A case that has sat before the Supreme Judicial Court since late 2021 could upend Maine’s policies on foreclosures and default notices that lenders send to borrowers.
The state’s highest court has yet to issue a ruling in the case, J.P. Morgan Acquisition Corp. v. Camille Moulton, since receiving the appeal in December 2021 and asking in August 2022 for interested parties to weigh in.
At stake is 25 years of legal precedent in Maine that has prevented lenders from going after borrowers repeatedly for loan defaults by “accelerating” a note, or asking for repayment at once, if they initially sought back, for example, an incorrect amount of money.
Various state and national organizations, representing financial institutions as well as consumers, have weighed in on the case, arguing it could either better support lenders or cause more problems for low-income residents already struggling in Maine’s housing crisis.
It is unknown when the Maine Supreme Judicial Court may rule on the case. Until it does, here are some of the key details.
What brought the case to Maine’s top court?
J.P. Morgan Acquisition Corp., part of the American banking giant, asked Maine’s high court to take up its case against Camille Moulton, who lives in the Oxford County town of Buckfield.
Moulton borrowed nearly $63,000 under a 30-year mortgage to acquire a home in 2009. When Moulton made a periodic payment of $720 in 2016, a discrepancy between what J.P. Morgan’s servicer calculated was due and what the lender told Moulton was due eventually led to a foreclosure notice and unsuccessful talks between the sides in 2019.
Several stays and continuations of the case due to foreclosure pauses after the COVID-19 pandemic began pushed it to 2021. That’s when a district court found J.P. Morgan failed to give Moulton a correct default notice. Therefore, she had the right to make up the payments before J.P Morgan could seek to seize the home.
Moulton was allowed to hold on to the property and was awarded attorney fees under that ruling. J.P. Morgan’s appeal is what has the case before justices today.
What are the legal arguments and precedents?
Moulton’s lawyers have argued J.P. Morgan violated Maine law and several past rulings going back to 1997 that found lenders cannot seek a second foreclosure if their initial attempt was dismissed because of errors, such as with the amount borrowers owe. But J.P. Morgan replied the district court had “overreached.”
“Although stringent, nowhere is the standard defined as perfection,” William Fogel and Santo Longo, the lawyers representing J.P. Morgan, wrote in a brief referring to state law.
Advocates for borrowers have wondered if the past legal rulings are at risk after the Supreme Judicial Court asked interested parties last year to submit briefs answering two questions: Should it reconsider precedent on prohibiting second foreclosure attempts, and should it reverse its rulings in two 2017 cases, Pushard v. Bank of America and Fannie Mae v. Deschaine?
An array of state and national groups submitted briefs in response, including federally backed mortgage companies Fannie Mae and Freddie Mac, the Maine Bankers Association, National Consumer Law Center and Maine Equal Justice.
Lawyers for Fannie Mae, Freddie Mac and the Federal Housing Finance Agency argued a ruling against J.P. Morgan could hurt future homebuyers by creating uncertainty over mortgages and repayments. The bankers’ association said Maine’s laws effectively give borrowers a free pass if lenders cannot correct their errors.
Writing in support of Moulton, Frank D’Alessandro, Maine Equal Justice’s legal director, and Deb Ibonwa, the nonprofit’s legal advocate, noted state lawmakers have not taken steps in recent years to overturn the foreclosure-related decisions and instead have moved to “increase homeowner protections.”
The Legislature, not justices, should decide whether to change the foreclosure laws, the two lawyers added last year in their brief.
“Given the current housing crisis in the State of Maine, removing the homeowner protections inherent in these decisions is bad policy as well,” D’Alessandro and Ibonwa wrote.
Do you have a question that wasn’t answered here? Ask us below.