Santos v. U.S Bank National Association

NOTICE: All slip opinions and orders are subject to formal
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15-P-334 Appeals Court

MILTON R. SANTOS1 vs. U.S. BANK NATIONAL ASSOCIATION, trustee,2
& others.3

No. 15-P-334.

Suffolk. February 24, 2016. - July 8, 2016.

Present: Katzmann, Milkey, & Blake, JJ.

Bank. Loan. Mortgage, Real estate, Foreclosure. Real
Property, Mortgage. Notice. Practice, Civil, Motion to
dismiss, Summary judgment, Summary process. Summary
Process.

Civil action commenced in the Superior Court Department on
March 28, 2011.

The case was heard by Heidi E. Brieger, J., on a motion for
summary judgment.

1
Also known as Milton R. Dossantos.
2
Of the Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, 2006-EQ1.
3
U.S. Bancorp and Wells Fargo Bank, N.A., doing business as
America's Servicing Company. Where Santos has not suggested any
reason to differentiate between the various named defendants in
terms of his theories of liability and the defendants have
presented a unified defense, we collectively refer to all the
defendant parties as "defendants" except where U.S. Bank
National Association acted alone (e.g., in pursuing the
postforeclosure summary process action).
 2

Michael J. Traft (Robert Graves with him) for the
plaintiff.
Sean R. Higgins (Michael Stanley with him) for the
defendants.

KATZMANN, J. The plaintiff mortgagor Milton R. Santos

appeals from orders of a Superior Court judge dismissing his

claim that the mortgagee and mortgage servicing defendants

violated G. L. c. 244, § 35A, and granting summary judgment to

the defendants on his claim that U.S. Bank National Association

(U.S. Bank) negligently processed his loan modification

applications made pursuant to the Home Affordable Modification

Program (HAMP). We affirm.

Background. We recite the facts alleged in Santos's

complaint as supplemented by the undisputed facts in the summary

judgment record and descriptions of HAMP from case law.

1. HAMP.4 "HAMP was part of Congress's response to the

financial and housing crisis that struck the country in the fall

of 2008." Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769,

772 (4th Cir. 2013). Acting under authority conferred by the

Emergency Economic Stabilization Act of 2008 (EESA), 12 U.S.C.

§§ 5201 et seq. (and specifically the Troubled Asset Relief

Program [TARP], 12 U.S.C. §§ 5211–5241), and in conjunction with

4
The following is but a brief overview of HAMP. For a
thorough and detailed presentation of "background information on
the HAMP program," see Wigod v. Wells Fargo Bank, N.A., 673 F.3d
547, 556-557 (7th Cir. 2012).
 3

the Federal Housing Finance Agency, the Federal National

Mortgage Association (Fannie Mae), and the Federal Home Loan

Mortgage Corporation (Freddie Mac), the Secretary of the

Treasury (Secretary) introduced the Making Home Affordable

Program in February, 2009. HAMP, which is administered by

Fannie Mae, is part of this initiative. Markle v. HSBC Mort.

Corp. (USA), 844 F. Supp. 2d 172, 176 (D. Mass. 2011).

"HAMP aims to provide relief to borrowers who have

defaulted on their mortgage payments or who are likely to

default by reducing mortgage payments to sustainable

levels. . . . Under HAMP, loan servicers receive incentive

payments for each permanent loan modification completed. . . .

Mortgage lenders approved by Fannie Mae must participate in

HAMP. . . . Lenders servicing mortgages not owned or guaranteed

by Fannie Mae or Freddie Mac may elect to participate in HAMP by

executing a Servicer Participation Agreement with Fannie Mae in

its capacity as financial agent for the United States." Id. at

176-177. "Loan servicers receive a $1,000 payment for each

permanent modification, in addition to other incentives." Young

v. Wells Fargo Bank, N.A., 717 F.3d 224, 229 (1st Cir. 2013).

"The Secretary negotiated Servicer Participation Agreements

(SPAs) with dozens of home loan servicers . . . . Under the

terms of the SPAs, servicers agreed to identify homeowners who

were in default or would likely soon be in default on their
 4

mortgage payments, and to modify the loans of those eligible

under the program." Wigod v. Wells Fargo Bank, N.A., 673 F.3d

547, 556 (7th Cir. 2012). On August 20, 2009, U.S. Bank

executed an SPA with Fannie Mae. "The Department of the

Treasury and Fannie Mae have issued a series of directives that

provide guidance to mortgage servicers implementing HAMP. Under

the guidelines, servicers may identify and solicit borrowers who

are in default on their mortgage payments, or soon will be, and

evaluate their eligibility to participate in HAMP." Markle, 844

F. Supp. 2d at 177.

"HAMP urges banks and loan servicers to offer loan

modifications to eligible borrowers with the goal of reducing

[their] mortgage payments to sustainable levels, without

discharging any of the underlying debt." Young, 717 F.3d at 228

(quotation omitted). Under the guidelines, HAMP-eligible

homeowners are offered a trial period plan (TPP) in which the

homeowner undertakes to pay modified mortgage payments for a

three-month trial period. "The standard-form TPP represents to

borrowers that they will obtain a permanent modification at the

end of the trial period if they comply with the terms of the

agreement." Markle, 844 F. Supp. 2d at 177. Freddie Mac "is

the sole compliance agent responsible for enforcing HAMP."

Spaulding, 714 F.3d at 774.
 5

"Perhaps not surprisingly, given the large stakes for

financially stressed homeowners, and in light of widespread

media reports of bureaucratic bungling (and worse) on the part

of lenders, mortgage servicers, and their myriad agents, HAMP

has given rise to a large number of civil claims by mortgagors

against financial industry firms." Ibid.

2. Santos's mortgage history. On April 28, 2006, Santos

purchased a residential property in Revere (property) for

$368,000. He financed the purchase with two mortgage loans that

together covered 100 percent of the purchase price.5 After an

assignment from the initial lender, Santos's first mortgage in

the amount of $294,400 was held by U.S. Bank, as trustee for a

securitized pool of mortgages, and serviced by Wells Fargo Bank,

N.A., doing business as America's Servicing Company.

Santos defaulted on his mortgage in 2008. Between 2009 and

2010, the defendants evaluated Santos several times for a

permanent loan modification under HAMP. Despite Santos's

participation in a three-month HAMP TPP, the defendants

ultimately denied all of Santos's applications for a permanent

loan modification under HAMP. In April, 2010, the defendants

offered Santos an in-house modification (that is, not a HAMP

modification) that Santos declined.

5
Only one of those mortgage loans is at issue here.
 6

On July 22, 2010, the defendants foreclosed on the mortgage

and purchased the property at the foreclosure sale for $212,415.

3. Procedural history. Subsequent to foreclosure, on

March 7, 2011, the defendants initiated a summary process action

in the District Court. Santos answered the summary process

complaint, asserting, inter alia, that he was in the process of

bringing a case in Superior Court against the defendants for

various claims, including a violation of G. L. c. 244, § 35A.6

On March 29, 2011, Santos in fact filed a verified

complaint in Superior Court alleging that the defendants

negligently failed to adhere to HAMP guidelines in processing

his loan modification applications (count I) and seeking a

declaration that the foreclosure was invalid because the

defendants failed to send him notice of his ninety-day right to

cure prior to foreclosure in violation of G. L. c. 244, § 35A(a)

6
General Laws c. 244, § 35A, has gone through various
iterations. As applicable here, it provided for a ninety-day
right to cure: "Any mortgagor of residential real property
located in the commonwealth . . . shall have a 90 day right to
cure a default of a required payment as provided in such
residential mortgage or note secured by such residential real
property by full payment of all amounts that are due without
acceleration of the maturity of the unpaid balance of such
mortgage. . . . The mortgagee . . . shall not accelerate
maturity of the unpaid balance of such mortgage obligation or
otherwise enforce the mortgage because of a default consisting
of the mortgagor's failure to make any such payment . . . by any
method authorized by this chapter or any other law until at
least 90 days after the date a written notice is given by the
mortgagee to the mortgagor." G. L. c. 244, § 35A(a) & (b),
inserted by St. 2007, c. 206, § 11 (effective May 1, 2008).
 7

(count II).7 In his prayer for relief, Santos sought, inter

alia, orders declaring the foreclosure void and restoring title

to his name. The complaint noted the pendency of eviction

proceedings in the "Housing Court."

Meanwhile, the summary process action in District Court

proceeded, culminating in a judgment in favor of U.S. Bank for

possession on December 1, 2011. Santos's appeal from the

judgment of possession was dismissed.8

The defendants moved to dismiss the Superior Court action

pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), on

June 7, 2011, before the resolution of the summary process

action. Where that motion apparently remained pending beyond

the conclusion of the summary process case, the defendants

ultimately filed a supplemental memorandum in support of

dismissal after the District Court judgment issued.

7
Additional counts for declaratory relief based on U.S.
Bank's standing to foreclose and for equitable production of the
original note, which were dismissed at the Mass.R.Civ.P.
12(b)(6), 365 Mass. 754 (1974), stage, are not before us on
appeal.
8
The order allowing the motion to dismiss the appeal does
not reflect the basis for the dismissal of the summary process
appeal. Counsel for the defendants informed this court at oral
argument that the appeal was dismissed for failure to pay an
appeal bond. The defendants' supplemental memorandum in support
of their motion to dismiss Santos's complaint in this case
states that the summary process appeal was dismissed for failure
to prosecute.
 8

In an order dated January 3, 2013, the Superior Court judge

dismissed Santos's § 35A claim on the basis of claim preclusion

where the claim could have been brought in the summary process

action between the identical parties. However, the judge denied

the defendants' motion to dismiss Santos's negligence claim,

allowing it to proceed based on her conclusions that, under

Federal law, Santos is a third-party beneficiary under the SPA

between Fannie Mae and U.S. Bank and that, as a third-party

beneficiary, Santos could pursue a claim for negligent

performance of the duties imposed by the SPA. However, when the

case later came before her for summary judgment on the

negligence claim, the same judge granted summary judgment in

favor of the defendants on the basis that, under the economic

loss theory as articulated in FMR Corp. v. Boston Edison Co.,

415 Mass. 393, 395 (1993), Santos had not presented evidence of

a legally cognizable injury that would support his negligence

claim.

Discussion. Although the orders on appeal arise from

different stages of the litigation, we review the allowance of

motions to dismiss and motions for summary judgment de novo.

"We review a grant of summary judgment de novo to determine

whether, viewing the evidence in the light most favorable to the

nonmoving party, all material facts have been established and

the moving party is entitled to a judgment as a matter of
 9

law. . . . De novo review also applies to the judge's dismissal

of the plaintiffs' complaint under Mass.R.Civ.P. 12(b) . . .

(6)." Pinti v. Emigrant Mort. Co., 472 Mass. 226, 231 (2015)

(quotation omitted). To survive a motion to dismiss, the

complaint must include "factual 'allegations plausibly

suggesting' . . . an entitlement to relief." Iannacchino v.

Ford Motor Co., 451 Mass. 623, 636 (2008), quoting from Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007).

Although the judge did not have the benefit of some of the

recent opinions of the Supreme Judicial Court in the mortgage

context, we are satisfied that the § 35A claim was properly

dismissed under the circumstances here where Santos should have

litigated it in the summary process action. Because we agree

with the overwhelming weight of authority that borrowers cannot

maintain negligence actions against lenders for failure to

adhere to HAMP guidelines, we conclude that Santos's negligence

claim should have been dismissed pursuant to the rule 12(b)(6)

motion and was therefore properly, if belatedly, resolved in the

defendants' favor on summary judgment.

1. Right to cure violation. Santos contends that the

defendants failed to provide him with notice of his right to

cure the mortgage default as required under G. L. c. 244, § 35A.

The judge correctly determined that res judicata bars Santos
 10

from pursuing this claim now when he could have done so in the

District Court summary process action.

a. Res judicata. "The term 'res judicata' includes both

claim preclusion and issue preclusion. Claim preclusion makes a

valid, final judgment conclusive on the parties and their

privies, and prevents relitigation of all matters that were or

could have been adjudicated in the action. This is based on the

idea that the party to be precluded has had the incentive and

opportunity to litigate the matter fully in the first lawsuit.

The invocation of claim preclusion requires three elements: (1)

the identity or privity of the parties to the present and prior

actions, (2) identity of the cause of action, and (3) prior

final judgment on the merits." Kobrin v. Board of Registration

in Med., 444 Mass. 837, 843 (2005) (quotations and citation

omitted). "It is the general rule that when two different

actions involving the same parties and the same claim are

pending at the same time, the final judgment first rendered is

entitled to res judicata effect in the second action, regardless

of which was commenced first." Wright Mach. Corp. v. Seaman-

Andwall Corp., 364 Mass. 683, 690 (1974), citing Restatement of

Judgments § 43 (1942) and Restatement (Second) of Judgments

§ 41.1 (1982).

The elements of claim preclusion are satisfied here. The

parties are identical or in privity with those in the summary
 11

process action. The cause of action was also sufficiently

identical where Santos has framed his § 35A claim as one that

would establish that the foreclosure was invalid, which would

also have defeated U.S. Bank's title in the summary process

action. That summary process action proceeded to final

judgment. The summary process judgment, which became final when

Santos's appeal was dismissed, established U.S. Bank's superior

title and subsumed all related claims, including the question

whether any defect in the notice of right to cure undermined

U.S. Bank's title.

Santos contends that claim preclusion is inapplicable to

his § 35A claim because he preserved the issue by explicitly

reserving his right to bring an action in Superior Court for

violation of § 35A in his summary process answer. However,

litigants cannot unilaterally reserve rights to bring claims in

later actions. Rather, the preservation of claims in this

manner is the exclusive province of the court hearing the

action. "Under a generally accepted exception to the res

judicata doctrine, a litigant's claims are not precluded if the

court in an earlier action expressly reserves the litigant's

right to bring those claims in a later action" (emphasis added).

Perroncello v. Donahue, 64 Mass. App. Ct. 564, 570 (2005), S.C.,

448 Mass. 199 (2007), quoting from Apparel Art Intl., Inc. v.

Amertex Enterprises Ltd., 48 F.3d 576, 586 (1st Cir. 1995), and
 12

citing Restatement (Second) of Judgments § 26(1)(b) (1982). See

Chadbourne v. Chadbourne, 245 Mass. 383, 384 (1923) (res

judicata not applicable to question that "not only was not

litigated but was expressly reserved by the court"). Absent a

judicial reservation, res judicata principles prohibit parties

from proceeding by way of "piecemeal litigation, offering one

legal theory to the court while holding others in reserve for

future litigation should the first theory prove unsuccessful."

Bagley v. Moxley, 407 Mass. 633, 638 (1990) (claim that was

"capable of being raised" and "should have been raised" in prior

action is "barred from relitigation" in subsequent action).

Santos's opposition to application of res judicata is

further weakened by the absence of any plausibly legitimate

reason for trying to pursue piecemeal litigation. In his answer

to the summary process action, Santos noted that he was "in the

process of bringing a court case against [U.S. Bank] alleging

wrongful foreclosure and the following claims relating to the

mortgage on the property and the underlying loan: . . .

Violation of [G. L. c. 244, §] 35A." Santos did not indicate in

any way that he had doubts about the propriety of raising such

claim in a summary process action.

Santos also did not suggest in his summary process answer,

or any other filing, that he doubted the District Court's

jurisdiction. The elucidation provided by subsequently decided
 13

cases does not support Santos's claim -- never raised in either

proceeding below -- of jurisdictional confusion. For example,

Bank of America, N.A. v. Rosa, 466 Mass. 613 (2013), may have

clarified the expanded jurisdiction of the Housing Court, but

U.S. Bank brought its summary process action in District Court.

Santos has not suggested any basis to doubt the District Court's

jurisdiction even prior to Rosa. See G. L. c. 218, § 19, as

amended by St. 2004, c. 252, § 5 ("Notwithstanding the

limitation of $25,000, or other amount ordered by the supreme

judicial court, the district courts may proceed with actions for

money damages in any amount in summary process actions"); G. L.

c. 218, § 19C, as amended by St. 2004, c. 252, § 8 ("The

district court and Boston municipal court departments of the

trial court shall have the same equitable powers and

jurisdiction as is provided for the superior court pursuant to

chapter 214 and the same authority with regard to declaratory

judgments as is provided for the superior court pursuant to

chapter 231A for the purpose of the hearing and disposition of

summary process actions and of civil actions for money damages

under section 19 of this chapter"); G. L. c. 231, § 31, as

amended by St. 1973, c. 1114, § 164 ("In the district courts,

the defendant may allege in defense any facts which would

entitle him in equity to be absolutely and unconditionally

relieved against the plaintiff's claim or cause of action or
 14

against a judgment recovered by the plaintiff in such action").

Santos has not claimed that he needed Rosa's discussion of G. L.

c. 231, § 31, to understand the statute's import for his case.

See Rosa, 466 Mass. at 620 ("Section 31 allows a summary process

defendant to raise equitable defenses in the District Court that

may 'absolutely and unconditionally' defeat the plaintiff's

claim. Such defenses are not limited to failure to comply

strictly with the power of sale of a mortgage. They may

include, without limitation, the defense of payment of the

mortgage note").

Finally, where Santos requested, but did not receive, a

stay of the summary process action, it was unreasonable for him

to believe that he could unilaterally hold back certain claims

for a later date or an alternate forum. Santos concluded his

summary process answer by requesting that the District Court

"stay all Summary Process proceedings in this Court while [he]

files a complaint in the Superior Court to quiet title on [his]

home and bring the accompanying claims against [U.S. Bank]."

There is no indication in the record that the District Court

ever acted on this request. On appeal, Santos himself reports

that his attempt to stay the summary process action by seeking a

temporary restraining order in Superior Court was unsuccessful.

It is not acceptable for a homeowner mortgagor to seek to

force a foreclosing lender to litigate in multiple venues across
 15

separate proceedings by unilaterally holding certain claims back

from summary process when those claims are within the summary

process court's jurisdiction and assertedly essential to the

determination of superior title. "Res judicata will be employed

by the courts to prevent the splitting of a cause of action

where the party to be precluded (here [Santos]) had both the

opportunity and the incentive to litigate all related matters

fully in the original lawsuit." Mancuso v. Kinchla, 60 Mass.

App. Ct. 558, 567 (2004). See id. at 562 (applying Federal res

judicata law and concluding that dismissal of State court action

after resolution of previously filed Federal action between same

parties arising from same nucleus of operative facts was

appropriate response to plaintiff's "disfavored claim splitting

contrary to well-established doctrine and policy"). We

therefore conclude that application of res judicata is

appropriate here where it will "serve to 'relieve parties of the

cost and vexation of multiple lawsuits, conserve judicial

resources, and, by preventing inconsistent decisions, encourage

reliance on adjudication.'" Bagley, 407 Mass. at 636, quoting

from Anderson v. Phoenix Inv. Counsel of Boston, Inc., 387 Mass.

444, 449 (1982).

Furthermore, the policy considerations underlying res

judicata generally are particularly applicable here as they are

consistent with "the legislative goal of 'just, speedy, and
 16

inexpensive' resolution of summary process cases," which policy

"is compromised if the [summary process court] must stay summary

process proceedings while litigation on the validity of the

foreclosure proceedings continues in another court." Bank of

N.Y. v. Bailey, 460 Mass. 327, 334 (2011). See Federal Natl.

Mort. Assn. v. Rego, 474 Mass. 329, 339 (2016) (presentation of

all defenses and counterclaims, including those not affecting

right to possession, before the summary process judge "conserves

judicial resources because the [summary process] judge already

will be familiar with the issues presented; it also reduces

further expenditure of resources by a summary process defendant,

who otherwise would be required to file a separate action in

another court"). Santos's attempt to force the defendants to

litigate on two fronts was therefore "precisely the type of

unnecessary delay and inefficiency that the Legislature intended

to eliminate when it reorganized the trial courts in the

Commonwealth." Bailey, 460 Mass. at 334.

b. Impact of recent Supreme Judicial Court decisions.

Santos also contends that his claim cannot be precluded where he

believes that the concurring opinion in U.S. Bank Natl. Assn. v.

Schumacher, 467 Mass. 421 (2014), decided after the relevant

events here, supports the approach he pursued below. But

Santos's reliance on Schumacher is misplaced. In Schumacher,

the Supreme Judicial Court held that a borrower's "challenge to
 17

the notice [issued pursuant to G. L. c. 244, § 35A,] should have

been raised in an independent equity action in the Superior

Court, not in a postforeclosure summary process action in the

Housing Court where the only legal issue for the court is

whether the mortgagee obtained title to the property in strict

accordance with the power of sale." Id. at 429. But the court

also stated that "the proper avenue by which a homeowner can

challenge a mortgagee's compliance with G. L. c. 244, § 35A, is

either filing an independent equity action in the Superior

Court, or asserting counterclaims pertaining to § 35A in

response to the mortgagee's postforeclosure summary process

action." Id. at 422 n.4.

In his concurring opinion in Schumacher, then Justice Gants

provided further explication of the implications of the

majority's opinion. He wrote that "where a defendant in the

summary process action claims a violation of the requirements in

§ 35A to provide timely and adequate written notice of the right

to cure the default, the defendant must prove more than a mere

violation of § 35A to defeat the eviction because, as the court

notes, § 35A is not one of the statutes relating to the

foreclosure of mortgages by the exercise of a power of sale.

Rather, to defeat the eviction, the defendant must prove that

the violation of § 35A rendered the foreclosure so fundamentally

unfair that she is entitled to affirmative equitable relief,
 18

specifically the setting aside of the foreclosure sale for

reasons other than failure to comply strictly with the power of

sale provided in the mortgage." Id. at 432-433 (Gants, J.,

concurring) (quotations omitted).9

We understand Schumacher, as explicated by Justice Gants,

to explain that a homeowner claiming a right to cure notice

violation needs to take affirmative action in Superior Court

prior to foreclosure and certainly prior to finding herself a

defendant in a postforeclosure summary process action if she

hopes to halt the foreclosure process by showing something less

than a violation of § 35A that would render foreclosure

fundamentally unfair. See Bank of N.Y. Mellon Corp. v. Wain, 85

Mass. App. Ct. 498, 501 (2014). "[T]he appropriate avenue for a

borrower to raise a challenge to the form of notice given under

§ 35A is by means of an equitable action, prior to foreclosure,

seeking to enjoin the foreclosure" (emphasis added). Haskins v.

Deutsche Bank Natl. Trust Co., 86 Mass. App. Ct. 632, 634

(2014), citing Schumacher, 467 Mass. at 422 n.4. See Gold Star

Homes, LLC v. Darbouze, 89 Mass. App. Ct. 374, 379-380 (2016).

9
"The majority opinion in Schumacher stated that the
concurring opinion 'accurately reflects the practical
consequences of our decision today in conjunction with our
decision in Bank of Am., N.A. v. Rosa, [466 Mass. 613 (2013)].'
Schumacher, supra at 429 n.12. Thus, the passage from the
concurring opinion quoted in the text reflects the unanimous
view of the court." Bank of N.Y. Mellon Corp. v. Wain, 85 Mass.
App. Ct. 498, 501 n.8 (2014).
 19

If a homeowner waits until he is being evicted in a

postforeclosure summary process action, he will need to show a

violation of § 35A that rises to the level of fundamental

unfairness.10 Accordingly, the summary process action was indeed

the proper venue for Santos to litigate his § 35A claim after

foreclosure. There was no need for him to go to Superior Court.

At oral argument, Santos suggested that it would be unfair

to hold him to a procedural landscape that had yet to fully take

shape when he sought to pursue the § 35A claim in Superior

Court. He contends that the summary process court's

jurisdiction to deal with the equity complaint he sought to

pursue in Superior Court was questionable at the time. This is

no doubt a challenging area of the law. See Schumacher, 467

Mass. at 431 (Gants, J., concurring) ("[O]ur jurisprudence in

this area of law is difficult for even attorneys to

understand"). Indeed, Schumacher clarified the role of § 35A

claims in summary process proceedings. This clarification,

however, suggests that Santos would have had even more incentive

to raise the § 35A claim in a summary process action prior to

Schumacher's determination that § 35A is not "part and parcel of

10
As we clarified in Haskins: "The fundamental unfairness
standard discussed in Schumacher applies when a § 35A violation
is raised in a postforeclosure summary process action, instead
of properly in a preforeclosure equity action." 86 Mass. App.
Ct. at 637 n.11, citing Schumacher, 467 Mass. at 433 (Gants, J.,
concurring).
 20

foreclosure proceedings by the exercise of a power of sale."

Schumacher, 467 Mass. at 430.

Santos's own briefing in Superior Court demonstrates this

very point. In his supplemental memorandum in opposition to the

defendants' motion to dismiss, Santos contended that:

"Massachusetts foreclosure law includes the right-to-
cure notice in a mortgage's power of sale
requirements. . . . [B]ecause a foreclosure cannot
begin until the right-to-cure notice requirement is
complied with, G. L. c. 244, § 35A is part of the
mortgage's power of sale requirements. . . . G. L.
c. 244, § 35A is part of the 'statutes relating to the
foreclosure of mortgages by the exercise of a power of
sale.' . . . Plaintiff's claim is based upon the
'strict compliance' standard required for non-judicial
foreclosures."

The established law was already clear that postforeclosure

summary process defendants could put the plaintiff's title in

issue. See Bank of N.Y. v. Bailey, 460 Mass. at 333

("Challenging a plaintiff's entitlement to possession has long

been considered a valid defense to a summary process action for

eviction where the property was purchased at a foreclosure

sale"). See also New England Mut. Life Ins. Co. v. Wing, 191

Mass. 192, 195 (1906); Sheehan Constr. Co. v. Dudley, 299 Mass.

51, 53 (1937); Wayne Inv. Corp. v. Abbott, 350 Mass. 775, 775

(1966). Santos was well aware of the state of the law as he

cited several cases standing for this very proposition in his

summary process answer, including language in Wayne Inv. Corp.,

350 Mass. at 775, that a bank's acquisition of title in strict
 21

compliance with the power of sale "is subject to challenge" in a

summary process action.

Where Santos believed that § 35A was included in the

mortgagee's power of sale requirements and he understood that

strict compliance with the power of sale was a defense to

summary process, he faces no unfairness in being held to

litigate his § 35A claim in the summary process action.

2. Negligent loan modification processing. Santos

contends that the defendants were negligent in their handling of

his applications for HAMP loan modification. This claim fails

as a matter of law and should have been dismissed pursuant to

the defendants' rule 12(b)(6) motion.

To prevail on a claim for negligence, Santos must prove:

(1) a legal duty owed to him by the defendants; (2) a breach of

that duty; (3) causation; and (4) an actual loss. Delaney v.

Reynolds, 63 Mass. App. Ct. 239, 241 (2005). Existence of a

duty in a negligence case is "a question of law." Cottam v. CVS

Pharmarcy, 436 Mass. 316, 320 (2002).

It is now well-established that, as a matter of law, HAMP

does not create a duty of care owed by mortgagees to mortgagors.

See, e.g., MacKenzie v. Flagstar Bank, FSB, 738 F.3d 486, 495-

496 (1st Cir. 2013) (decided subsequent to judge's order on

motion to dismiss here). The rejection by the United States

Court of Appeals for the First Circuit (First Circuit) of HAMP-
 22

based negligence claims is consistent with that of the majority

of Federal court decisions in Massachusetts (before and after

MacKenzie) as well as across the country. The consensus among

these courts is that there is no private right of action under

HAMP11 and that borrowers are not intended third-party

beneficiaries of SPAs or similar contracts between lending banks

and Fannie Mae.12 Although the concepts of private rights of

action, intended beneficiary status, and duty of care are all

somewhat interconnected in the context of HAMP-based negligence

claims, the former two are clearly questions of Federal law

while the latter is resolved with reference to State common-law

principles. Nonetheless, the clear trend of Federal courts

applying State law is that neither HAMP nor the relationship

between a borrower and her servicer/lender imposes any duty of

care owed by lending banks and servicers to borrowers. See,

e.g., Wigod, 673 F.3d 547 (applying Illinois law); Spaulding,

714 F.3d 769 (applying Maryland law); Milton v. U.S. Bank Natl.

Assn., 508 Fed. Appx. 326 (5th Cir. 2013) (per curiam) (applying

Texas law); Rush v. Freddie Mac, 792 F.3d 600 (6th Cir. 2015)

11
See Wigod, 673 F.3d at 559 n.4 ("[c]ourts have uniformly
rejected" claims asserting rights arising under HAMP itself
"because HAMP does not create a private federal right of action
for borrowers against servicers").
12
See Wigod, 673 F.3d at 559 n.4 (most but not all courts
have held "that borrowers were not intended third-party
beneficiaries of the SPAs") (collecting cases).
 23

(applying Michigan law); Markle, 844 F. Supp. 2d at 185

(declining "the invitation to recognize in the HAMP guidelines a

new duty of care, thus far unrecognized by Massachusetts

courts"); Brown vs. Bank of America Corp., U.S. Dist. Ct., No.

10–11085 (D. Mass. Mar. 31, 2011) ("[W]hile violation of a

regulation such as HAMP may provide evidence of a breach of a

duty otherwise owed, it does not create such a duty in the first

place"); Souza vs. Bank of America, U.S. Dist. Ct., Natl. Assn.,

No. 1:13–cv–10181–PBS (D. Mass. July 8, 2013) ("Every Court of

Appeals that has addressed the issue has concluded that HAMP

does not provide an implied right of action under federal

law. . . . Regarding negligence claims, every Court of Appeals

that has addressed the issue has denied HAMP-based negligence

claims") (collecting cases); Almeida vs. U.S. Bank Natl. Assn.,

U.S. Dist. Ct., No. 12–11565–RWZ (D. Mass. Mar. 10, 2014).13 We

agree with the reasoning and analysis of these courts and

conclude that, under Massachusetts law, HAMP does not impose a

duty of care owed by lenders and servicers to borrowers.

In declining to dismiss Santos's negligence claim pursuant

to rule 12(b)(6), the judge concluded that Santos had alleged a

13
Santos cites Speleos v. BAC Home Loans Servicing, L.P.,
755 F. Supp. 2d 304, 311 (D. Mass. 2010), where the court found
that "a plausible negligence claim" had been stated for the
lender's failure to comply with HAMP even though HAMP does not
include a private right of action. However, Speleos was decided
prior to the First Circuit's opinion in MacKenzie.
 24

plausible claim for negligence based on her determination that

Santos was a third-party beneficiary of the SPA between U.S.

Bank and Fannie Mae. The First Circuit has reached the opposite

conclusion. See MacKenzie, 738 F.3d at 492 (borrowers may not

enforce HAMP guidelines by claiming third-party beneficiary

status under SPA). In our view, the basis of the judge's denial

of the motion to dismiss as to the negligence claim is no longer

viable. See Markle, 844 F. Supp. 2d at 180 ("[I]t is . . .

generally established that federal common law controls the

interpretation of contracts entered into pursuant to federal law

and to which the United States is a party"); Seidel vs. Wells

Fargo Bank, N.A., U.S. Dist. Ct., No. 12–10766–RWZ (D. Mass.

July 3, 2012) ("HAMP is a federal program and as such

interpretation of the HAMP contract is controlled by federal

law").

Thus, if Santos's negligence claim is to survive, he must

identify an alternate legal basis for the existence of a duty of

care. Santos has failed to establish the existence of such a

duty.14

14
Although Santos appears to rely on the judge's third-
party beneficiary theory as the source of the defendants' duty
in his appellate brief, at oral argument Santos stated that he
was not relying on a third-party beneficiary theory. The only
other authority Santos relied on in his brief for the source of
the defendants' duty was Speleos v. BAC Home Loans Servicing,
L.P., 755 F. Supp. 2d 304, 311 (D. Mass. 2010), which is a case
whose holding has essentially been overruled by the First
 25

In general, "[t]he relationship between a borrower and

lender does not give rise to a duty of care under Massachusetts

law." MacKenzie, 738 F.3d at 495. Cf. Clark v. Rowe, 428 Mass.

339, 346 (1998) (agent acting for bank that refinanced loan on

property "owed no duty of care to the plaintiff borrower");

Shawmut Bank, N.A. v. Wayman, 34 Mass. App. Ct. 20, 24 (1993)

(lending bank owes no duty to exercise reasonable care to

guarantor on commercial loan).

There are some exceptions to this general rule. For

example, mortgage holders do in fact have a duty to "act in good

faith and must use reasonable diligence to protect the interests

of the mortgagor" in the context of an extrajudicial foreclosure

and exercise of power of sale. Williams v. Resolution GGF Oy,

417 Mass. 377, 382-383 (1994) (quotation omitted). See West

Roxbury Co–Op. Bank v. Bowser, 324 Mass. 489, 492 (1949) ("It is

familiar law that a mortgagee in exercising a power of sale in a

mortgage must act in good faith and must use reasonable

diligence to protect the interests of the mortgagor"). Lenders

also have a duty of good faith and fair dealing in the

performance of their obligations under the mortgage. See

Circuit. See note 13, supra. At oral argument, Santos for the
first time claimed that he was relying on the duty of good faith
and fair dealing, that this is a "negligence contract matter,"
and that the defendants voluntarily assumed a duty. We do not
address arguments raised for the first time at oral argument.
See Warner-Lambert Co. v. Execuquest Corp., 427 Mass. 46, 50 n.7
(1998); Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975).
 26

Shawmut, 34 Mass. App. Ct. at 25 ("[U]nder Massachusetts law,

every contract contains an implied covenant of good faith").

However, neither the implied covenant nor the duties

arising from foreclosure extends to preforeclosure loan

modification processing where the mortgage loan documents do not

themselves contemplate such modifications.15 See MacKenzie, 738

F.3d at 493 ("[I]n the event of foreclosure, the existence of a

duty of good faith is tied directly to the mortgagee's

contractual right to exercise a power of sale"); Uno

Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376,

385 (2004) (covenant of good faith and fair dealing may not "be

invoked to create rights and duties not otherwise provided for

in the existing contractual relationship").16 "Nor can the

mortgage and promissory note be said to incorporate the HAMP

guidelines or impose on the servicer a duty to offer a HAMP

modification, as the documents were executed before the EESA was

enacted." Markle, 844 F. Supp. 2d at 183 n.11.

In the absence of a duty of care owed to him by the

defendants, Santos's negligence claim fails even if we assume

that he could show statutory or regulatory violations in

15
Santos has never argued that his mortgage includes any
modification requirement.
16
To the extent it represents an actionable contract of its
own, a point on which we express no opinion, Santos has not
alleged any breach of the implied covenant of good faith and
fair dealing under the TPP.
 27

connection with the defendants' processing of his HAMP

modification applications because "statutory or regulatory

violations cannot give rise to a negligence claim when there is

no independent duty of care between the parties." MacKenzie,

738 F.3d at 495. HAMP itself does not provide that duty of

care. See Larivaux vs. Bank of America, N.A., U.S. Dist. Ct.,

No. 12–11172–FDS (D. Mass. June 6, 2013) ("Because no duty of

care is established by the HAMP guidelines, plaintiff has not

set forth a plausible claim for negligence"). In affirming the

dismissal of a HAMP-based negligence claim, the First Circuit

further explained that "[w]here an independent duty of care

exists, the violation of a statute or regulation can provide

evidence of a breach of that duty, even if the statute or

regulation itself does not create a private right of action.

But in the absence of an independent duty, a plaintiff cannot

proceed with a negligence claim based solely on a statutory or

regulatory violation." MacKenzie, 738 F.3d at 496.

Because we conclude that Santos's negligence claims falter

on the element of duty, we need not address the defendants'

additional contentions regarding infirmities on other elements

of the claim.17

17
That Santos cannot look to a private right of action,
third-party beneficiary principles, or common-law negligence
does not necessarily mean that borrowers are completely without
a vehicle by which to seek relief for alleged HAMP violations.
 28

Order allowing motion to
dismiss affirmed.

Order allowing defendant's
motion for summary judgment
affirmed.

As the defendants acknowledged at oral argument, some
courts have allowed claims under G. L. c. 93A grounded in
alleged HAMP violations to proceed beyond the rule 12(b)(6)
stage. See, e.g., Rosa, 466 Mass. at 616, 625 (holding that
Housing Court had jurisdiction to hear 93A claim based on HAMP
violations in postforeclosure summary process action but not
passing on viability of claim itself); Markle, 844 F. Supp. 2d
at 185-186 ("Other courts in this district have also concluded
that the absence of a private right to enforce HAMP does not
automatically preclude chapter 93A claims predicated on the
failure to comply with HAMP obligations") (collecting cases);
Morris v. BAC Home Loans Servicing, L.P., 775 F. Supp. 2d 255,
256 (D. Mass. 2011) ("HAMP violations can give rise to a viable
93A claim if the activity would be independently actionable
under Chapter 93A as unfair and deceptive"). Cf. Wigod, 673
F.3d at 575 (reversing dismissal of claim under Illinois
Consumer Fraud and Deceptive Business Practices Act).

Courts have also recognized potential breach of contract
claims arising from the HAMP TPP. See, e.g., Wigod, 673 F.3d at
566; Young, 717 F.3d at 235; Markle, 844 F. Supp. 2d at 182-183
(collecting cases).

Where Santos has not raised claims alleging a breach of
contract with respect to the TPP or a violation of c. 93A, we do
not address their hypothetical viability.