Foreclosure opinion from ALTA

By | January 18, 2011

The Docket: Ibanez Ruling Spells Out Proper Foreclosure Procedure

January 18, 2011

The Docket is a monthly TitleNews Online feature provided by ALTA’s Title Counsel Committee that reviews significant court rulings and other legal developments, and explains the relevance to the title insurance industry.

Citation: U.S.National Bank Association, trustee vs. Antonio Ibanez (and a consolidated case)…; No.SJC-10694

Short Facts: Two lenders, trustees of a securitized pool of loans, purchased property at their respective foreclosure sales. They then started quiet title actions to have the court ratify the location of the publication of notice (they thought they used the wrong newspaper). The complaint sought the declaration that the title was held by the lenders in fee simple. The original borrowers did not respond, so the lenders asked for default judgments that asked the court recognize the assignment into the plaintiff which appeared of record after the sale. The record holder of the mortgage was the apparent servicer. The lenders tried to show the court, by use of the various unrecorded assignments, and servicing and pooling agreements, that they, as trustees of the “Mortgage Pass-Through Certificates” and “Asset Backed Certificates” that they were, in fact the current owner of the mortgage and indebtedness. The documents were not executed and did not have exhibits describing the specific loans and appeared to be incomplete. The court did not agree.

Holding: The lower court (Land Court which is a specialized process of title review) held that the publication in the metro paper was good notice for land in an adjacent suburb, however, the foreclosure was void because the plaintiffs did not have standing to foreclose since the assignments to them were executed and recorded after the sale. The Supreme Judicial Court in Massachusetts granted direct appellate review and agreed with the lower court.

Relevance to the title insurance industry: In the current climate of foreclosure fiasco, the courts are not hesitating to hold the lenders to the letter of the law, even though the borrowers did not raise a defense (or even appear). Unfortunately, in the deluge of foreclosures, the foreclosing parties have been shown to cut corners. We need to make sure we are reviewing and analyzing each foreclosure carefully, especially on the resale of REO.

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