AUGUSTA, Maine — Maine’s high court issued a long-awaited ruling Tuesday that said J.P. Morgan had a right to foreclose on a woman despite incorrectly notifying her of what she owed on a mortgage.
But the Supreme Judicial Court also made a broader decision earlier in January that effectively reversed a 2017 opinion on lenders’ rights to seek foreclosures after making mistakes with what borrowers owe. The 4-3 decision this month effectively said U.S. Bank and other lenders do not lose their ability to seek the entire payments despite making mistakes in the default process.
Tuesday’s ruling in a case involving J.P. Morgan and an Oxford County woman similarly found a lender had erred in its calculations but left a lower court to decide whether the home can keep the home essentially for free or if she still owes money.
The case had been before Maine Supreme Judicial Court since 2021 and drew interest from national groups representing banks and consumers. The attention concerned roughly 25 years of precedent in Maine preventing lenders from repeatedly going after borrowers for defaults by asking for repayment at once if lenders initially sought an incorrect amount of money.
J.P. Morgan had appealed a lower court ruling out of Oxford County that found it failed to give Camille Moulton of Buckfield a correct default notice. 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.
Due to the error, a district court later said Moulton had the right to make up missed payments before J.P. Morgan could try to seize the home. That allowed Moulton to hold onto the property.
While the state’s high court agreed Tuesday in a 15-page ruling that J.P. Morgan erred in telling the woman how much she owed and awarded Moulton attorney fees, it overturned the lower court’s decision effectively letting Moulton hold onto the home. J.P. Morgan does not need to “discharge” or consider the mortgage paid off, the high court found.
The new high court decision mostly follows the one earlier this month out of Androscoggin County but still leaves open several questions for a lower court to answer, Moulton’s attorney, Kendall A. Ricker, said Tuesday. They include whether she still owes the outstanding mortgage balance as of the date of the court decision.
“That part isn’t 100 percent clear to me,” Ricker said.
Since Moulton had not made an additional “declaratory relief” claim related to keeping the property, the high court said the district court had no basis to go beyond its decision regarding the incorrect notice. The Supreme Judicial Court cited its stance in the separate but similar case this month out of Androscoggin County.
However, one justice disagreed with Tuesday’s ruling in an opinion holding the lower court’s determination that Moulton could hold onto the home was “a final judgment on the merits and bars relitigation of any matter related to the mortgage.”
Associate Justice Andrew Mead, in a dissenting opinion also including former Associate Justice Thomas Humphrey, who was part of the case until leaving the court in 2022, said J.P. Morgan’s mortgage acquisition arm did not have standing to challenge the lower court ruling because it “failed to demonstrate its ownership of the mortgage.”
Consumer law groups had joined Moulton’s attorneys in arguing Maine law and past court rulings said lenders cannot seek a second foreclosure if their initial attempt was dismissed because of errors.
But 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 Maine Bankers’ Association also said Maine’s laws effectively give borrowers a free pass if lenders cannot correct their errors.
