Massachusetts Bankruptcy Judge Robert Somma in the case of In re Strayton, --- B.R. ----, 2007 WL 150192 (Bankr.D.Mass., Jan 17, 2007)(NO. 06-13703-RS, 06-1394) enjoined Champion mortgage from completing a mortgage foreclosure sale that had occurred prior to the filing of the homeowners’ Chapter 13 bankruptcy case. After commencing the case, counsel for the debtor filed an adversary proceeding seeking to invalidate the foreclosure sale and to prevent the completion of the acts necessary to finalize it. The memorandum of sale had been signed but an actual closing had not yet occurred. It is highly unusual for foreclosure sale to be reversed in these circumstances and I think that this case is significant because it draws our attention to some basic principles of mortgage foreclosures. According to the opinion, the house had a fair market value of $325,000 but had been sold at the foreclosure sale for only $130,000. Judge Somma, citing cases, stated that a "foreclosing mortgagee must also act in good faith and use reasonable diligence in conducting the foreclosure sale" and not merely "comply with the procedure prescribed by statute." The judge found fault with the procedures leading up to the foreclosure sale. "[T]he diligence not done is persuasive on the question of success on the merits: no marketing, no appraisal, no real estate broker contact, no inquiry into the market regarding either value or prospective buyers; no inspection effort. Moreover, if the foreclosure sale is completed, significant value will be lost to the estate."
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