## Facts

- Henrietta Eaton executed a promissory note secured by a mortgage on her Massachusetts home.
- The mortgage was assigned to Green Tree Servicing, LLC, which became the record mortgage holder.
- After Eaton defaulted, Green Tree conducted a nonjudicial foreclosure sale under the mortgage’s statutory power of sale.
- Green Tree stipulated it held the mortgage at the time of foreclosure but did not hold the promissory note.
- Federal National Mortgage Association (Fannie Mae) acquired the property by foreclosure deed and filed a summary process (eviction) action against Eaton.
- Eaton challenged the foreclosure’s validity, asserting that the foreclosing entity needed to hold the note to foreclose.
- A Superior Court judge preliminarily enjoined the eviction, finding Eaton likely to succeed on the theory that the foreclosing party must hold both the mortgage and note.
- The matter reached the Supreme Judicial Court of Massachusetts on interlocutory review of the preliminary injunction.

## Issues

1. Under Massachusetts foreclosure-by-power-of-sale statutes, must the foreclosing “mortgagee” hold the promissory note or act on behalf of the noteholder at the time of foreclosure?
2. If such a requirement exists, does it apply retroactively or only prospectively?
3. Did the trial court abuse its discretion by granting a preliminary injunction based on Eaton’s likelihood of success?

## Decision

- The court construed “mortgagee,” for purposes of statutory power-of-sale foreclosure, to mean an entity that holds the mortgage and also either holds the note or acts on behalf of the noteholder.
- The court applied this construction prospectively only, to foreclosure sales for which notice of sale is given on or after June 22, 2012.
- Because Eaton’s foreclosure preceded the decision, the new construction did not provide a basis to find she was likely to succeed on the merits.
- The court vacated the preliminary injunction restraining post-foreclosure eviction.

## Legal Principles

- A power-of-sale foreclosure must comply with the governing foreclosure statutes, including their “mortgagee” requirement.
- For notices of sale given on or after June 22, 2012, the statutory “mortgagee” authorized to foreclose is the holder of the mortgage that also holds the mortgage note or is the authorized agent of the noteholder.
- The court may limit a new construction of foreclosure statutes to prospective application to avoid widespread disruption of settled titles and reliance interests.
- A preliminary injunction based on likelihood of success is improper where the merits theory depends on a rule the court applies only prospectively.

## Conclusion

The court held that, for future power-of-sale foreclosures, the foreclosing mortgagee must also hold the note or act for the noteholder, but it limited that requirement to prospective application; because Eaton’s foreclosure predated the decision, the preliminary injunction preventing eviction was vacated.


Eaton v. Fed. Nat'l Mortg. Ass'n, 969 N.E.2d 1118 (Mass. 2012)