Mortgages

Mass high court prospectively requires banks to physically possess the note as well as the mortgage in order to foreclose

/ Consumer Protection, Due Process, Mortgages, Real Estate Transactions, Title Issues

In Eaton v. Fed. Nat’l Mortgage Ass’n (Fannie Mae), 2012 Mass. LEXIS 488 (Mass. June 22, 2012), the Supreme Judicial Court of Massachusetts held that a foreclosing party must be in physical possession of both the note and the mortgage (or be acting on behalf of someone who does) when bringing a foreclosure proceeding. However, the ruling applies only prospectively to foreclosures that occur in the future, with the exception that the plaintiff in Eaton that convinced the Court to clarify this rule can take the benefit of it. The refusal to apply the rule retroactively was based on the belief that the law may have been unclear beforehand and that it was the case that many people acted without regard for this principle in the past.

New Jersey Supreme Court allows foreclosure despite faulty procedures

/ Mortgages, Real Estate Transactions

In US Bank Nat’l Ass’n v. Guillaume, 38 A.3d 570 (N.J. 2012), the Supreme Court of New Jersey applied the equitable doctrine of substantial compliance to allow a bank to foreclose despite its failure to include the name and address of the actual lender on the notice of intent to foreclose as required by state law. The notice actually only included the name of the mortgage service, not the mortgage lender. Dismissal without prejudice is not the exclusive remedy for the service of a notice of intention to foreclose that does not satisfy Fair Foreclosure Act’s requirement that a notice of intention include the name and address of the actual lender. Instead, the trial court may dismiss the action without prejudice, order the service of a corrected notice, or impose another remedy appropriate to the circumstances of the case; overruling Bank of N.Y. v. Laks, 27 A.3d 1222 (N.J. Super. Ct. App. Div. 2011).

Banks as landlords

/ Consumer Protection, Leaseholds, Mortgages, Real Estate Transactions

Banks that have obtained title to foreclosed properties traditionally would sell them quickly but the current real estate malaise resulting from the subprime crisis has made it difficult for them to do so. The result is that many properties remain on the books of the banks. Under state property law, the banks have the obligations all landowners have to comply with housing codes and the warranty of habitability. But many banks do not have established procedures for keeping track of all the individual properties they own, especially when the mortgages to those properties were securitized, making the owner of the trust that owns those mortgages the effective landlord of thousands of homes. Both localities and tenants are having to deal with the failure of banks to comply with regulations mandating maintenance of rental properties. read article.

Michigan Supreme Court holds that MERS has standing to foreclose

/ Mortgages, Real Estate Transactions

Contrary to the ruling of some other courts, the Michigan Supreme Court held that MERS (Mortgage Electronic Registration Systems) has standing to foreclose on properties for which it is the record holder of the mortgage even if it does not “own’ the note or the right to moneys under the note. The court held that because MERS is the “holder of the mortgage, MERS owned a security lien on the properties, the continued existence of which was contingent upon the satisfaction of the indebtedness.” The court concluded that the legislature would want the record mortgage holder to have the right to foreclose on the property. The case is Residential Funding Co. v. Saurman, 805 N.W.2d 183 (Mich. 2011).

Massachusetts high court voids title when a buyer purchases property from an owner who obtained title through an improper foreclosure

/ Consumer Protection, Mortgages, Real Estate Transactions, Statute of Frauds

In an important but almost inevitable case, Bevilacqua v. Rodriguez,  2011 WL 4908845 (Mass. 2011), the Supreme Judicial Court of the Commonwealth of Massachusetts held that a lender who does not follow proper procedures to foreclose on property cannot pass good title to a subsequent purchaser. The court’s earlier ruling in U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40 (Mass. 2011) had held that a nonjudicial foreclosure cannot lawfully happen unless the party conducting the foreclosure can show requisite assignments of the mortgage given it the right to foreclose. In Bevilacqua, the original buyer Rodriguez granted a mortgage to MERS (Mortgage Electronic Registration Systems, Inc.) as nominee for the real lender Finance America, LLC. At the time of the private foreclosure proceedings, MERS had not formally assigned the mortgage from the original lender to U.S. Bank National Association (US Bank); for that reason, the foreclosure brought by US Bank was invalid. The buyer at …

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Register of Deeds in Essex County, Massachusetts refuses to record robo-signed documents

/ Mortgages, Real Estate Transactions, Statute of Frauds, Title Issues

A dispute has arisen between South Essex Register of Deeds John O’Brien and the Massachusetts Real Estate Bar Association (REBA) over O’Brien’s refusal to allow seemingly “robo-signed” mortgage documents to be recorded in the Registry of Deeds. REBA contends that state law allows the recording of any document “purporting” to be signed by an authorized signatory to a mortgage or a mortgage assignment. Mass. Gen. Laws ch. 183, § 54B. But Register O’Brien points to 1,300 documents received that were signed “Linda Green” but which exhibit different handwriting styles and different titles, and some were filed after 2010 when it was believed that Green stopped working for a mortgage company. O’Brien takes the position that he will not record documents signed by “known robo-signers” and he will also forward suspicious documents to the Attorney General’s office for investigation of mortgage fraud. Scott Pitman & MIchael Pill, To record or not to …

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Bank cannot suggest a homeowner stop mortgage payments as part of modification negotiations and then foreclose on the basis of that failure to pay

/ Mortgages, Real Estate Transactions, Statute of Frauds

A federal District Court judge in Massachusetts has ruled in the case of Dixon v. Wells Fargo Bank, 2011 WL 2945795 (D. Mass. 2011), that a ban cannot induce a homeowner to stop making mortgage payments as a prerequisite to negotiations to modify the mortgage and then use that failure to make the mortgage payments as a predicate for foreclosing on the property and evicting the owner. The bank’s representation that it would renegotiate following the borrower’s cessation of mortgage payments constituted a promise on which the borrower reasonably relied and that promise could be equitably enforced by denying the bank the right to foreclose in the circumstances. The court did not find a promise by the bank to modify the mortgage but it did have a duty to negotiate the modification in good faith before foreclosing.

Massachusetts Attorney General settles lawsuit with subprime mortgage lender, requiring $115 million of loan modifications

/ Antidiscrimination Law, Consumer Protection, Fair Housing Act, Mortgages, Real Estate Transactions

Attorney General Martha Coakley announced that the Commonwealth of Massachusetts settled a lawsuit with a subprime mortgage lender that originated subprime mortgages it knew were likely to fail and which not only targeted African American and Latino borrowers but gave its employees discretion to charge higher fees to such borrowers. The company will pay a penalty of almost $10 million to the Commonwealth and will direct its mortgage servicer to modify $115 million in loans either by writing down the principal balance of lowering interest rates. read article The settlement is based on the legal ruling in the earlier case of Commonwealth v. Fremont Inv. & Loan, 897 N.E.2d 548 (Mass. 2008), which held that it might violate the state consumer protection act to market mortgages that were almost certain to end in foreclosure.

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