In recent months, the Pennsylvania Superior Court issued three important decisions regarding the rights of property owners and lenders in mortgage foreclosure proceedings. The court's decisions touch on several key areas, such as the true definition of a property owner, the rights of lenders seeking to foreclose on a mortgage endorsed in blank and the need for evidence when imposing an equitable lien against a common party's interest in a property.

Ownership Rights

In U.S. Bank National Association as Trustee v. Watters, 2017 Pa. Super. 110 (2017), the court concluded that a nontitled spouse does not have to be named as a defendant in a mortgage foreclosure proceeding. Bryan J. Watters and Diane Watters were a married couple who purchased a home in Erie County. Due to Diane Watters' poor credit rating, title to the property was placed solely in Bryan Watters' name. Bryan Watters assigned a mortgage to the property through American Home Mortgage, which was later assigned to U.S. Bank National Association. On April 16, 2013, Bryan Watters filed for divorce, and moved out of the property, while his ex-wife continued to reside there.

Shortly after moving out, Bryan Watters ceased making payments against the mortgage, and U.S. Bank commenced a foreclosure action against him. Although Diane Watters was served with a copy of the foreclosure complaint as the occupant of the property, she was not named as a defendant. The bank obtained a default judgment against Bryan Watters, and the property was scheduled for Sheriff's Sale.

More than a year later, the Watterses filed a petition seeking to open or strike the default judgment, set aside the Sheriff's Sale, or obtain leave to intervene in the foreclosure action asserting that, since Diane Watters held an equitable interest in the property because of the divorce proceeding, Pa R.C.P. 1144 required that she be named as a party to the foreclosure action. The trial court denied the petition, and the Superior Court affirmed noting that Pa.R.C.P. 1141 through 1150 govern actions in mortgage foreclosure, and Pa.R.C.P. 1144(a)(3) states that defendants in a foreclosure action are defined as “the real owner of the property, or if the real owner is unknown, the grantee in the last recorded deed.” Since only Bryan Watters' name appeared on the deed, Diane Watters was not a “real owner” of the property and U.S. Bank was not required to name her as a defendant.

History of Assignments Not Required

In Bank of New York Mellon as Trustee v. Bach, 2017 Pa. Super. 85 (2017), the court concluded that a lender seeking to foreclose on a mortgage evidenced by a note endorsed in blank is not required to establish the history of assignments of the mortgage and note.