massachusetts loan modification

According to the Globe, there were 582 foreclosure deeds recorded in May, a 58.6 percent decrease from 1,405 during the same month in 2008, and a 24.3 percent drop from April.

Others attribute the drop to the so-called Ibanez decision by the Massachusetts Land Court in late March that invalidated two foreclosures because the lenders failed to show proof they held titles to the properties. The Ibanez decision is a product of the Massachusetts conveyancing practice struggling to keep up with modern mortgage lending practices. The ownership of a loan may be divided and freely transferred numerous times on the lenders’ books, but the documentation (i.e., the assignments) actually on file at the Registry of Deeds often lags far behind. The Land Court ruled that foreclosures were invalid when the lender brought the ownership documentation (the assignments) up-to-date after the foreclosure sale had already taken place — even if the effective date of the assignment was before the first foreclosure notice. The ruling, which is ultimately expected to head to the Massachusetts Supreme Judicial Court, has prompted concern throughout the conveyancing and mortgage industry, and is stalling sales of foreclosed properties, real estate specialists say.

Based on discussions I have had with other real estate attorneys, up to 20% of all foreclosure titles in Massachusetts may be affected by the Ibanez decision.

This is causing so much angst in the industry that title insurers are refusing to insure foreclosure titles affected by the problem. That means in cases where this issue is present, the lender cannot foreclosure, and the real estate sits barren for the indefinite future. This is bad for the lender who is trying to get rid of a non-performing asset, for the potential buyers interested in purchasing foreclosed properties, and certainly for the neighborhoods affected by blighted foreclosed properties.

Here is a copy of a portion of a memo sent by Stewart Title Company to its local title agents suspending authorizations to issue title insurance over titles derived from foreclosures which are affected by this problem:

Date:	April 22, 2009
To:	All Massachusetts Issuing Offices
RE:	Recent Land Court Decisions Requiring Suspension of Authorization to Insure Massachusetts Titles Based on Foreclosures with Post-Foreclosure Assignments

Dear Associates:

As you may be aware, the Land Court issued two recent decisions that call into question the validity of several titles coming out of foreclosure.

The result of these two decisions is that titles based on foreclosures by an Assignee lender are potentially fatal unless the Assignment in question was executed and held by the foreclosing lender prior to the commencement of foreclosure under M.G.L. c. 244, §14. Foreclosures based on Assignments that were dated after the foreclosure sale were deemed invalid even if the Assignments were “backdated” (i.e., contained an “effective date”) prior to the first c. 244, §14 notices.

Accordingly, subject to certain exceptions discussed later in this Bulletin, until further developments in these cases and the law upon which these cases were decided, Stewart Title Guaranty Company is suspending authorization to insure titles derived from foreclosures where the recorded Assignment into the foreclosing Lender is not dated prior to the date of the first publication under c. 244, §14.

I will be monitoring the Land Court decision through what will surely be an appeal to the Supreme Judicial Court, the highest appellate court in Massachusetts.

Update (Aug. 27, 2009):  I have been informed by attorneys involved in the Ibanez case that the lenders have filed a motion to reconsider the Land Court’s ruling. Also, the Real Estate Bar Association of Massachusetts has taken the unusual step of filing a “friend of the court” brief, urging the Land Court to reconsider its decision. The National Consumer Law Center and well known consumer class action attorney Gary Klein has also joined the fray. As of now, Judge Long of the Land Court has not made a final decision. I will update you when the ruling comes down. Either way, this case is going up to the Supreme Judicial Court, and probably on direct appellate review.

Related Posts:

• Ibanez Update: Massachusetts Land Court Decision Invalidates Foreclosures Based On Post-Sale Assignments
• Massachusetts Security Deposit Law: To Take A Security Deposit Or Not To Take One, That Is The Question.
• Massachusetts Property Values: An Appraiser’s Outlook And Predictions On Future Massachusetts Property Values
• Massachusetts Landlord Tenant Law: A Legal Refresher Course For Landlords
• Richard Vetstein Guest Blogging on Boston.com’s Real Estate Blog

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