Court rules against banks on mortgage assignments

By: Thomas Egan
Published: January 7, 2011

Massachusetts’ highest court has upheld a decision invalidating foreclosure sales conducted by two banks to which mortgages had been assigned.

The banks claimed that "securitization documents" they submitted established valid assignments that made them the holders of the two mortgages before a notice of sale and foreclosure sale.

The court disagreed.

"We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure. … As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties. …

"We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent foreclosure sale, although recording is likely the better practice," the court said. "The key … is that the foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale (or the foreclosing entity must be one of the parties authorized to foreclose under [state law]."

Foreclosure lawyer Robert J. Pomerene of Plymouth, Mass. said the ruling provides leverage to homeowners who are defending against or trying to reverse foreclosures, but does little to ease the concerns of title insurers.

“Title insurers have basically been reluctant to issue titles … and that’s not going to change,” he said. “This … ruling apparently doesn’t provide any clarity or guidance on how to handle those issues, so more litigation can be expected.”

Massachusetts Supreme Judicial Court. U.S. Bank National Association v. Ibanez , Lawyers USA No. 993-2562.

Comments

Atty. Mike Agranoff says:

For decades, or centuries, if you assigned a mortgage, you took the trouble to prepare an assignment and record it on the land records. Banks had no business ending this time-honored practice on their own. The solution is to go back to what has worked since Colonial times. The clown who thought up the current system should be tarred-and-feathered.

In plain English: the recording system works. Use it.

I myself hold a private mortgage. If I sold or assigned it, preparing a proper deed and recording it would be standard. What is the problem – other than laziness and greed?

I really wonder: when banks think up these schemes, do they not run it by even one common-sense practicing small lawyer?

Atty. Mike Agranoff, Ellington, CT

Posted on 01/10/11 at 11:09 am
Massachusetts decision could wreak ‘havoc’ on mortgage industry « Lawyers USA Online says:

[...] Massachusetts court is the first state supreme court to rule that only the holder of a mortgage may foreclose on a property, upholding a Land Court judge’s earlier decision in U.S. Bank v. [...]

Posted on 01/10/11 at 8:12 pm

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