GFR & Associates Staff (April 25, 2016)
On November 25, 2015, Massachusetts Governor Charlie Baker signed into law the Act Clearing Title to Foreclosed Properties, which became effective on December 31, 2015 (Mass Gen. Laws ch. 185C, § 3 and Mass Gen. Laws ch. 244, § 15). This office receives many phone calls from homeowners that are under the impression that this legislation was "helpful" or a "good thing" for the former homeowners that were foreclosed upon, which is hardly the case. Indeed, the financial and real estate lobby worked very hard to help get this legislation passed. A sobering thought is that homeowners previously had twenty (20) years to challenge these issues. Realizing the thousands of "land mines" that exist as a result of this firm's successful ruling from the Massachusetts Supreme Judicial Court in Ibanez, the title insurance industry had to close this loophole quickly, by tightening up such wild card to a "manageable" three year window of uncertainty. Thus Governor Baker's passage of this "helpful" bill, only "helps" the title insurance industry. The citizens of this Commonwealth should be outraged.
The new "law signed into effect by Gov. Baker, gives foreclosed homeowners only a three-year statute of limitations (from the date of the filing of the "foreclosure deed") to challenge the foreclosure. After that period is over, the foreclosure is deemed under current statute to have have been conducted "legally", (that is until the very constitutionally of such legislation is actually challenged before the SJC). For foreclosures that have already concluded, the law provides a one year waiting period, such that a defective foreclosure would be considered non-defective on December 31, 2016. Therefore, if you were foreclosed upon within the past twenty-years, , you have until this December to challenge the foreclosure under the current (unchallenged) wording of G.L. c. 244, sec. 15.
We firmly believe that this "legislation" represents a state action countenancing the unconstitutional "taking" of real property without an opportunity for a "full and fair" hearing on the merits. The citizens of this commonwealth should be deeply concerned that this type legislation was allowed to be enacted and continually allowed to play out unchallenged. To state that the lobbyist for the financial industry are a powerful lot, is clearly an understatement, where evidenced by the passage of this bill. Further, this firm is under a deep seated conviction that the statutory non-judicial foreclosure process itself is unconstitutional, given today's "securitized" mortgage lending practices. The non-judicial statutory process was enacted during a time when a "bank" actually owned an individual's mortgage, and therefore at that time it represented a waste of judicial resources to litigate foreclosure when there was nothing to challenge in the way of ownership. Fast forward to today, where the legal ownership of the right to enforce a borrower's promissory note and security instrument, is anything but clear, given the "securitization" of the loan. The "non-judicial" foreclosure process is an anachronistic vestige of the past that has long out lived its utility as a legally fair process to remove a resident consumer of this Commonwealth from their family abode. Indeed, listening to the propaganda spewed by the financial industry media, one constantly hears that "lenders" are trying to help homeowners, our response? what "lender" ? Unlike the by gone era, where "banks"actually owned mortgage loans, where the money used to fund these loans came from monies on deposit from savers passbook accounts, under the present day "securitized lending" practice the "bank" undertakes a "warehouse line of credit" to temporarily fund mortgages, during the 30-90 day window for the right to the payment stream to be sold in the form of bonds to "institutional investors". Thus, unlike the by gone era, a mortgage is is immediately "sold" into the secondary mortgage market, meaning that investors who purchase bonds or certificates, are the ones that supply monies to fund the underlying mortgage assets. However, in Massachusetts the mortgage (security instrument) represents an interest in title to land, and therefore the mortgage does not follow the note in this jurisdiction. What this means is that even if an entity had possession of the borrower's promissory note, this would not allow that entity to foreclose [if it was not the original "lender"]. The preceding is a very brief discussion of the extremely complex transactions that take place in this process, which utilizes the Trust form to convey the underlying mortgage assets to a "Trustee", and therefore such procedure must comply with long standing and well established trust law theory.
This "law" came into being after the ruling achieved by this firm in US Bank Nat'l Ass'n,v. Ibanez (458 Mass. 637 (2011)). In Ibanez, the Supreme Judicial Court of Massachusetts agreed with this firm's position, and affirmed the land court's finding, which invalidated two non-judicial foreclosure sales conducted by securitization trusts under the mortgages' power of sale. The court found that since assignment documents were not properly executed, the trustee did not prove that it was the holder of the underlying mortgage. Therefore, the underlying foreclosure was invalidated, and the trustee did not hold clear title to the property, because it failed to follow strict statutory requirements under G.L. c. 244, §14, and G.L. c. 183, §.21. The Ibanez ruling represented the Supreme Judicial Court of this Commonwealth's pronouncement upon the state of the law in Massachusetts with regard to the legally valid exercise of the statutory remedy. Unlike the financial and real estate "spin", the events that took place in Ibanez, were not "errors", but in fact, represented intentional acts that took place in a non judicial foreclosure state in which it was known would never be challenged. The financial industry acts with impunity, where its hired counsel has largely impressed an unchallenged legally incorrect imprimatur upon the few decisional case law holding in this area of the law, This firm worked extremely hard to distinguish arguments on behalf of the represented borrower in that action, which the SJC agreed with.
Indeed, unlike the Ibanez where that borrower (who was represented by Harvard Law School Legal Services) ultimately lost the property, the LaRace family (represented by this firm) continues to occupy their residence, although the purported foreclosing claimant has attempted to renew its wrongful attempt to extricate these folks from their home. This firm continues to stand behind the LaRace family, and will do so as long as it takes to achieve a successful outcome, despite not currently receiving any compensation to do so. In fact all three successful SJC cases argued by this firm were uncompensated, as well as the firms successful representation of another borrower before the U.S. Court of Appeals for the First Circuit, in Juarez v. Select Portfolio Servcs., 708 F.3d 269, (1st Cir. 2013), which was also undertaken without compensation. Juarez, represents the sole ruling from the First Circuit, that remanded a matter based upon the failure to follow statutory prerequisites in conducting the foreclosure process. After remand to the U.S. District Court for the District of Massachusetts,this firm also forced further remand of Juarez, back to the Suffolk County Superior State Court, based upon the addition of the in-state purported "purchasers of the Juarez property at a void foreclosure auction sale.The Juarez fact pattern mirrors both Ibanez, and Bevilacqua v. Rodriguez, 460 Mass. 762 (2011), in that the purported foreclosing entity attempted to utilize the statutory remedy under G.L. c. 244, §14, prior to the receipt of an "assignment" of mortgage, and is attempting to "rely upon a "Pooling and Servicing" agreement to have earlier transferred such mortgage. Additionally, like Bevilacqua, despite not having legal possession of the legal right to enforce the Juarez mortgage at the time of the foreclosure auction sale, the Defendant bank trustee purported to sell the title to the Juarez property to a third party purchaser. As of April 25, 2016, this matter is presently pending decision under Motions for Summary Judgment, under Ca. No.1084CV04282.
One thing to keep in mind is that Massachusetts is what as known as a "title-theory" jurisdiction, meaning that when one undertakes a mortgage loan within this Commonwealth, they grant a "defeasible fee interest" in their title to real property to the original "lender". Thus, even those who are "current" on their mortgage payments are not immune from the malignancy of "securitization" of their mortgage, which leaves their title uncertain and not immune from later challenges. While Title Insurance companies "boast" that they will "paper over" such issue, you would be well served to carefully read your owner's title policy. When title insurers actually have to "defend" title, you will quickly find out that the title insurer's response is that the Owner's policy is not insurance, but a "policy of indemnity", in which is only effective for specific "covered risks". The title insurer is only required to "attempt to clear title". This firm believes that an owner's policy is a supreme waste of money, with regard to protecting title under the securitized mortgage scenario, however that is only this firm's subjective viewpoint and should not be taken as advice not to procure an owners policy. However, you would be well advised to seek out a legal opinion prior to purchasing an Owner's policy of title insurance. The title insurance industry is a "cash cow" for the financial industry, in which there are relatively very few "payouts".
Having recently been signed by Governor Baker, the Act Clearing Titles To Foreclosed Properties, is worded to purportedly "resolve" post-Ibanez title defects.. Unlike the real estate industry propaganda, owners and potential investors of foreclosed upon properties will not have a "clear path to clear title", as a result of this "legislation", as this firm firmly believes that this legislation is unconstitutional, and is eager to find the right case, in order to bring this issue before the Massachusetts Supreme Judicial Court, and thereafter bring title insurance industry to its knees.