The Supreme Judicial Court has upheld a Land Court judge’s decision in U.S. Bank v. Ibanez invalidating foreclosure sales conducted by two plaintiff banks to which mortgages had been assigned.
“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,” Judge Ralph D. Gants wrote for the SJC. “As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties.”
The banks claimed that “securitization documents” they submitted established valid assignments that made them the holders of the two mortgages before the notice of sale and the foreclosure sale.
But the SJC disagreed.
“The judge did not err in concluding that the securitization documents submitted by the plaintiffs failed to demonstrate that they were the holders of the … mortgages, respectively, at the time of the publication of the notices and the sales,” Gants said.
“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,” he added. “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 G.L.c. 183, §21, and G.L.c. 244, §14).”
The plaintiffs had also asked the court to apply its ruling prospectively, but the SJC rejected the request. The court said its decision did not significantly change the common law and therefore did not warrant a prospective application.
While the Real Estate Bar Association supported the SJC’s confirmation of Land Court Judge Keith C. Long’s ruling, it had also pushed for a prospective application of the decision, said REBA president Edward M. Bloom.
“It’s clear that they have decided this holding applies retroactively and this does not solve the problem of all the old back titles, which we wanted to clean up by saying this was enough of a change that it should only apply prospectively,” he said.
Foreclosure lawyer Robert J. Pomerene of Plymouth said the ruling provides leverage to residents 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 since Long’s decision and that’s not going to change,” he said. “This SJC ruling apparently doesn’t provide any clarity or guidance on how to handle those issues, so more litigation can be expected.”
Pomerene added that the ruling suggests the need for a statewide mechanism for handling foreclosures, such as judicial review or mandatory mediation between borrowers and lenders.
The 32-page decision is U.S. Bank National Association v. Ibanez (and a consolidated case), Lawyers Weekly No. 10-005-11. The full text of the ruling can be found by clicking here.
Lawyers Weekly reporter Phillip Bantz contributed to this story.