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The Massachusetts Legislature and Governor Baker have taken a much needed step to limit further problems resulting from the Ibanez decision and its progeny.  Those cases made clear that a foreclosure by a party that did not yet hold an assignment of the mortgage failed to convey good title.  As a result, many third party

Educational opportunities abound this spring!  Next Tuesday, April 2, 2013, at the Massachusetts Continuing Legal Education (MCLE) headquarters in Downtown Crossing, my current Rackemann colleague and fellow MLUM contributor Gordie Orloff, and my former Rackemann colleague, Land Court Justice Robert B. Foster, will be among the panelists in a program entitled, “Resolving Common & Complex Title Issues.”  Among other topics, this program will cover how to spot

Rumor has it that the Supreme Judicial Court will issue its long-awaited decision in the case of Eaton v. Fannie Mae later this morning.  One crucial issue presented is whether a foreclosing mortgagee must hold both the mortgage and the note.  For some background, see my colleague Gordie Orloff’s prior post here.  We will bring you this potentially explosive

Massachusetts Attorney General Martha Coakley today filed a wide-ranging lawsuit in Suffolk County Superior Court in Boston against Bank of America, JP Morgan Chase, Citibank, GMAC, Wells Fargo and MERS, alleging that the defendants’ conduct in foreclosing “hundreds, if not thousands” of mortgages in Massachusetts was fraudulent, unfair, deceptive and in violation of numerous provisions of Massachusetts

In previous posts (here and here) we’ve discussed the question of whether ownership of the mortgage and the note must be unified in the same person.  Superior Court Judge Cornelius Moriarty has now weighed in, with his split decision on the defendants’ motion to dismiss in Mack v. Wells Fargo Bank, N.A., 29 Mass. L.

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On October 3, the Supreme Judicial Court (SJC) heard oral argument in yet another case involving a foreclosure – Eaton v. Federal National Mortgage AssociationEaton raises the important question of whether, to properly foreclose, a mortgagee must hold the underlying, defaulted promissory note.  Interestingly, about a week before the argument in Eaton, the federal district court in Massachusetts issued a decision in Rosa v. Mortgage Electronic Registration Systems, Inc. (pdf) answering that same question “no.”

In Eaton, the borrower (Henrietta Eaton) took out a mortgage loan from BankUnited.  However, the mortgage named Mortgage Electronic Registration Systems, Inc. (MERS) as BankUnited’s nominee, and expressly granted MERS the power of sale.  BankUnited assigned Eaton’s promissory note to Federal National Mortgage Association (Fannie Mae), which engaged Green Tree Servicing, LLC (Green Tree) to service the loan.  Eaton made some payments to Green Tree, but eventually stopped paying and defaulted.

Eaton’s mortgage was also assigned, but not to Green Tree.  In contrast to the situation in U.S. Bank National Association v. Ibanez (pdf) (see related commentary here), there was no claim in Eaton that the mortgage assignment came too late.  Rather, after the foreclosure sale was completed, and in the context of an eviction proceeding, Eaton claimed that the foreclosure was invalid because his mortgage and promissory note had been improperly separated from one another.  A Superior Court judge entered a preliminary injunction stopping the eviction, and that order was the subject of the SJC’s review.

At oral argument, the SJC grilled both attorneys pretty thoroughly.  However, by the end, the momentum seemed to be in Fannie Mae’s favor.

One issue was whether separating the mortgage from the note could result in the borrower being forced to pay the mortgage holder while remaining on the hook to the note holder for the same debt.  It seemed that the justices were in agreement with Fannie Mae that, while this “double liability” scenario was theoretically possible, there was no evidence it had ever occurred.  The justices did seem somewhat concerned about the lack of clarity over who can initiate a foreclosure – that is, whether a servicer such as Green Tree was authorized to make that decision.

Fannie Mae relied on recent state and federal court decisions supporting its view that the note and mortgage need not be united in one owner.  On this point, the justices noted that Eaton’s mortgage itself made clear that it could be assigned, and that such assignments are a regular feature in today’s economy.

Eaton tried to get the justices to focus – as have some other states – on sections of the Uniform Commercial Code (UCC) governing promissory notes.  However, the court seemed reluctant to accept that invitation, pointing out that notes and mortgages serve different purposes and are governed by different legal principles.  Eaton cited some 19th century Massachusetts cases suggesting that notes and mortgages must be unified, but the court did not seem to feel constrained by these older cases, instead referring to the contractual rights Eaton had granted in the mortgage, which could be seen as waiving any common law requirement of unity.  Some of the justices – particularly Justice Cordy –focused on the fact that Eaton had stopped paying the note, and therefore was subject to foreclosure.  Overall, they did not seem impressed by Eaton’s claim that she was entitled to know exactly whom she was not paying.


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In an “unpublished” decision (pdf) issued earlier this week (“unpublished” means the decision hasn’t been reviewed and issued by the full court), a three-judge Appeals Court panel reversed a lower court decision awarding possession of a foreclosed property to the foreclosing lender.  The case, Novastar Mortgage, Inc. v. Elliot Saffran, involves a mortgage granted to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee

Citing the Supreme Judicial Court’s Ibanez decision (pdf), the U.S. Bankruptcy Court in Massachusetts recently re-opened a judgment it had entered in favor of defendants involved in foreclosing the debtor’s home mortgage.  The case is called In re Schwartz, and the bankruptcy court’s decision granting the debtor’s motion for a new trial is here (pdf).  Initially, the court ruled

Last week the Massachusetts Supreme Judicial Court (SJC) heard oral argument in the Bevilacqua and Nunez appeals (see our prior comment here).  In a measure of its interest in Ibanez-related issues, the court permitted amici on both sides of Bevilacqua – the Mortgage Bankers Association and the Massachusetts Attorney General, respectively – to participate in the argument.

A few observations follow:

Bevilacqua concerns an action to try title started by a party who bought property from a bank after the bank foreclosed on that property.  The bank didn’t hold an assignment of record at the time of the foreclosure, raising serious questions about its validity under the SJC’s recent Ibanez decisionWith some minor exceptions, everyone in Bevilacqua seemed to agree that a foreclosure sale by a party before it became the assignee of the mortgage (a premature foreclosure) effectuated an assignment of the mortgage to the buyer.  There also was agreement that the plaintiff-buyer might have other remedies, such as seeking damages from the foreclosing bank, or rescission.  (Note that these remedies might not help subsequent buyers, who would have limited rights under quitclaim covenants). 

The thrust of the buyer’s position was that the court should take a narrow view of the meaning of record title, since the relevant instruments (including an assignment of the mortgage) were now on record.  The buyer argued that he had a sufficient record title in the property to warrant discovery on the issue of whether there had been an off-record assignment of the mortgage to the foreclosing bank before the foreclosure sale.

For the most part, the court’s questions reflected a concern that a buyer from a bank that did not itself hold title could not become an owner (the “how’d you like to buy the Brooklyn Bridge” problem).  This concern led to a discussion of whether the title acquired in a premature foreclosure sale was void, or merely voidable, and the possible ramifications of each outcome on an innocent buyer who did not recognize the Ibanez issue at the time of his purchase.

The Attorney General was insistent that a ruling for the buyer would unduly expand the action to try title.

With some notable exceptions, the court seemed inclined to rule against the buyer.  Given the number of issues the justices raised, it will be interesting to see the grounds for their decision.

The Nunez case seems easier to call. After foreclosing and taking title, Fannie Mae filed a summary process (i.e. eviction) action.  That case was pending when M.G.L. c. 186A, which contains new requirements for evictions by foreclosing parties, became effective.  It was not disputed that this new statute would require dismissal of the summary process case and leave Fannie Mae unable to evict.  The justices appeared to agree that, as a result, Chapter 186A affected Fannie Mae’s substantive rights and should take effect only prospectively.


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One of many issues swirling in the miasma of the foreclosure crisis has been whether Mortgage Electronic Registration Systems, Inc. – MERS for short – can validly foreclose a mortgage that it holds as nominee for the lender.  The question arises because MERS itself doesn’t make loans – it simply holds mortgages that secure loans made by others.  While this issue is now