If I was dealing with a foreclosure, I'd get the decisions and the briefs from both sides and see if there is anything in those I could use in my case.
"In a worst-case scenario for the banking industry, the ruling means banks won't be able to foreclose on homes unless they can prove under new standards they are the actual title owners. That would be an expensive proposition because banks would then have to buy back securitized mortgage packages to reacquire the title."
Read more:
re_case Another article discussing the same case:
The actual decision:
U.S. Bank National Association, Trustee [Fn1 v. Antonio Ibanez (And A Consolidated Case [Fn2] ). For Abfc 2005-Opt 1 Trust, Abfc Asset Backed, No.SJC-10694. (Mass. 01/07/2011)
[1] Massachusetts Supreme Court
[2] No. SJC-10694.
[4] January 7, 2011
[5] U.S. BANK NATIONAL ASSOCIATION, TRUSTEE [*FN1]v.ANTONIO IBANEZ (AND A CONSOLIDATED CASE [*FN2] ). FOR ABFC 2005-OPT 1 TRUST, ABFC ASSET BACKED CERTIFICATES, SERIES 2005-OPT 1. [*FN3]).
[6] R. Bruce Allensworth (Phoebe S. Winder & Robert W. Sparkes,III, with him) for U.S. Bank National Association & another. Paul R. Collier, III (Max W. Weinstein with him) for Antonio Ibanez. Glenn F. Russell, Jr., for Mark A. LaRace & another. The following submitted briefs for amici curiae: Martha Coakley, Attorney General, & John M. Stephan, Assistant Attorney General, for the Commonwealth. Kevin Costello, Gary Klein, Shennan Kavanagh & Stuart Rossman for National Consumer Law Center & others. Ward P. Graham & Robert J. Moriarty, Jr., for Real Estate Bar
Association for Massachusetts, Inc. Marie McDonnell, pro se.
[7] The opinion of the court was delivered by: Gants, J.
[8] October 7, 2010.
[9] Real Property, Mortgage, Ownership, Record title. Mortgage, Real estate, Foreclosure, Assignment. Notice, Foreclosure of mortgage.
[10] CIVIL ACTIONS commenced in the Land Court Department on September 16 and October 30, 2008.
[11] Motions for entry of default judgment and to vacate judgment were heard by Keith C. Long, J.
[12] The Supreme Judicial Court granted an application for direct appellate review.
[13] Present: Marshall, C.J., Ireland, Spina, Cordy, Botsford, & Gants, JJ. [*fn4]
[14] After foreclosing on two properties and purchasing the properties back at the foreclosure sales, U.S. Bank National Association (U.S.Bank), as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z; and Wells Fargo Bank, N.A. (Wells Fargo), as trustee for ABFC 2005-OPT 1 Trust, ABFC Asset Backed Certificates, Series 2005-OPT 1 (plaintiffs) filed separate complaints in the Land Court asking a judge to declare that they held clear title to the properties in fee simple. 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. As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties, and their requests for a declaration of clear title were properly denied. [*fn5]
[15] Procedural history. On July 5, 2007, U.S. Bank, as trustee, foreclosed on the mortgage of Antonio Ibanez, and purchased the Ibanez property at the foreclosure sale. On the same day, Wells Fargo, as trustee,
foreclosed on the mortgage of Mark and Tammy LaRace, and purchased the LaRace property at that foreclosure sale.
[16] In September and October of 2008, U.S. Bank and Wells Fargo brought separate actions in the Land Court under G.L. c. 240, § 6, which authorizes actions "to quiet or establish the title to land situated in the commonwealth or to remove a cloud from the title thereto." The two complaints sought identical relief: (1) a judgment that the right, title, and interest of the mortgagor (Ibanez or the LaRaces) in the property was extinguished by the foreclosure; (2) a declaration that there was no cloud on title arising from publication of the notice of sale in the Boston Globe; and (3) a declaration that title was vested in the plaintiff trustee in fee simple. U.S. Bank and Wells Fargo each asserted in its complaint that it had become the holder of the respective mortgage through an assignment made after the foreclosure sale.
[17] In both cases, the mortgagors--Ibanez and the LaRaces--did not initially answer the complaints, and the plaintiffs moved for entry of default judgment. In their motions for entry of default judgment, the plaintiffs addressed two issues: (1) whether the Boston Globe, in which the required notices of the foreclosure sales were published, is a newspaper of "general circulation" in Springfield, the town where the foreclosed properties lay. See G.L. c. 244, § 14 (requiring publication every week for three weeks in newspaper published in town where foreclosed property lies, or of general circulation in that town); and (2) whether the plaintiffs were legally entitled to foreclose on the properties where the assignments of the mortgages to the plaintiffs were neither executed nor recorded in the registry of deeds until after the foreclosure sales. [*fn6] The two cases were heard together by the Land Court, along with a third case that raised the same issues.
[18] On March 26, 2009, judgment was entered against the plaintiffs. The judge ruled that the foreclosure sales were invalid because, in violation of G.L. c. 244, § 14, the notices of the foreclosure sales named U.S. Bank (in the Ibanez foreclosure) and Wells Fargo (in the LaRace foreclosure) as the mortgage holders where they had not yet been assigned the mortgages. [*fn7] The judge found, based on each plaintiff's assertions in its complaint, that the plaintiffs acquired the mortgages by assignment only after the foreclosure sales and thus had no interest in the mortgages being foreclosed at the time of the publication of the notices of sale or at the time of the foreclosure sales. [*fn8]
[19] The plaintiffs then moved to vacate the judgments. At a hearing on the motions on April 17, 2009, the plaintiffs conceded that each complaint alleged a postnotice, postforeclosure sale assignment of the mortgage at issue, but they now represented to the judge that documents might exist that could show a prenotice, preforeclosure sale assignment of the mortgages. The judge granted the plaintiffs leave to produce such documents, provided they were produced in the form they existed in at the time the foreclosure sale was noticed and conducted. In response, the plaintiffs submitted hundreds of pages of documents to the judge, which they claimed established that the mortgages had been assigned to them before the foreclosures. Many of these documents related to the creation of the securitized mortgage pools in which the Ibanez and LaRace mortgages were purportedly included. [*fn9]
[20] The judge denied the plaintiffs' motions to vacate judgment on October 14, 2009, concluding that the newly submitted documents did not alter the conclusion that the plaintiffs were not the holders of the respective mortgages at the time of foreclosure. We granted the parties' applications for direct appellate review.
[21] Factual background. We discuss each mortgage separately, describing when appropriate what the plaintiffs allege to have happened and what the documents in the record demonstrate. [*fn10]
[22] The Ibanez mortgage. On December 1, 2005, Antonio Ibanez took out a $103,500 loan for the purchase of property at 20 Crosby Street in Springfield, secured by a mortgage to the lender, Rose Mortgage, Inc. (Rose Mortgage). The mortgage was recorded the following day. Several days later, Rose Mortgage executed an assignment of this mortgage in blank, that is, an assignment that did not specify the name of the assignee. [*fn11] The blank space in the assignment was at some point stamped with the name of Option One Mortgage Corporation (Option One) as the assignee, and that assignment was recorded on June 7, 2006. Before the recording, on January 23, 2006, Option One executed an assignment of the Ibanez mortgage in blank.
[23] According to U.S. Bank, Option One assigned the Ibanez mortgage to Lehman Brothers Bank, FSB, which assigned it to Lehman Brothers Holdings Inc., which then assigned it to the Structured Asset Securities Corporation, [*fn12] which then assigned the mortgage, pooled with approximately 1,220 other mortgage loans, to U.S. Bank, as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z. With this last assignment, the Ibanez and other loans were pooled into a trust and converted into mortgage-backed securities that can be bought and sold by investors--a process known as securitization.
[24] For ease of reference, the chain of entities through which the Ibanez mortgage allegedly passed before the foreclosure sale is:
[25] Rose Mortgage, Inc. (originator)
[26] <>
[27] Option One Mortgage Corporation (record holder)
[28] <>
[29] Lehman Brothers Bank, FSB
[30] <>
[31] Lehman Brothers Holdings Inc. (seller)
[32] <>
[33] Structured Asset Securities Corporation (depositor)
[34] <>
[35] U.S. Bank National Association, as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z
[36] According to U.S. Bank, the assignment of the Ibanez mortgage to U.S. Bank occurred pursuant to a December 1, 2006, trust agreement, which is not in the record. What is in the record is the private placement memorandum (PPM), dated December 26, 2006, a 273-page, unsigned offer of mortgage-backed securities to potential investors. The PPM describes the mortgage pools and the entities involved, and summarizes the provisions of the trust agreement, including the representation that mortgages "will be" assigned into the trust. According to the PPM, "[e]ach transfer of a Mortgage Loan from the Seller [Lehman Brothers Holdings Inc.] to the Depositor [Structured Asset Securities Corporation] and from the Depositor to the Trustee [U.S. Bank] will be intended to be a sale of that Mortgage Loan and will be reflected as such in the Sale and Assignment Agreement and the Trust Agreement, respectively." The PPM also specifies that "[e]ach Mortgage Loan will be identified in a schedule appearing as an exhibit to the Trust Agreement." However, U.S. Bank did not provide the judge with any mortgage schedule identifying the Ibanez loan as among the mortgages that were assigned in the trust agreement.
[37] On April 17, 2007, U.S. Bank filed a complaint to foreclose on the Ibanez mortgage in the Land Court under the Servicemembers Civil Relief Act (Servicemembers Act), which restricts foreclosures against active duty members of the uniformed services. See 50 U.S.C. Appendix §§ 501, 511, 533 (2006 & Supp. II 2008). [*fn13] In the complaint, U.S. Bank represented that it was the "owner (or assignee) and holder" of the mortgage given by Ibanez for the property. A judgment issued on behalf of U.S. Bank on June 26, 2007,
declaring that the mortgagor was not entitled to protection from foreclosure under the Servicemembers Act. In June, 2007, U.S. Bank also caused to be published in the Boston Globe the notice of the foreclosure sale required by G.L. c. 244, § 14. The notice identified U.S. Bank as the "present holder" of the mortgage.
[38] At the foreclosure sale on July 5, 2007, the Ibanez property was purchased by U.S. Bank, as trustee for the securitization trust, for $94,350, a value significantly less than the outstanding debt and the estimated market value of the property. The foreclosure deed (from U.S.Bank, trustee, as the purported holder of the mortgage, to U.S. Bank, trustee, as the purchaser) and the statutory foreclosure affidavit were recorded on May 23, 2008. On September 2, 2008, more than one year after the sale, and more than five months after recording of the sale, American Home Mortgage Servicing, Inc., "as successor-in-interest" to Option One, which was until then the record holder of the Ibanez mortgage, executed a written assignment of that mortgage to U.S. Bank, as trustee for the securitization trust. [*fn14] This assignment was recorded on September 11, 2008. The LaRace mortgage. On May 19, 2005, Mark and Tammy LaRace gave a mortgage for the property at 6 Brookburn Street in Springfield to Option One as security for a $103,200 loan; the mortgage was recorded that same day. On May 26, 2005, Option One executed an assignment of this mortgage in blank. According to Wells Fargo, Option One later assigned the LaRace mortgage to Bank of America in a July 28, 2005, flow sale and servicing agreement. Bank of America then assigned it to Asset Backed Funding Corporation (ABFC) in an October 1, 2005, mortgage loan purchase agreement. Finally, ABFC pooled the
mortgage with others and assigned it to Wells Fargo, as trustee for the ABFC 2005-OPT 1 Trust, ABFC Asset-Backed Certificates, Series 2005-OPT 1, pursuant to a pooling and servicing agreement (PSA).
[39] For ease of reference, the chain of entities through which the LaRace mortgage allegedly passed before the foreclosure sale is: Option One Mortgage Corporation (originator and record holder) Bank of America Asset Backed Funding Corporation (depositor) Wells Fargo, as trustee for the ABFC 2005-OPT 1, ABFC Asset-Backed Certificates, Series 2005-OPT 1
[40] Wells Fargo did not provide the judge with a copy of the flow sale and servicing agreement, so there is no document in the record reflecting an assignment of the LaRace mortgage by Option One to Bank of America. The plaintiff did produce an unexecuted copy of the mortgage loan purchase agreement, which was an exhibit to the PSA. The mortgage loan purchase agreement provides that Bank of America, as seller, "does hereby agree to and does hereby sell, assign, set over, and otherwise convey to the Purchaser [ABFC], without recourse, on the Closing Date ... all of its right, title and interest in and to each Mortgage Loan." The agreement makes reference to a schedule listing the assigned mortgage loans, but this schedule is not in the record, so there was no document before the judge showing that the LaRace mortgage was among the mortgage loans assigned to the ABFC.
[41] Wells Fargo did provide the judge with a copy of the PSA, which is an agreement between the ABFC (as depositor), Option One (as servicer), and Wells Fargo (as trustee), but this copy was downloaded from the Securities and Exchange Commission website and was not signed. The PSA provides that the depositor "does hereby transfer, assign, set over and otherwise convey to the Trustee, on behalf of the Trust ... all the right, title and interest of the Depositor ... in and to ... each Mortgage Loan identified on the Mortgage Loan Schedules," and "does hereby deliver" to the trustee the original mortgage note, an original mortgage assignment "in form and substance acceptable for recording," and other documents pertaining to each mortgage.
[42] The copy of the PSA provided to the judge did not contain the loan schedules referenced in the agreement. Instead, Wells Fargo submitted a schedule that it represented identified the loans assigned in the PSA, which did not include property addresses, names of mortgagors, or any number that corresponds to the loan number or servicing number on the LaRace mortgage. Wells Fargo contends that a loan with the LaRace property's zip code and city is the LaRace mortgage loan because the payment history and loan amount matches the LaRace loan. On April 27, 2007, Wells Fargo filed a complaint under the Servicemembers Act in the Land Court to foreclose on the LaRace mortgage. The complaint represented Wells Fargo as the "owner (or assignee) and holder" of the mortgage given by the LaRaces for the property. A judgment issued on behalf of Wells Fargo on July 3, 2007, indicating that the LaRaces were not beneficiaries of the Servicemembers Act and that foreclosure could proceed in accordance with the terms of the power of sale.
In June, 2007, Wells Fargo caused to be published in the Boston Globe the statutory notice of sale, identifying itself as the "present holder" of the mortgage.
[43] At the foreclosure sale on July 5, 2007, Wells Fargo, as trustee, purchased the LaRace property for $120,397.03, a value significantly below its estimated market value. Wells Fargo did not execute a statutory foreclosure affidavit or foreclosure deed until May 7, 2008. That same day, Option One, which was still the record holder of the LaRace mortgage, executed an assignment of the mortgage to Wells Fargo as trustee; the assignment was recorded on May 12, 2008. Although executed ten months after the foreclosure sale, the assignment declared an effective date of April 18, 2007, a date that preceded the publication of the notice of sale and the foreclosure sale.
[44] Discussion.
[45] The plaintiffs brought actions under G.L. c. 240, § 6, seeking declarations that the defendant mortgagors' titles had been extinguished and that the plaintiffs were the fee simple owners of the foreclosed properties. As such, the plaintiffs bore the burden of establishing their entitlement to the relief sought. Sheriff's Meadow Found., Inc. v. Bay-Courte Edgartown, Inc., 401 Mass. 267, 269 (1987). To meet this burden, they were required "not merely to demonstrate better title ... than the defendants possess, but ... to prove sufficient title to succeed in [the] action." Id. See NationsBanc Mtge. Corp. v. Eisenhauer, 49 Mass.App.Ct. 727, 730 (2000). There is no question that the relief the plaintiffs sought required them to establish the validity of the foreclosure sales on which their claim to clear title rested.
[46] Massachusetts does not require a mortgage holder to obtain judicial authorization to foreclose on a mortgaged property. See G.L. c. 183, § 21; G.L. c. 244, § 14. With the exception of the limited judicial procedure aimed at certifying that the mortgagor is not a beneficiary of the Servicemembers Act, a mortgage holder can foreclose on a property, as the plaintiffs did here, by exercise of the statutory power of sale, if such a power is granted by the mortgage itself. See Beaton v. Land Court, 367 Mass. 385, 390-391, 393, appeal dismissed, 423 U.S. 806 (1975). Where a mortgage grants a mortgage holder the power of sale, as did both the Ibanez and LaRace mortgages, it includes by reference the power of sale set out in G.L. c. 183, § 21, and further regulated by G.L. c. 244, §§ 11-17C. Under G.L. c. 183, § 21, after a mortgagor defaults in the performance of the underlying note, the mortgage holder may sell the property at a public auction and convey the property to the purchaser in fee simple, "and such sale shall forever bar the mortgagor and all persons claiming under him from all right and interest in the mortgaged premises, whether at law or in equity." Even where there is a dispute as to whether the mortgagor was in default or whether the party claiming to be the mortgage holder is the true mortgage holder, the foreclosure goes forward unless the mortgagor files an action
and obtains a court order enjoining the foreclosure. [*fn15] See Beaton v.
Land Court, supra at 393.
[47] Recognizing the substantial power that the statutory scheme
affords to a mortgage holder to foreclose without immediate judicial
oversight, we adhere to the familiar rule that "one who sells under a power
[of sale] must follow strictly its terms. If he fails to do so there is no
valid execution of the power, and the sale is wholly void." Moore v. Dick,
187 Mass. 207, 211 (1905). See Roche v. Farnsworth, 106 Mass. 509, 513
(1871) (power of sale contained in mortgage "must be executed in strict
compliance with its terms"). See also McGreevey v. Charlestown Five Cents
Sav. Bank, 294 Mass. 480, 484 (1936). [*fn16]
[48] One of the terms of the power of sale that must be strictly
adhered to is the restriction on who is entitled to foreclose. The
"statutory power of sale" can be exercised by "the mortgagee or his
executors, administrators, successors or assigns." G.L. c. 183, § 21. Under
G.L. c. 244, § 14, "[t]he mortgagee or person having his estate in the land
mortgaged, or a person authorized by the power of sale, or the attorney duly
authorized by a writing under seal, or the legal guardian or conservator of
such mortgagee or person acting in the name of such mortgagee or person" is
empowered to exercise the statutory power of sale. Any effort to foreclose
by a party lacking "jurisdiction and authority" to carry out a foreclosure
under these statutes is void. Chace v. Morse, 189 Mass. 559, 561 (1905),
citing Moore v. Dick, supra. See Davenport v. HSBC Bank USA, 275 Mich.App.
344, 347-348 (2007) (attempt to foreclose by party that had not yet been
assigned mortgage results in "structural defect that goes to the very heart
of defendant's ability to foreclose by advertisement," and renders
foreclosure sale void).
[49] A related statutory requirement that must be strictly adhered to
in a foreclosure by power of sale is the notice requirement articulated in
G.L. c. 244, § 14. That statute provides that "no sale under such power
shall be effectual to foreclose a mortgage, unless, previous to such sale,"
advance notice of the foreclosure sale has been provided to the mortgagee,
to other interested parties, and by publication in a newspaper published in
the town where the mortgaged land lies or of general circulation in that
town. Id. "The manner in which the notice of the proposed sale shall be
given is one of the important terms of the power, and a strict compliance
with it is essential to the valid exercise of the power." Moore v. Dick,
supra at 212. See Chace v. Morse, supra ("where a certain notice is
prescribed, a sale without any notice, or upon a notice lacking the
essential requirements of the written power, would be void as a proceeding
for foreclosure"). See also McGreevey v. Charlestown Five Cents Sav. Bank,
supra. Because only a present holder of the mortgage is authorized to
foreclose on the mortgaged property, and because the mortgagor is entitled
to know who is foreclosing and selling the property, the failure to identify
the holder of the mortgage in the notice of sale may render the notice
defective and the foreclosure sale void. [*fn17] See Roche v. Farnsworth,
supra (mortgage sale void where notice of sale identified original mortgagee
but not mortgage holder at time of notice and sale). See also Bottomly v.
Kabachnick, 13 Mass.App.Ct. 480, 483-484 (1982) (foreclosure void where
holder of mortgage not identified in notice of sale).
[50] For the plaintiffs to obtain the judicial declaration of clear
title that they seek, they had to prove their authority to foreclose under
the power of sale and show their compliance with the requirements on which
this authority rests. Here, the plaintiffs were not the original mortgagees
to whom the power of sale was granted; rather, they claimed the authority to
foreclose as the eventual assignees of the original mortgagees. Under the
plain language of G.L. c. 183, § 21, and G.L. c. 244, § 14, the plaintiffs
had the authority to exercise the power of sale contained in the Ibanez and
LaRace mortgages only if they were the assignees of the mortgages at the
time of the notice of sale and the subsequent foreclosure sale. See In re
Schwartz, 366 B.R. 265, 269 (Bankr.D.Mass.2007) ("Acquiring the mortgage
after the entry and foreclosure sale does not satisfy the Massachusetts
statute"). [*fn18] See also Jeff-Ray Corp. v. Jacobson, 566 So.2d 885, 886
(Fla.Dist.Ct.App.1990) (per curiam) (foreclosure action could not be based
on assignment of mortgage dated four months after commencement of
foreclosure proceeding).
[51] The plaintiffs claim that the securitization documents they
submitted establish valid assignments that made them the holders of the
Ibanez and LaRace mortgages before the notice of sale and the foreclosure
sale. We turn, then, to the documentation submitted by the plaintiffs to
determine whether it met the requirements of a valid assignment. Like a sale
of land itself, the assignment of a mortgage is a conveyance of an interest
in land that requires a writing signed by the grantor. See G.L. c. 183, § 3;
Saint Patrick's Religious, Educ. & Charitable Ass'n v. Hale, 227 Mass. 175,
177 (1917). In a "title theory state" like Massachusetts, a mortgage is a
transfer of legal title in a property to secure a debt. See Faneuil
Investors Group, Ltd. Partnership v. Selectmen of Dennis, 458 Mass. 1, 6
(2010). Therefore, when a person borrows money to purchase a home and gives
the lender a mortgage, the homeowner-mortgagor retains only equitable title
in the home; the legal title is held by the mortgagee. See Vee Jay Realty
Trust Co. v. DiCroce, 360 Mass. 751, 753 (1972), quoting Dolliver v. St.
Joseph Fire & Marine Ins. Co., 128 Mass. 315, 316 (1880) (although "as to
all the world except the mortgagee, a mortgagor is the owner of the
mortgaged lands," mortgagee has legal title to property); Maglione v.
BancBoston Mtge. Corp., 29 Mass.App.Ct. 88, 90 (1990). Where, as here,
mortgage loans are pooled together in a trust and converted into
mortgage-backed securities, the underlying promissory notes serve as
financial instruments generating a potential income stream for investors,
but the mortgages securing these notes are still legal title to someone's
home or farm and must be treated as such.
[52] Focusing first on the Ibanez mortgage, U.S. Bank argues that it
was assigned the mortgage under the trust agreement described in the PPM,
but it did not submit a copy of this trust agreement to the judge. The PPM,
however, described the trust agreement as an agreement to be executed in the
future, so it only furnished evidence of an intent to assign mortgages to
U.S. Bank, not proof of their actual assignment. Even if there were an
executed trust agreement with language of present assignment, U.S. Bank did
not produce the schedule of loans and mortgages that was an exhibit to that
agreement, so it failed to show that the Ibanez mortgage was among the
mortgages to be assigned by that agreement. Finally, even if there were an
executed trust agreement with the required schedule, U.S. Bank failed to
furnish any evidence that the entity assigning the mortgage--Structured
Asset Securities Corporation--ever held the mortgage to be assigned. The
last assignment of the mortgage on record was from Rose Mortgage to Option
One; nothing was submitted to the judge indicating that Option One ever
assigned the mortgage to anyone before the foreclosure sale. [*fn19] Thus,
based on the documents submitted to the judge, Option One, not U.S. Bank,
was the mortgage holder at the time of the foreclosure, and U.S. Bank did
not have the authority to foreclose the mortgage. Turning to the LaRace
mortgage, Wells Fargo claims that, before it issued the foreclosure notice,
it was assigned the LaRace mortgage under the PSA. The PSA, in contrast with
U.S. Bank's PPM, uses the language of a present assignment ("does hereby ...
assign" and "does hereby deliver") rather than an intent to assign in the
future. But the mortgage loan schedule Wells Fargo submitted failed to
identify with adequate specificity the LaRace mortgage as one of the
mortgages assigned in the PSA. Moreover, Wells Fargo provided the judge with
no document that reflected that the ABFC (depositor) held the LaRace
mortgage that it was purportedly assigning in the PSA. As with the Ibanez
loan, the record holder of the LaRace loan was Option One, and nothing was
submitted to the judge which demonstrated that the LaRace loan was ever
assigned by Option One to another entity before the publication of the
notice and the sale. Where a plaintiff files a complaint asking for a
declaration of clear title after a mortgage foreclosure, a judge is entitled
to ask for proof that the foreclosing entity was the mortgage holder at the
time of the notice of sale and foreclosure, or was one of the parties
authorized to foreclose under G.L. c. 183, § 21, and G.L. c. 244, § 14. A
plaintiff that cannot make this modest showing cannot justly proclaim that
it was unfairly denied a declaration of clear title. See In re Schwartz,
supra at 266 ("When HomEq [Servicing Corporation] was required to prove its
authority to conduct the sale, and despite having been given ample
opportunity to do so, what it produced instead was a jumble of documents and
conclusory statements, some of which are not supported by the documents and
indeed even contradicted by them"). See also Bayview Loan Servicing, LLC v.
Nelson, 382 Ill.App.3d 1184, 1188 (2008) (reversing grant of summary
judgment in favor of financial entity in foreclosure action, where there was
"no evidence that [the entity] ever obtained any legal interest in the
subject property").
[53] 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. Where a pool of mortgages
is assigned to a securitized trust, the executed agreement that assigns the
pool of mortgages, with a schedule of the pooled mortgage loans that clearly
and specifically identifies the mortgage at issue as among those assigned,
may suffice to establish the trustee as the mortgage holder. However, there
must be proof that the assignment was made by a party that itself held the
mortgage. See In re Samuels, 415 B.R. 8, 20 (Bankr.D.Mass.2009). A
foreclosing entity may provide a complete chain of assignments linking it to
the record holder of the mortgage, or a single assignment from the record
holder of the mortgage. See In re Parrish, 326 B.R. 708, 720 (Bankr.N.D.Ohio
2005) ("If the claimant acquired the note and mortgage from the original
lender or from another party who acquired it from the original lender, the
claimant can meet its burden through evidence that traces the loan from the
original lender to the claimant"). The key in either case 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 judge did not err in
concluding that the securitization documents submitted by the plaintiffs
failed to demonstrate that they were the holders of the Ibanez and LaRace
mortgages, respectively, at the time of the publication of the notices and
the sales. The judge, therefore, did not err in rendering judgments against
the plaintiffs and in denying the plaintiffs' motions to vacate the
judgments. [*fn20]
[54] We now turn briefly to three other arguments raised by the
plaintiffs on appeal. First, the plaintiffs initially contended that the
assignments in blank executed by Option One, identifying the assignor but
not the assignee, not only "evidence[ ] and confirm[ ] the assignments that
occurred by virtue of the securitization agreements," but "are effective
assignments in their own right." But in their reply briefs they conceded
that the assignments in blank did not constitute a lawful assignment of the
mortgages. Their concession is appropriate. We have long held that a
conveyance of real property, such as a mortgage, that does not name the
assignee conveys nothing and is void; we do not regard an assignment of land
in blank as giving legal title in land to the bearer of the assignment. See
Flavin v. Morrissey, 327 Mass. 217, 219 (1951); Macurda v. Fuller, 225 Mass.
341, 344 (1916). See also G.L. c. 183, § 3.
[55] Second, the plaintiffs contend that, because they held the
mortgage note, they had a sufficient financial interest in the mortgage to
allow them to foreclose. In Massachusetts, where a note has been assigned
but there is no written assignment of the mortgage underlying the note, the
assignment of the note does not carry with it the assignment of the
mortgage. Barnes v. Boardman, 149 Mass. 106, 114 (1889). Rather, the holder
of the mortgage holds the mortgage in trust for the purchaser of the note,
who has an equitable right to obtain an assignment of the mortgage, which
may be accomplished by filing an action in court and obtaining an equitable
order of assignment. Id. ("In some jurisdictions it is held that the mere
transfer of the debt, without any assignment or even mention of the
mortgage, carries the mortgage with it, so as to enable the assignee to
assert his title in an action at law.... This doctrine has not prevailed in
Massachusetts, and the tendency of the decisions here has been, that in such
cases the mortgagee would hold the legal title in trust for the purchaser of
the debt, and that the latter might obtain a conveyance by a bill in
equity"). See Young v. Miller, 6 Gray 152, 154 (1856). In the absence of a
valid written assignment of a mortgage or a court order of assignment, the
mortgage holder remains unchanged. This common-law principle was later
incorporated in the statute enacted in 1912 establishing the statutory power
of sale, which grants such a power to "the mortgagee or his executors,
administrators, successors or assigns," but not to a party that is the
equitable beneficiary of a mortgage held by another. G.L. c. 183, § 21,
inserted by St.1912, c. 502, § 6.
[56] Third, the plaintiffs initially argued that postsale assignments
were sufficient to establish their authority to foreclose, and now argue
that these assignments are sufficient when taken in conjunction with the
evidence of a presale assignment. They argue that the use of postsale
assignments was customary in the industry, and point to Title Standard No.
58(3) issued by the Real Estate Bar Association for Massachusetts, which
declares: "A title is not defective by reason of ... [t]he recording of an
Assignment of Mortgage executed either prior, or subsequent, to foreclosure
where said Mortgage has been foreclosed, of record, by the Assignee."
[*fn21] To the extent that the plaintiffs rely on this title standard for
the proposition that an entity that does not hold a mortgage may foreclose
on a property, and then cure the cloud on title by a later assignment of a
mortgage, their reliance is misplaced because this proposition is contrary
to G.L. c. 183, § 21, and G.L. c. 244, § 14. If the plaintiffs did not have
their assignments to the Ibanez and LaRace mortgages at the time of the
publication of the notices and the sales, they lacked authority to foreclose
under G.L. c. 183, § 21, and G.L. c. 244, § 14, and their published claims
to be the present holders of the mortgages were false. Nor may a
postforeclosure assignment be treated as a pre-foreclosure assignment simply
by declaring an "effective date" that precedes the notice of sale and
foreclosure, as did Option One's assignment of the LaRace mortgage to Wells
Fargo. Because an assignment of a mortgage is a transfer of legal title, it
becomes effective with respect to the power of sale only on the transfer; it
cannot become effective before the transfer. See In re Schwartz, supra at
269.
[57] However, we do not disagree with Title Standard No. 58(3) that,
where an assignment is confirmatory of an earlier, valid assignment made
prior to the publication of notice and execution of the sale, that
confirmatory assignment may be executed and recorded after the foreclosure,
and doing so will not make the title defective. A valid assignment of a
mortgage gives the holder of that mortgage the statutory power to sell after
a default regardless whether the assignment has been recorded. See G.L. c.
183, § 21; MacFarlane v. Thompson, 241 Mass. 486, 489 (1922). Where the
earlier assignment is not in recordable form or bears some defect, a written
assignment executed after foreclosure that confirms the earlier assignment
may be properly recorded. See Bon v. Graves, 216 Mass. 440, 444-445 (1914).
A confirmatory assignment, however, cannot confirm an assignment that was
not validly made earlier or backdate an assignment being made for the first
time. See Scaplen v. Blanchard, 187 Mass. 73, 76 (1904) (confirmatory deed
"creates no title" but "takes the place of the original deed, and is
evidence of the making of the former conveyance as of the time when it was
made"). Where there is no prior valid assignment, a subsequent assignment by
the mortgage holder to the note holder is not a confirmatory assignment
because there is no earlier written assignment to confirm. In this case,
based on the record before the judge, the plaintiffs failed to prove that
they obtained valid written assignments of the Ibanez and LaRace mortgages
before their foreclosures, so the postforeclosure assignments were not
confirmatory of earlier valid assignments.
[58] Finally, we reject the plaintiffs' request that our ruling be
prospective in its application. A prospective ruling is only appropriate, in
limited circumstances, when we make a significant change in the common law.
See Papadopoulos v. Target Corp., 457 Mass. 368, 384 (2010) (noting "normal
rule of retroactivity"); Payton v. Abbott Labs, 386 Mass. 540, 565 (1982).
We have not done so here. The legal principles and requirements we set forth
are well established in our case law and our statutes. All that has changed
is the plaintiffs' apparent failure to abide by those principles and
requirements in the rush to sell mortgage-backed securities.
[59] Conclusion.
[60] For the reasons stated, we agree with the judge that the
plaintiffs did not demonstrate that they were the holders of the Ibanez and
LaRace mortgages at the time that they foreclosed these properties, and
therefore failed to demonstrate that they acquired fee simple title to these
properties by purchasing them at the foreclosure sale. Judgments affirmed.
[61] CORDY, J. (concurring, with whom Botsford, J., joins).
[62] I concur fully in the opinion of the court, and write separately
only to underscore that what is surprising about these cases is not the
statement of principles articulated by the court regarding title law and the
law of foreclosure in Massachusetts, but rather the utter carelessness with
which the plaintiff banks documented the titles to their assets. There is no
dispute that the mortgagors of the properties in question had defaulted on
their obligations, and that the mortgaged properties were subject to
foreclosure. Before commencing such an action, however, the holder of an
assigned mortgage needs to take care to ensure that his legal paperwork is
in order. Although there was no apparent actual unfairness here to the
mortgagors, that is not the point. Foreclosure is a powerful act with
significant consequences, and Massachusetts law has always required that it
proceed strictly in accord with the statutes that govern it. As the opinion
of the court notes, such strict compliance is necessary because
Massachusetts is both a title theory State and allows for extra-judicial
foreclosure.
[63] The type of sophisticated transactions leading up to the
accumulation of the notes and mortgages in question in these cases and their
securitization, and, ultimately the sale of mortgaged-backed securities, are
not barred nor even burdened by the requirements of Massachusetts law. The
plaintiff banks, who brought these cases to clear the titles that they
acquired at their own foreclosure sales, have simply failed to prove that
the underlying assignments of the mortgages that they allege (and would
have) entitled them to foreclose ever existed in any legally cognizable form
before they exercised the power of sale that accompanies those assignments.
The court's opinion clearly states that such assignments do not need to be
in recordable form or recorded before the foreclosure, but they do have to
have been effectuated.
[64] What is more complicated, and not addressed in this opinion,
because the issue was not before us, is the effect of the conduct of banks
such as the plaintiffs here, on a bona fide third-party purchaser who may
have relied on the foreclosure title of the bank and the confirmative
assignment and affidavit of foreclosure recorded by the bank subsequent to
that foreclosure but prior to the purchase by the third party, especially
where the party whose property was foreclosed was in fact in violation of
the mortgage covenants, had notice of the foreclosure, and took no action to
contest it.
[65] END OF DOCUMENT
Opinion Footnotes
[66] *fn1 . For the Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 2006-Z.
[67] *fn2 . Wells Fargo Bank, N.A., trustee, v. Mark A. LaRace &
another.
[68] *fn3 . The Appeals Court granted the plaintiffs' motion to
consolidate these cases.
[69] *fn4 . Chief Justice Marshall participated in the deliberation
on this case prior to her retirement.
[70] *fn5 . We acknowledge the amicus briefs filed by the Attorney
General; the Real Estate Bar Association for Massachusetts, Inc.; Marie
McDonnell; and the National Consumer Law Center, together with Darlene
Manson, Germano DePina, Robert Lane, Ann Coiley, Roberto Szumik, and Geraldo
Dosanjos.
[71] *fn6 . The uncertainty surrounding the first issue was the
reason the plaintiffs sought a declaration of clear title in order to obtain
title insurance for these properties. The second issue was raised by the
judge in the LaRace case at a January 5, 2009, case management conference.
[72] *fn7 . The judge also concluded that the Boston Globe was a
newspaper of general circulation in Springfield, so the foreclosures were
not rendered invalid on that ground because notice was published in that
newspaper.
[73] *fn8 . In the third case, LaSalle Bank National Association,
trustee for the certificate holders of Bear Stearns Asset Backed Securities
I, LLC Asset-Backed Certificates, Series 2007-HE2 v. Freddy Rosario, the
judge concluded that the mortgage foreclosure "was not rendered invalid by
its failure to record the assignment reflecting its status as holder of the
mortgage prior to the foreclosure since it was, in fact, the holder by
assignment at the time of the foreclosure, it truthfully claimed that status
in the notice, and it could have produced proof of that status (the
unrecorded assignment) if asked."
[74] *fn9 . On June 1, 2009, attorneys for the defendant mortgagors
filed their appearance in the cases for the first time.
[75] *fn10 . The LaRace defendants allege that the documents
submitted to the judge following the plaintiffs' motions to vacate judgment
are not properly in the record before us. They also allege that several of
these documents are not properly authenticated. Because we affirm the
judgment on other grounds, we do not address these concerns, and assume that
these documents are properly before us and were adequately authenticated.
[76] *fn11 . This signed and notarized document states: "FOR VALUE
RECEIVED, the undersigned hereby grants, assigns and transfers to _______
all beneficial interest under that certain Mortgage dated December 1, 2005
executed by Antonio Ibanez...."
[77] *fn12 . The Structured Asset Securities Corporation is a wholly
owned direct subsidiary of Lehman Commercial Paper Inc., which is in turn a
wholly owned, direct subsidiary of Lehman Brothers Holdings Inc.
[78] *fn13 . As implemented in Massachusetts, a mortgage holder is
required to go to court to obtain a judgment declaring that the mortgagor is
not a beneficiary of the Servicemembers Act before proceeding to
foreclosure. St.1943, c. 57, as amended through St.1998, c. 142.
[79] *fn14 . The Land Court judge questioned whether American Home
Mortgage Servicing, Inc., was in fact a successor in interest to Option One.
Given our affirmance of the judgment on other grounds, we need not address
this question.
[80] *fn15 . An alternative to foreclosure through the right of
statutory sale is foreclosure by entry, by which a mortgage holder who
peaceably enters a property and remains for three years after recording a
certificate or memorandum of entry forecloses the mortgagor's right of
redemption. See G.L. c. 244, §§ 1, 2; Joyner v. Lenox Sav. Bank, 322 Mass.
46, 52-53 (1947). A foreclosure by entry may provide a separate ground for a
claim of clear title apart from the foreclosure by execution of the power of
sale. See, e.g., Grabiel v. Michelson, 297 Mass. 227, 228-229 (1937).
Because the plaintiffs do not claim clear title based on foreclosure by
entry, we do not discuss it further.
[81] *fn16 . We recognize that a mortgage holder must not only act in
strict compliance with its power of sale but must also "act in good faith
and ... use reasonable diligence to protect the interests of the mortgagor,"
and this responsibility is "more exacting" where the mortgage holder becomes
the buyer at the foreclosure sale, as occurred here. See Williams v.
Resolution GGF Oy, 417 Mass. 377, 382-383 (1994), quoting Seppala & Aho
Constr. Co. v. Petersen, 373 Mass. 316, 320 (1977). Because the issue was
not raised by the defendant mortgagors or the judge, we do not consider
whether the plaintiffs breached this obligation.
[82] *fn17 . The form of foreclosure notice provided in G.L. c. 244,
§ 14, calls for the present holder of the mortgage to identify itself and
sign the notice. While the statute permits other forms to be used and allows
the statutory form to be "altered as circumstances require," G.L. c. 244, §
14, we do not interpret this flexibility to suggest that the present holder
of the mortgage need not identify itself in the notice.
[83] *fn18 . The plaintiffs were not authorized to foreclose by
virtue of any of the other provisions of G.L. c. 244, § 14: they were not
the guardian or conservator, or acting in the name of, a person so
authorized; nor were they the attorney duly authorized by a writing under
seal.
[84] *fn19 . Ibanez challenges the validity of this assignment to
Option One. Because of the failure of U.S. Bank to document any
preforeclosure sale assignment or chain of assignments by which it obtained
the Ibanez mortgage from Option One, it is unnecessary to address the
validity of the assignment from Rose Mortgage to Option One.
[85] *fn20 . The plaintiffs have not pressed the procedural question
whether the judge exceeded his authority in rendering judgment against them
on their motions for default judgment, and we do not address it here.
[86] *fn21 . Title Standard No. 58(3) issued by the Real Estate Bar
Association for Massachusetts continues: "However, if the Assignment is not
dated prior, or stated to be effective prior, to the commencement of a
foreclosure, then a foreclosure sale after April 19, 2007 may be subject to
challenge in the Bankruptcy Court," citing In re Schwartz, 366 B.R. 265
