Mortgages

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.

Massachusetts high court denies eviction from a home foreclosed in a private sale unless there is proof of a right to foreclose

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

In an extension of its earlier ruling in U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40 (Mass. 2011) that a foreclosure is invalid unless the party seeking foreclosure proves that it owns the mortgage (has the right to foreclose) at the time of the foreclosure, the Supreme Judicial Court of the Commonwealth of Massachusetts ruled in the case of Bank of New York v. KV Bailey, 2011 WL 3307553 (Mass. 2011),  that a homeowner could challenge an eviction from his home even though it was foreclosed in a private sale to determine whether the mortgagor/lender had the power to foreclose. Because Massachusetts uses private foreclosure rather than court-supervised foreclosure, the ruling extends court supervision of foreclosure to homeowners by effectively requiring foreclosing parties to have proof of the right to foreclose before the foreclosure sale. It does so by denying power to evict an occupying homeowner without proof of the right to possession of …

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NY and Delaware AGs investigate mortgage bundling for requisite written documentation of the chain of title

/ Mortgages, Statute of Frauds

The New York and Delaware Attorneys General have asked for information from two trustees of mortgage bundles (Bank of New York Mellon and Deutsche Bank) to determine whether they complied with all contractual obligations in the process of bundling the mortgages and selling shares to investors. The trusts that bundled the mortgages were supposed to ensure that proper paperwork was completed in transferring “ownership” of  the mortgages to the trust to ensure that the investors were actually investing in something that the trust owned. Many of the bundling contracts required the trust to examine the individual mortgages to ensure a proper chain of title and failure to do so would constitute a breach of contract that could lead to the whole thing unraveling. Read article

NY court holds that MERS cannot bring foreclosure actions

/ Mortgages, Real Estate Transactions, Statute of Frauds

An appellate court in New York has held that MERS (Mortgage Electronic Registration Systems) cannot file foreclosure lawsuits in its own name because it does not “own” the mortgage, having neither the right to payment under the note nor the right to foreclose. Bank of N.Y. v. Silverberg, 2011 WL 2279723 (N.Y. App. Div. 2011). Despite the fact that the parties put MERS’s name on the mortgage, it is not the real party in interest, having no right to payment under the note

Maine Supreme Court denies foreclosure when the lender filed fraudulent affidavits

/ Mortgages, Real Estate Transactions, Statute of Frauds

On May 19, 2011, the Maine Supreme Court denied summary judgment on a foreclosure claim when it found that affidavits filed by the lender were suspect and possibly fraudulent. HSBC Mortgage Services, Inc. v. Murphy, 2011 Me. LEXIS 59, 2011 ME 59 (Me. 2011). The question was whether the note had been validly assigned from the original lender to the entity now seeking to foreclose. The court found the affidavits testifying to that effect to be inherently untrustworthy because (1) one affidavit swearing that a mortgage assignment had been recorded was signed before the assignment was recorded, (2) another affidavit and assignment suggested the same person was simultaneously the vice president of both the assignor and the assignee, (3) an affidavit’s jurat was dated four days before the affidavit was signed, and (4) an affidavit in support of a summary judgment motion that was denied provided information vital to the entry of a …

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Massachusetts Supreme Judicial Court requires lawyers for the lender to be present and active at real estate closings

/ Mortgages

In answer to two certified questions from the First Circuit the Massachusetts high court has ruled that Massachusetts law requires the presence and substantive participation by a lawyer on behalf of the mortgage lender but that routine title examination does not constitute the unauthorized practice of law. The case is Real Estate Bar Assn for Mass. Inc. (REBA) v. National Real Estate Information Services (NREIS), 2011 Mass. LEXIS 244 (Mass. 2011).

No foreclosure if notice does not include the name of the lender

/ Mortgages, Statute of Frauds

A New Jersey trial court has interpreted a state statute, N.J. Stat.. §2A:50-56,  to require mortgage foreclosure notices to include the name of the lender (the current holder of the mortgage) as well as contact information. Because a notice included only the name of the mortgage servicer, the court dismissed the foreclosure complaint. read article

Banks charged with failing to maintain foreclosed properties

/ Leaseholds, Mortgages, Nuisance

When banks foreclose on property and then purchase the property at the foreclosure sale, they become the new owners of the property. They would like to resell the property as soon as possible. But in a recession, that is not always possible and when banks retain title to those foreclosed properties, they are subject to local law regulations to maintain the property and ensure that it does not become dilapidated. But many banks have been failing in that regard. They are in the business of financing the sale of property not in managing it. That has prompted the City of Boston to impose more than $80,000 in fines on Wells Fargo & Co and Bank of America for allowing many vacant properties in their possession ‘to fall into disrepair and blight neighborhoods.” Megan Woolhouse, Banks high on list of delinquent property owners, Boston Globe, Apr. 15, 2011. Bank officials deny they own some …

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Alabama judge denies foreclosure of securitized mortgage for failure to comply with the formalities of loan transfers

/ Mortgages, Real Estate Transactions

An Alabama judge refused to allow a trustee to foreclose on a mortgage that had been made part of a securitized package of loans because there was no signed endorsement on the note (the contract creating the original loan) when the mortgage was transferred to the trust that held the securitized mortgages. Because the parties did not strictly adhere to the writing requirement in the state version of the UCC (Uniform Commercial Code) — a particularized version of the statute of frauds — the transfer of the mortgage never occurred and the trustee has no power to foreclose. Nor did the trustee have the rights of a “holder” of the note under the UCC because it did not acquire the note in a manner that complied with the rules in its foundational documents. In effect the party bringing the foreclosure action could not show that it had acquired the right …

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