Massachusetts Ibanez Foreclosure Decision: What Lawyers Are Saying

For your reference, here’s a look at what JD Supra lawyers are saying about the recent Massachusetts Supreme Judicial Court decision in U.S. Bank, Nat’l Ass’n. v. Ibanez, “where two mortgage foreclosures
were invalidated because the foreclosing lenders were not able to
produce sufficient proof of mortgage ownership.”

MA Supreme Judicial Court Affirms Land Court Ruling in Ibanez Decision (by Partridge Snow):

“The SJC is one of the first state supreme courts to weigh in on the evidence necessary for foreclosing lenders to demonstrate that they validly hold mortgages they are attempting to foreclose. Last week the suspense ended. On January 7, 2011, the SJC issued its opinion in the Ibanez case that makes clear that the foreclosing lender must be able to document ownership of the mortgage to be foreclosed before issuing notices of foreclosure. Importantly, however, the SJC did not restrict evidence of mortgage ownership to fully executed assignments in “recordable form,” as the Land Court had found…

The effects of the Ibanez case on the industry are uncertain. On the one hand, the holding — that to fulfill the statutory power of sale requirements, a foreclosing party must be “[t]he mortgagee or his administrators, successors or assigns” — does no more than apply legal principles and requirements already well established in Massachusetts law. The SJC acknowledged as much, by stating that the ruling is not limited to prospective foreclosures because it does not reflect a change in the law. On the other hand…”

Read Patridge Snow’s complete analysis of Ibanez here>>

Banks Lose Important Foreclosure Case In Massachusetts High Court (by Sheppard Mullin):

“One of the arguments made by US Bank and Wells Fargo was that, because
they held the mortgage note, they had a sufficient financial interest
in the mortgage to allow them to foreclose. The law of many states
provides that the mortgage follows the note, so that if a party has
possession of the note, it is presumed to have good title to the
mortgage. Massachusetts, however, is not one of those states. 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. 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. In the absence of a valid
written assignment of a mortgage or a court order of assignment
(neither of which were provided by either US Bank or Wells Fargo), the
mortgage holder remains unchanged…”

Read all of Sheppard Mullin’s Ibanez analysis here>>

Apocalypse Now? Will The Massachusetts Ibanez Case Unravel Widespread Irregularities In The Residential Securitized Mortgage Market? (by Richard Vetstein):

“The Ibanez ruling clearly invalidates a common practice in the sub-prime mortgage securitization industry of assigning the promissory note and mortgage in blank and not recording it until after the foreclosure process has started. The Court held that there must be evidence of a valid assignment of the mortgage at the time the foreclosure process starts which would establish the current ownership of the mortgage…

…The major problem for banks is mounting evidence is that originating lenders never transferred a vast number of loans into the securitized trusts in the first place. Josh Rosner, a well respected financial analyst, issued a client advisory in October 2010, advising of widespread violations of pooling and servicing agreements on mortgages. Mr. Rosner counseled that although PSA’s require transfer of the promissory notes into the securitized trusts, that hardly ever occurred in the white hot run-up of securitized loans in the last decade. He also says that the mortgage assignments which must accompany each note are routinely ignored or left blank. (This was the major problem in the Ibanez case).

Before the Ibanez ruling came down Bloomberg News said the best scenario is that the disputes are deemed as legal technicalities, which would cause a one-year delay in foreclosures. In the medium case, years of litigation will ensue. In the worst case, the problem becomes systemic, causing ―the mortgage market to grind to a halt as title insurers refuse to insure mortgages involving existing homes Well, we now know from the Ibanez decision that this is hardly a ―legal technicality. So we are in the medium or worst case scenarios. For those thousands (or millions?) of defaulted loans which were ―assigned in blank. I’m simply not sure if or how mortgage lenders are going to be able to cure the title defects they created. It’s going to take some major effort and creative lawyering, that’s for sure…”

Read Richard Vetstein’s complete analysis of Ibanez here>>


Also see:

US Bank, N.A. v. Ibanez, Slip Opinion, SJC-10694 (posted by George Bourguignon):

“The Massachusetts Supreme Judicial Court has issued its long awaited
decision related to foreclosure defense: US Bank, N.A. v. Ibanez. This
decision was decided in the consumer’s favor and ruled that the prior
foreclosures that occurred in Springfield, Massachusetts were not
proper. The court affirmed that the banks did not have title to the
mortgage when they published the required notices of the expected
foreclosure sale or actually conducted the foreclosure sale. It is
reported that this case will establish that many prior foreclosures
were conducted improperly…”

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