The Massachusetts State Supreme Court has affirmed a lower court's decision declaring invalid two foreclosure cases conducted in March of 2007 because the foreclosing bank could not prove they owned the underlying mortgage. Banks are nervous that this ruling may give guidance to the rest of the Country as to when to declare a completed foreclosure invalid.
At issue in this case was the transfer of the original note and mortgage instrument ultimately to a Mortgage Backed Security Trust. The Court found that the assignment of the mortgage did not name who the assignee was to be, the eventual recipient and owner of the mortgage. Since no other evidence was presented that would demonstrate who the recipient of the mortgage was, the Court declared the assignment was void for failing to list the name of the assignee. The Court stated that long settled Massachusetts law required that the assignee of the mortgage or deed of trust be named to give effect to the conveyance of real property. In this case, the assignment of the mortgage occurred after the foreclosure was already completed. This meant that the bank did not actually own the mortgage which they relied upon to give them the right to foreclose.
The Massachusetts Supreme Court states that the entire securitization process when performed properly passes legal muster, but the decision also holds that assignments of mortgages can be executed in blank, as long as a complete chain of transfers can be shown through the applicable deal documents. Because here, an otherwise valid confirmatory assignment was used to provide the basis of the bank's right to foreclose, the Court ruled that the confirmatory assignment was not sufficient to provide a legal basis to foreclose. It is obvious that the confirmatory assignment used here was performed after the foreclosure sale.
The Bank foreclosing on these properties properly held the notes that represented the borrower's obligation to repay the loans. The Court held, however, that even though the bank held the note, that the note was not itself the mortgage and, therefore, could not foreclose absent a proper assignment of the underlying mortgage.
This case is sure to send shock waves across the nation as bank executives, lawyers, and judges analyze the decision's true meaning.
If you have questions about your foreclosure, contact our Baltimore bankruptcy attorneys at BWH.