In an action filed by servicing companies or banks on behalf of securitized trusts ("foreclosers"), it has been held that the Plaintiffs were not entitled to a declaration of perfection. The Plaintiffs in that case requested a judicial declaration that their real estate titles were perfected. Instead, the Courts unanimously held that the foreclosers failed to obey the Law which allows nonjudicial foreclosures. U.S. Bank National Association v. Ibanez (Mass., Opinion Filed January 7, 2011). Try this link for the Public Access Official Opinion: http://weblinks.westlaw.com/result/default.aspx?action=Search&cnt=DOS&db=MA=ORS, or do an internet search for "Massachusetts Supreme Judicial Court" and click on decisions or opinions.
The Plaintiffs were not denied their relief in this case because they acted in Bad Faith. In Massachusetts, as in other nonjudicial foreclosure jurisdictions, "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." Id. n. 16. The issue of the Plaintiffs' Bad Faith was not adjudicated here. The Plaintiffs were not even accused of Bad Faith in this case, apparently.
The issue was whether the foreclosers followed the Law.
This was not a lawsuit filed by Homeowners (Mortgagors) who stopped paying their mortgages. In fact, the Homeowners-Mortgagors admitted that they stopped paying their mortgages. For a long time, they did not even contest the case for any reason.
The issue was whether the foreclosers obeyed the Law.
The Courts of Massachusetts held that the foreclosers did not obey the Law.
Massachusetts is a nonjudicial foreclosure jurisdiction. In taking that position, it stands with the majority of jurisdictions in the United States which do not require a Court to approve a Foreclosure or even a forced sale of the distressed property at issue. This means that foreclosers like the Plaintiffs who filed this lawsuit, do not need a Court proceeding in order to foreclose when as here defaulting Mortgagors have stopped paying their mortgages. Id. However, to perfect their title, i.e., to eliminate a cloud on their title after foreclosure, foreclosers like the Plaintiffs in this case need a judicial declaration. Id. That is why the foreclosers filed suit here, to request a judicial declaration that they did it right.
The Courts of Massachusetts, as noted, held that the foreclosers in this case did not obey the Law. As a normal and ordinary part of securitization, the foreclosers recorded the final assignment of the Mortgages at issue after they foreclosed. This was the first time in the record that during the course of securitization, the Plaintiffs-foreclosers recorded any assignment of the Mortgages on which they foreclosed. They attempted to backdate their assignment. Backdating was held a nullity, void and of no effect.
The decision is based entirely on the Law of Massachusetts. This Law is followed throughout many if not all nonjudicial foreclosure jurisdictions. There does not appear to be any recognized basis for a majority of the U.S. Supreme Court to seize jurisdiction and reverse the result, even assuming that a majority could be assembled to seek that result. The decision of the Massachusetts State Courts appears final.
The facts which led to the decision do not appear to have involved any mistakes, so much as a procedure mandated by the foreclosing Plaintiffs' business model. It would have cost a lot of money to record all the assignments involved in their securitization. It also appears to be plain that securitization has set up a deadly contest. Either the Law or securitization must give way to the other. The two cannot exist side-by-side without one radically changing or dying in order to accommodate the other in its present form.
Time will tell.
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