class
mail to the Note Holder at the addtess stated in Section 3(A} above or at a different address if I am given a. notice o( !bat different
address.
8. OBLIGATIONS OF PERSONS UNDER TFnS NOTE
If more than one person signs Ibis Note, each. person is fully and persot1ally obligaltd to keep aU or the promises made in this
Note, including !he promise to pay the full amount owed. Any person who is a guarantor, SUJUy or endorser of this Note Is also
obligated to do lhese thi(lgs. Any person whQ talces ovu these obligations, including the obligations of a gulrlUllOI, surety or
endorser of this Note, is also obligated to keep all of the promises made in lhls Note. The Note Holder may enforce its righlS under
lllis Note against each person individually or against all of us togelher. This means rhatany one of us may be required to pay 1111 of
!he amounts owed under this Note.
9. WA.IVRRS
I and any other person who has obligations under !his Note waive !be rights of Presentment and Notice of Dishonor.
"Presentment" menns the right 10 require the Note Holder 10 demand paymcnr of amounts due. ''Notice of Dishonor" means the
right to require the Note Holder to give notice to orber persons !hat amounts due have not been paid.
.. ·SN fOOOSJ.OI
II>
P•t•2 of 3
S.A. 22
j
_, v

10. UNIFORM SECURED NOTE
This Note is a uniform instrument with limited varilltions in some jurisdictions. In addition to the protections given to the
Note Holder under this Note, a Mortgage, Deed of Trust, or Security Deed (the "Security Instrument''), dated the same date as this
Note, protects the Note Holder from possible losses which might result if l do not keep the promises which I make in !his Nme.
That Security lnsaumem describes how and under what conditions 1 may be required to make immediate payment in full of all
amounts I owe under !.his Some of those conditions are described as foUows:
' If all or any part of Property or any Interest in the Propeny is sold or aansferred (or if Borrower is not a
natural person and a beneficial interest in Borrower is sold or transferud) without Lender's prior written consent,
Lender may require Immediate payment in full of all sums secured by !his Security Instrument However, this
option shall not be by Lender if such tlt'ercise is prohibited by Applicable Law.
If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall provide
a period of not less th1111 30 days from lhe date the notice is given in accordance with Section !5 within which
Borrower must pay all sums secured by this Security lnsaument. If Borrower fails to pay these sums prior to the
expiration of lhis period, Lender may invoke lillY remedies permitted by lhis Security Insb'ument without further
notice or demand on Borrower.
•• SEE BALLOON PAYMENT RIDER ATTACHED HERETO AND MADE A PART HEREOF ••
Wl1NESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED.
              (Seal)


______________ (Seal)
-Borrower
---------------<Seal)
·Borrower
________________ (Seal)
-Borrower
·Borrower
--------------<Seal}
-Borrower
--------------<Seal)
·Borrower

·Borrower
{Sign Original Only!
Q ·SN roooS).o'
Ill
Page 3 of J Form 3200 1/0T
S.A. 23

. .
BALLOON.NOTE ADDENDUM
(CONDITIONAL AND EXTENSION OF LQAN TERMS).
THIS BALLOON NOTE ADDENDmYt is       m4 . 2.6th ·· · day of Ju 1 y, · 2006 _ , and is incor.pQtated
inlO and shall be deemed to amend and supplement the Balloon Ncite made by the undersigned (the "Borrower") irr favor of
FREMONT INVESTMENT & LOAN
(!he ''Lender") and dated !he same date as the Addendum (the ''Note"). The interest rate slated on the Note is called the "Note Rate."
The date of !he Note is called the "Note Date."
I (the Borrower) understand the Lendei may transfer the Note, the related Mortgage, Deed of Trust, or Deed to Secure Debt
(the "Security Instrument") and this Addendum. The Lender or anyone who takes the Note, Security lnSII'ument and tlns
Addendum by rransfer and who is entitled to receive payments under the Note is called the "Note Holder."
ADDITIONAL COVENANTS. In addition 10 the covenants and agreements in the Security Instrument, Borrower, and
Lender, further covenant and abrree as follows {despite anything to the contrary contained in the Security Instrument or the Note):
I. CONDITIONAL MODIFrCA. TION AND EXTENSION OF LOAN TERMS
At the maturity date of the Note and Security Instrument (the "Note Maturity Date"), I will be able to extend the Note
Matunty Date to 9 I 1 I 4 6 , (the "E.xtendcd Maturity Date") and modify the Note Rate Ul the "Modified
Note Rate" decermmed in accordance with Section 3 below if all the conditions provided in Sections 2 and 5 below are met (the
"Conditionlll Modification and Extension Option"). If those conditions ace not met, I understand that the Note Holder is under no
obligauon to refinance the Note or to modify the Note, reset the Note Rate or extend the Note Maturity Date, and that I will have to
repay !he Note from my own resources or find a lender willing 10 lend me the money to repay the Note.
2. CONDITIONS TO OPTION
If I want to exercise the Conditional Modification and Extension Option, certain conditions must be met as of the Note
Maturity Date. These conditions are: (a) I must still be the owner and occupant of the propeny subject to the Security lnstrumem
(the "Property"): (b) I must be current in my monthly payments and cannot have been more than 30 days late on any of the 12
scheduled monthly payments immediately preceding the Note Maturity Date; (c) there ace no liens, defectS, or encumbrances
against the Property, or ather adverse matters affecting title to the Property (except for ta.xes and special assessments not yet due
and payable) arising after the Security Instrument was recorded; (d) the Modified Note Rate cannot be more than 5 percentage
points above the Note Rate; and (e) 1 must make a written request 10 the Note Holder as provided in Section 5 below.
J. CALCULATING THE MODIFIED NOTE RATE
The Modified Note Rate will be a fixed rate of interest equal to the Federal Home Loan Mongage Corporation's required net
yield for 30-year fixed rate mor1gages subject to a 60-day mandatory delivery commitment, plus one-half of one percent (0.5%),
rounded to tlle_ nearest one-eighth of one percent (0.125%) (the "Modified Note Rate"). The required net yield shall be the
applicable net yield in effect on the date and time of day that the Note Holder receives notice of my election 10 exercise the
Conditional Modification and Extension Opuon. If this required net yield is not available, the Note Holder will determine the
Modified Note Rare by using comparable information.
MUL TISTATE BALLOON NOTE ADDENDUM (MODIFICATION AND EXTENSION)·Singl& Family-
Freddie Moo UNIFORM INSTRUMENT
0®B79N (0005)
1879NHIA
Pao• 1 ol 2
VI.IP I(ORTGAGE FOAMS· (100)521-7291
S.A. 24
. 4. CALCULA TlNG THE NEW PAYMENT AMOUNT
Provided the Note Race as ca.Jculaled in Section 3 is not gTeatcr than 5 percentage points above the Note Rate
and all other condinons required in Section 2 above are satisfied. !he Note Holder wiiJ derermine !he amount of the monlllly
payment !hat will be sufficient ro repay in full (a) !he unpaid principal, plus (b) accrued but unpaid interest, plus (c) all olher sums I
will owe under !he Nore and Security Insrrumelll on the Nate Maturity Date· (assuming my monthly payments then are 'urrent, as
required under Section 2 above), over the remaining extended tum at !he Modified Note Rate in equal monthly payments. The
of !his calculation will be the new amount of principal and interest payment every month until the Note is fully paid.
S. EXERCISING THE CONDITIONAL MODIFICATION AND EXTENSION OPTION
The Note Holder will notify me at least 60 calendBI days in advance of the Nate Maturity Date 1111d advise me of the principal,
accrued but unpaid interest, and all other sums l atn expected to owe on the Note Maturity Date. The Note Holder also will ad vise
me that I may exercise the Conditiontll Modification and Extension Option if the conditions in Section 2 above are met. The Note
Holder will provide my payment record information, together with the natne, title and address of the person representing the Note
Holder !haL r must notify in order to exercise the Conditional Modification and ExtenSion Option. rf I meet the conditions of
Section 2 above, 1 may exercise the Conditional Modification and Extension Opdon by notifying the Holder no earlier than 60
calendar days and no later than 45 calendar days prior ro theNme Maturity Dale. The Note Holder will calculate the fixed Modified
NOte Rate based upon the Federal Home Loan Mongage CoiTJoralion 's applicable published required net yield in effect on the date
notificilliOn is received by the Note Holder and as calculated in Section 3 above. I will then have 30 calendar days to provide the
Note Holder wilh acceptable proof of my required ownership, occupancy and property lien status. Before the Note Maturily Date
the Note Holder will advise me of the new interest rate (the Modified Note Rate), new monthly paymenl amount and 11 date, time
und place at which 1 must appear to sign any documents required to complete the required Note Rate modification and NoiC
MaturitY Date extension. I understand the Note Holder will charge me a $250 processing fee and the costS associated with the
exercise of the Conditional Modification and Ex.tension Option, including but not limited to the cost of updating the. title insurance
policy.
BY STONING BELOW. BORROWER accepts and agrees to the terms and covenants contained in this Balloon Note
Addendum.

. . J Ei>A:GAUASTRo
(Seal)

---------------- (Setll)
·Borrower
JOoo•J
1879N1MA
(Seal)·
·Borrower
 
·Borrower
(Seal)
·Borrower
----------------(Seal)
·Borrower
-------------- (Seal)
·Burrower
[Sign Orrgina/ Only/
Form 3291 1/01
S.A. 25
.. . ..
Payment Rider to Note
(Fixed Rate)
THIS LOAN IS PAYABLE IN FULL AT MATURITY. YOU MUST REPAY THE
ENTIRE UNPAID PRINCIPAL .BALANCE OF THE LOAN, TOGETHER WITH
ALL. UNPAID INTEREST 'AND LOAN CHARGES THEN DUE, IN A SINGLE
BALLOON PAYMENT. THE LENDER IS UNDER NO OBLIGATION TO
REFINANCE THIS LOAN AT THAT TIME. YOU WILL, THEREFORE, BE
REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS THAT YOU MAY
OWN, OR YOU WILL HAVE TO FlND A LENDER, WHICH MAY BE THE
LENDER YOU HAVE TinS LOAN Wmi, WD..llNG TO LEND YOU THE
MONEY. IF YOU REFINANCE TillS LOAN AT MATIJRITY, YOU MAY HAVE
TO PAY HIGHER INTEREST RATES ON THE NEW LOAN THAN TilE
INTEREST RATE PAID ON TIDS LOAN. FURTHER, IF YOU REFINANCE,
YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS
NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN
REFINANCING FROM THE SAME LENDER.
THIS BALLOON PAYMENT RIDER TO NOTE (the "Note Rider") is made this 26th day of
July, 2008 and is incorpordted into and shall be deemed to amend
and supplement 111e Note (che "Note") made by rhe undersigned (the "Borrower') in favor of
FREMONT !NVESTI!IENT & LOAN {the "Lender") and dated the same date as this Nme
Rider.
ADDITIONAL COVENANTS. Jn addition to the covenants and agreements made in the Note,
Borrower and Lender further covenant and agree as follows.
1. P11ymen1s
Section 3 of the Note is moditied, amended and supplemented to read, in its entirety, as follows:
"3. PAYMENTS
(A) Time and Place or
I will pay principal and interest by nuking a payment every month.
I will make my monthly paymellt on the first day of each month
begiruting on September 1, 2006 . I Will make
these payments every month until I have paid all of the principal and interest and any
other charges described below that I may owe under this Note. Each ruonthly payment
will be applied as of its scheduled due date and will be applied to inlerest before Principal.
On August 1, 2036 (which is called the "Maturity Date"),
l will pay the entire unpaid Principal balance of this Note, together with all accrued but
unpaid interest and all charges due under tl1is Note. in a single payment (the "Balloon
Payment"). 1 understand and acknowledge that U1e Balloon Payment due on the Maturity
Date will be much larger than a regular monthly payment and that the Note Holder has
110 obligation te refmance the Balloon Payment.
! will my monthly payments at 2727 E IMPERIAL HIGHWAY, BREA CA 92821
or at a different place if required by the Note Holder.
(BJ Amounl of Monthly Payments
My monthly payment will be in the amount of U.S.$ 3,064.33
2. Effect of Note Rider
This Note Rider modifies, amends and supplements Ute Note. To the extent of any inconsistency between
the provisions of this Note Rider and the provisions of che Note, the provisions of chis Note Rider shall
prevail over and supersede the     provisions of the Note. Except as modified, amended or
supplemented by this No1e Rider, U1e Note shall remain in full force and effect.
BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants contained in
this Balloon Payment Rider to Note.
llALFrXNI cl Sn4/05
nS .. A. 26
(Seal)
-Borrower
(Seal}
-Borrower
(Seal)
-Borrower
(Seal}
-Borrower
[Sign Original Only]

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