A Massachusetts judge recently ruled against two securitization trustees who foreclosed before the loans had been properly assigned. The cases are part of a growing national trend and offer the mortgage industry insight into how to avoid similar situations.
In the two cases, which are both pending before the Massachusetts Land Court, foreclosure sales had taken place before the trustees for the mortgage-backed securities became holders of the mortgages, Patton Boggs LLP Partner Patrick McManemin explained in a case summary prepared for MortgageDaily.com.
The trustees sought to quiet title on the foreclosed residential properties.
But the trial judge entered an order on Oct. 14 denying a motion to vacate judgments in both cases. The judge found that the foreclosure sales were invalid because of a failure to meet the requirement of the Massachusetts foreclosure statute.
In a third case, filed on behalf of a plaintiff named Rosario, the same court upheld the validity of the foreclosure. In that case, the foreclosure took place after the assignment to the trustee but before the assignment was recorded.
“Although the specific details and facts in each of the three cases are critical, the trial court’s ruling turned on the fact that two of the foreclosures were invalid because the mortgages were not properly assigned before the trustees exercised the power of sale — which violates the Massachusetts foreclosure statute,” McManemin wrote.
He added that the Rosario foreclosure was valid because the mortgage had been assigned, even though the assignment had not been recorded at the time of the foreclosure sale.
“These cases, and other similar rulings around the country, are highlighting the systems and procedures followed by trustees and servicers and providing the industry with the opportunity to determine how to avoid these issues in foreclosure and loss mitigation,” McManemin stated.
U.S. Bank National Association v. Ibanez.
08 MISC 384283 (KCL) (Massachusetts Land Court)
Wells Fargo Bank v. Larace
08 MISC 386755 (KCL) (Massachusetts Land Court)
