Underwriting Guidelines for Reviewing in Massachusetts

These guidelines apply whether the appears in your back or is the immediate source of title

Start by comparing the into the borrower against the mortgage being foreclosed.

Identity of the Mortgagor

• Are the grantees and mortgagors the same? o All grantees must be accounted for as mortgagors.

• Are your mortgagor’s subject to some restraints to act freely, such as being a ward under a guardianship requiring a license to mortgage, or under protection of a bankruptcy petition requiring permission of the court to grant a mortgage? Make sure your examiner has checked probate and bankruptcy indexes.

In the event the borrower(s) was not an individual, is the signatory duly authorized?

• Trust : Is the Declaration of Trust or a Trustee’s Certificate Pursuant to M.G.L. ch. 184, §35 recorded with or prior to the mortgage? Did the Trustee’s have the power to Mortgage?

• LLC : Can you verify on record or on line that the LLC was in existence at time of granting the mortgage and corroborate the authority of the signatory?

• Corporation : Verify that the mortgage was signed by President or Vice President and Treasurer or Assistant Treasurer, otherwise was a vote recorded therewith?

• LP : Can you verify on record or on line that the LP was in existence at the time of granting the mortgage and that the party signing was its GP?

• GP : Is there compliance with REBA standard 44?

• Power of Attorney : Is the POA previously or contemporaneously recorded with the mortgage? Does the POA authorize the attorney in fact to sign mortgages? Was the proper format followed: Mortgagor identified as Principal, signature “Principal’s Name, by Agent, her Attorney in Fact”? Is the acknowledgment proper (see United States Bankruptcy Appellate Panel for the First Circuit, BAP No. MS 13-012, Steven Weiss, Chapter 7 Trustee, Plaintiff-Appellant v. Wells Fargo Bank, N.A., Defendant-Appellee)?

Description Checklist

• Is the legal description in the deed the same as the legal description in the mortgage?

• If the Mortgage references an Exhibit, was it actually attached?

Necessary Powers Contained in the Mortgage

• Does the mortgage contain a reference to Statutory Conditions and Statutory Power of Sale? If not, was a Judgment to Reform the Mortgage obtained?

The Assignment

• Is the assignor the same as the original mortgagee?

Example: Mortgagee is MERS as Nominee for Bank of Massachusetts and Assignment is from MERS not Bank of Massachusetts.

Example: Mortgagee is A and Assignment recites “B, successor by merger to A”

Example: Mortgagee is A and Assignment from A by its Attorney in Fact with a reference to the POA in the signature block or recorded immediately therewith.

• Do the Mortgagor’s name, date of mortgage and recording information of the mortgage all agree? TS 21 may resolve an incorrect reference so long as the Book and Page reference does not refer to another mortgage from the same borrower to same lender, rendering the instrument too ambiguous.

Out of Order and Post Dated Assignments

• The companion cases of Ibanez, Larace and Rosario involved three variations on the same theme of foreclosures by assignees whose assignments were not dated and recorded at the time of the first publication date of the mortgagee’s notice to sell pursuant to M.G.L. ch. 244, §14.

Ibanez’s mortgagee/assignee did not acquire an interest in the mortgage until long after the foreclosure sale by an assignment dated post sale.

Larace’s mortgagee/assignee did not acquire an interest in the mortgage until after the foreclosure sale by an assignment dated “effective” as of prior to the foreclosure sale but the actual date (based on date of acknowledgment) was post sale.

Rosarios’s mortgagee/assignee was the actual holder of the mortgage prior to the first publication date but failed to record its assignment until a year after the sale.

The only foreclosure that was held to be valid was Rosario’s.

• In August 2012, Chapter 194 of the Acts of 2012, An Act Preventing Unnecessary and Unlawful Foreclosures (the “Act”), was enacted which Act became effective November 1, 2012. Among other things, the Act amended M.G.L. ch. 244, 14 by requiring that:

(I)n the event a mortgagee holds a mortgage pursuant to an assignment, no notice under this section shall be valid unless (i) at the time such notice is mailed, an assignment, or a chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of for the county or district where the land lies and (ii) the recording information for all recorded assignments is referenced in the notice of sale required in this section.

Accordingly, for foreclosures after November 1, 2012, the ability to record an assignment into the foreclosing mortgagee after the first publication is no longer permitted. Record reference to any mortgage assignments must also be made in any mailed or published notices of foreclosure.

• Practical effect of Ibanez and the Act:

The lender who publishes the three consecutive week notices in a newspaper with circulation in the town where the land lies, pursuant to M.G.L. ch. 244, §14 must be the actual holder of the mortgage by an assignment dated and acknowledged prior to the first publication date .

In order to determine if the foreclosure is in compliance with this ruling check the actual date (NOT the “effective” date) of the assignment(s) and make sure it is dated and acknowledged no later than one day prior to the first publication date as recited in the Foreclosure Affidavit.

For those foreclosures which occur after 11/1/12, the Assignment must also be recorded prior to the first publication.

• What can be done to correct a foreclosure that violates the holding in Ibanez ?

If the bank was the original high bidder, the bank could re-foreclose as there is no third party buyer who may be ousted by a new high bidder;

Or

Record a release deed from the mortgagor. Caveat: Other than the borrower’s reluctance to aid the foreclosing lender, any subordinate that would have otherwise been wiped out by the foreclosure will remain valid and will require releases or discharges.

Or

A valid foreclosure by entry under M.G.L. ch. 244, §1 will resolve an otherwise invalid foreclosure under power of sale under the Ibanez ruling. (see below)

Servicemembers Civil Relief Act (SCRA)

If the borrower is a natural person, not an entity (other than a nominee trust), the foreclosing lender is required to prove to the satisfaction of the court (Land Court or Superior Court) that the borrower is not protected by the SCRA.

Recent case in the Bankruptcy court may render the foreclosure void if:

The borrower files for bankruptcy protection and the lender petitioning bankruptcy court for removal from the automatic stay in order to foreclose is not the holder of record at the time of filing the complaint. (In Re Schwartz , 366 B.R. 265 (Bankr.D.Mass. April 19, 2007).

Judgment under the SCRA action must issue before the foreclosure sale date. Should judgment enter on the date of the sale or later, an action to remove a cloud from title will be necessary.

The main focus of your review of the Complaint and Judgment is to verify that the owner(s) of the equity of redemption (the borrowers or whoever bought the property subject to the mortgage) is/are properly identified and that Judgment entered prior to the foreclosure sale.

The Entry

• The Entry or Evidence of Possession is a separate means of foreclosing (M.G.L. ch. 244, §1) independent of the lender’s exercise of its statutory rights under its conditions and power of sale (M.G.L. ch. 244, §14). Three years thereafter the entry “ripens” (i.e., 3 years from the recording of the Certificate of Entry) the Lender becomes the owner and any procedural errors in the foreclosure deed, affidavit, notice and publication are no longer of concern as this “belts and suspenders” measure cures any defects with the foreclosure under power of sale process. A valid foreclosure by entry under M.G.L. ch. 244, §1 will resolve an otherwise invalid foreclosure under power of sale under the Ibanez ruling.

• There must be two witnesses to the entry, and the entry itself must be made by the lender through one of the Lender’s officers or by the lender’s agent by way of a POA. The Certificate of Entry must be made “under oath” (M.G.L. ch. 244, §2) and therefore, the acknowledgment clause should contain an appropriate jurat rather than the standard acknowledgment clause, and the notary must be a third party.

• Verify that whoever is making the Entry is duly authorized.

• Verify that the lender held the Mortgage by Assignment prior to the date that Entry was made.

• If the person giving oath is doing so pursuant to a POA, make certain to review the POA. If there is none recorded therewith, it may have been previously recorded or recorded in another county.

• POAs granted for making Entry and for signing the foreclosure deed may be signed by any of the principal’s officers. M.G.L. ch. 183, §54B

• Often the attorney in fact will delegate his or her authority to a third party to make Entry. This Delegation of Authority must be recorded with or referred to in the Entry.

• This delegation in an Entry context is authorized even if the POA does not contain the power to delegate. (see Land Court Memo). In all other contexts, if an attorney in fact attempts to delegate, there must be a specific provision authorizing the agent to delegate.

• Foreclosure by Entry requires compliance with SCRA during the ripening period or, if after the fact, by way of a Petition to Remove Cloud on Title in the Land Court.

The Foreclosure Deed

When reviewing a foreclosure deed, break it down to its elementary parts:

• Grantor: Is the entity the current holder of the mortgage because:

1. It was the original mortgagee; 2. It was properly and timely assigned; 3. It is the successor by merger; or 4. Is there a missing element?

• Is the original mortgage reference information correct: mortgagor, date, recording information?

• Is the amount of the consideration the same as the bid amount as recited in the Foreclosure Affidavit?

• Signature Clause: is it pursuant to a POA? Is the POA properly referenced in the signature block or do you have a copy for your file??

• Power of Attorney: is it granted by the principal (mortgagee) or is it granted by a delegate of the primary Attorney in Fact, to which proper recording reference is made or of which you have a proper copy?

• Does the POA include the power to sign foreclosure documents?

• Does the POA include the power to delegate?

• Due Execution Authority: Does M.G.L. ch. 183, §54B apply? If not, it will be necessary to obtain and record appropriate due execution authority documents.

• Are the documents in the proper format? E.g., if executed under POA, is the grantor the named principal? Is the signatory clause proper? Is the acknowledgement clause proper?

Affidavit of Sale

The affiant certifies that all the requirements under M.G.L. ch. 244, §14 (as revised 11/1/12) were met, but it is up to you to verify the veracity of their statements:

• Is the Affidavit made based upon personal knowledge of the Affiant?

• If the lender was the holder by Assignment, was the recording information for all recorded assignments referenced in the notice of sale? (for foreclosures after 11/1/12)

• If the lender changed its name or merged into another entity during the time it was the mortgage holder, was the fact of the merger, consolidation, amendment, conversion or acquisition of assets causing the change in name or identity recited within the body of the notice of sale, the recital of which shall be conclusive in favor of any bona fide purchaser, mortgagee, lienholder, or encumbrancer of value relying in good faith on such recital? (for foreclosures after 11/1/12)

• Were the three publication dates for three consecutive weeks?

• Is the first publication date at least 21 days prior to the scheduled sale?

• If the sale was postponed, was the announcement of same by public proclamation at the first scheduled date, time and place?

• Was the sale held at the time and place as advertised?

• Is there a recitation that the lender has complied with M.G.L. ch. 244, §14 by mailing the notices certified mail return receipt requested (the green cards)?

• If the grantee is not the highest bidder, was there an Assignment of Bid recorded therewith?

• If the foreclosure is within the past three years (and therefore the Entry has not yet ripened) have you reviewed the green cards to make sure everyone whose interest is being wiped out by the foreclosure (whose interest was created up to 30 prior to the sale date) was given notice? The latest the notice may be sent is 14 days prior to the sale.

Caveat: subordinate lenders may have assigned their mortgage or the entity may have merged or morphed into a new entity or a conservator or receiver; you must make sure that the correct entity received notice.

Owners of the equity of redemption may have died, and if a probate was opened, the proper parties named therein must receive notice, as well as any creditors, if any, who filed claims against the estate along with the Dept. of Revenue and the US Treasury. If no probate was opened, what due diligence was conducted to notice the proper parties?

Owners may also be deemed incompetent and a guardian or conservator appointed in which case notice must go to the legal representative of the Estate.

Owners may also file bankruptcy. In case of Bankruptcy, the lender must seek relief from the automatic stay in order to proceed.

Property Description

• Is the property description (copy of the newspaper advertisement) identical to the mortgage description?

• Was the original mortgage for several condominium units or lots in a subdivision for which partial releases were granted prior to the sale? If so, and the remaining security under the mortgage was one unit or lot vs. several yet the advertisement failed to recite that the sale is “a portion of the premises secured by the Mortgage”…. or “excepting units… or lot…”, many potential buyers could be discouraged from bidding as they perceived the value of the properties (vs. one unit or lot) greater than what they would bid…. which could have the effect of “chilling the sale.”

The Eaton Decision (applies to foreclosures post-6/22/12)

Henrietta Eaton vs. Federal National Mortgage Association & another (SJC 11041) 462 Mass. 569 (2012) (“Eaton”) held that for foreclosures after June 22, 2012, the foreclosing mortgagee must either holder the promissory note or be acting on behalf of the note holder from the date of the commencement of the power of sale (i.e., the date of first publication pursuant to M.G.L. ch. 244, §14) through the date of the foreclosure sale. Accordingly, when insuring a title derived from a foreclosure under power of sale commenced after June 22, 2012, we will require an Affidavit executed by an “officer” (For purposes of this Affidavit, “officer” shall mean any “officer” as defined in M.G.L. ch. 183, §54B) of the foreclosing mortgagee certified under the pains and penalties of perjury by the foreclosing mortgagee or its authorized agent which contains a certification by an Attorney for the foreclosing mortgagee to be recorded with the proper Registry of Deeds as follows:

• Certifies that the foreclosing mortgagee is the holder of the Note or authorized agent of the Note from the date of first publication through the date of the foreclosure sale; • If the foreclosing mortgagee is acting as the authorized agent of the Note holder, the foreclosing mortgagee must record an appropriate POA or relevant Servicing Agreement authorizing the foreclosing mortgagee to act on behalf of the note holder; • For those Mortgage foreclosures conducted between June 22, 2012 and November 1, 2012, the foreclosing Lender must be prepared to produce the original Note (A certified original, certified by the noteholder is acceptable) with the allonge attached thereto, as appropriate, as evidence of ownership of the Note. The Note should be reviewed to confirm accuracy of the Eaton Affidavit and retained for your file.; • Note that Eaton applies to all foreclosures, whether they are residential or commercial transactions. • The Affidavit must contain an appropriate jurat. • If the Affidavit is made pursuant to M.G.L. ch. 183, §5B, the appropriate Certification must be attached to the Affidavit

This Affidavit may be in the form of an Affidavit pursuant to M.G.L. ch. 183, §5B or may be incorporated into the Foreclosure Affidavit per M.G.L. ch. 244, §15. Please see Massachusetts Bulletin: Underwriting Guidelines for insuring foreclosures with respect to Eaton v. Federal National Mortgage Association & Another (SJC 11041) (2012) 462 Mass. 569 for a more detailed discussion.

* If the Affidavit executed by a third party loan servicer or by any person or entity acting on behalf of a third party loan servicer after 10/11/13, see 209 CMR 18.21A requirements below

Affidavit of Compliance with M.G.L. ch. 244, §35B (foreclosures post 11/1/12)

• The Act also introduced M.G.L. ch. 244, §35B which provides for criteria by which a creditor must offer the mortgagor a means to avoid foreclosure with respect to “certain mortgage loans” as defined in the section.

M.G.L. ch. 244, §35B(f) provides in pertinent part as follows:

“Prior to publishing a notice of a foreclosure sale, as required by section 14, the creditor, or if the creditor is not a natural person, an officer or duly authorized agent of the creditor, shall certify compliance with this section in an affidavit based upon a review of the creditor's business records. The creditor, or an officer or duly authorized agent of the creditor, shall record this affidavit with the registry of deeds for the county or district where the land lies.

The affidavit certifying compliance with this section shall be conclusive evidence in favor of an arm's-length third party purchaser for value, at or subsequent to the resulting foreclosure sale, that the creditor has fully complied with this section and the mortgagee is entitled to proceed with foreclosure of the subject mortgage under the power of sale contained in the mortgage and any 1 or more of the foreclosure procedures authorized in this chapter;…”

• Has the creditor, as defined in M.G.L. ch. 244, §35B (usually the foreclosing mortgagee) certified compliance with M.G.L. ch. 244, §35B in an Affidavit based upon a review of the lender’s business records prior to first publication in accordance with M.G.L. ch. 244, §14? While this Affidavit is not required to be recorded prior to the first publication, it is required to be executed prior to the first publication. While it would be prudent for the lender to record it prior to the first publication, the statute only requires that the Affidavit be executed prior to the first publication.

• If M.G.L. ch. 244, §35B does not apply, an Affidavit of Non-Applicability must be obtained and recorded.

• Note: Affidavit must contain a proper jurat.

* If the Affidavit executed by a third party loan servicer or by any person or entity acting on behalf of a third party loan servicer after 10/11/13, see 209 CMR 18.21A requirements below

Affidavit of Compliance with M.G.L. ch. 244, §35C (foreclosures post 11/1/12)

• By introducing M.G.L. ch. 244, §35C, the Act also codified a portion of Eaton by providing as follows:

“A creditor shall not cause publication of notice of foreclosure, as required under section 14, when the creditor knows or should know that the mortgagee is neither the holder of the mortgage note nor the authorized agent of the note holder.

Prior to publishing a notice of a foreclosure sale, as required by section 14, the creditor, or if the creditor is not a natural person, an officer or duly authorized agent of the creditor, shall certify compliance with this subsection in an affidavit based upon a review of the creditor's business records. The creditor, or an officer or duly authorized agent of the creditor, shall record this affidavit with the registry of deeds for the county or district where the land lies. The affidavit certifying compliance with this subsection shall be conclusive evidence in favor of an arm's-length third party purchaser for value, at or subsequent to the resulting foreclosure sale, that the creditor has fully complied with this section and the mortgagee is entitled to proceed with foreclosure of the subject mortgage under the power of sale contained in the mortgage and any 1 or more of the foreclosure procedures authorized in this chapter;…”

• Has the creditor (usually the foreclosing mortgagee) certified compliance with M.G.L. ch. 244, §35C in an Affidavit based upon a review of the lender’s business records prior to the first publication in accordance with M.G.L. ch. 244, §14? While this Affidavit is not required to be recorded prior to the first publication, it is required to be executed prior to the first publication. While it would be prudent for the lender to record it prior to the first publication, the statute only requires that the Affidavit be executed prior to the first publication.

• If M.G.L. ch. 244, §35C does not apply, an Affidavit of Non-Applicability must be obtained and recorded.

• Note: Affidavit must contain a proper jurat.

NOTE: The lender may record a combined Affidavit of Compliance relative to M.G.L. ch. 244, §§35B and 35C or it may record separate Affidavits, depending on each particular circumstance.

* If the Affidavit executed by a third party loan servicer or by any person or entity acting on behalf of a third party loan servicer after 10/11/13, see 209 CMR 18.21A requirements below

209 C.M.R. 18.00*

On October 11, 2013, the Division of Banks and Loan Agencies enacted new regulations at 209 CMR 18.00 et seq: entitled “Conduct of the Business of Debt Collectors and Loan Servicers”, the relevant provisions of which are contained in 209 CMR 18.21A entitled “Mortgage Loan Servicing Practices” which provide as follows:

(a) A third party loan servicer shall ensure that all foreclosure affidavits or sworn statements are based on personal knowledge.

(b) A third party loan servicer shall ensure that foreclosure affidavits or sworn statements shall set forth a detailed description of the basis of affiant’s claimed personal knowledge of information contained in the affidavit or sworn statement, including sources of all information recited and a statement as to why the sources are accurate and reliable.

(c) A third party loan servicer shall certify in writing the basis for asserting that the foreclosing party has the right to foreclose, including but not limited to, certification of the chain of title and ownership of the note and mortgage from the date of the recording of the mortgage being foreclosed upon. The third party loan servicer shall provide such certification to the borrower with the notice of foreclosure, and shall also include a copy of the note with all required endorsements.

U.S. Bank National Association v. Schumacher (Docket No. SJC-11490, March 12, 2014)

M.G.L. c. 244, § 35A requires the lender to send a Right to Cure Notice prior to the commencement of foreclosure proceedings for certain principal residential properties. The Land Court has issued a form entitled, “Mortgagee’s Affidavit” which is filed with the Land Court prior to the commencement of the foreclosure action which form is not required to be recorded with the Registry of Deeds or filed with the Registry District. The Supreme Judicial Court in the recent decision of U.S. Bank National Association v. Schumacher (Docket No. SJC-11490, March 12, 2014) held that Section 35A is not part of the mortgage foreclosure process.

Cures after the fact

• Due execution authority documents not on record at the time of the signing of the document in question? Recording a vote or POA after the fact with ratifying language may cure the defect. See M.G.L. ch. 183, §54B which was amended in November, 2010 to add “any instrument for the purposes of foreclosing a mortgage and conveying the title therefrom” (i.e., REO deeds) which alleviates the need for many previously requested due execution authority documents.

• Missing Assignments? So long as the actual date of the Assignment was prior to the first publication date, not “effective date”, it can be recorded after the fact to cure this missing link. But note: For those foreclosures which occur after 11/1/12, the Assignment must also be recorded prior to the first publication.

• Failure to notify a party in interest pursuant to M.G.L. ch. 244, §14? Obtain and record a Waiver.

Additional Considerations

• Is the property vacant? If the property remains occupied by the foreclosed mortgagor or related parties to the foreclosed mortgagor, Stewart will not insure the property OR specific exception must be taken as follows:

"Any rights, claims or interest of (the mortgagor) in the land or any claim that the foreclosure by (lender) is invalid."

• Have Bankruptcy records been checked for bankruptcy of the mortgagor/holder of the equity of redemption?

• If the mortgagor(s)/holder of the equity of redemption filed for bankruptcy, has a certified copy of Relief from Automatic Stay been recorded or a copy viewed on the online Bankruptcy Court records?

• Have you verified that all foreclosure proceedings pre-date the Bankruptcy filing or post-date the Order for Relief from Automatic Stay?

• If the sale occurred within the last 3 years, certified “green cards” or USPS.com Track and Confirm records should be obtained and reviewed to verify that:

o Notice to all owners of the equity of redemption at the address last appearing on the records of the holder of the mortgage or to the address of the owners listed on the deed or petition for probate by which the owners acquired title o Notice to all junior lienholders appearing of record as of 30 days prior to the published sale date at the address in any document evidencing the interest, or last address known to the mortgagee  Mailed at least 14 days prior to the published sale date

• Federal Tax Liens

• Foreclosure of a mortgage that has priority over a federal tax filed more than thirty (30) days before the foreclosure sale date does not divest such lien unless special notice of the foreclosure sale is given to the IRS.

• The notice must be in writing, by registered or certified mail, sent not less than twenty-five (25) days prior to such sale to IRS, Attn: Collection Advisory Group Manager (see attached) and contain all of the following information:

o 1. The name, address and telephone number of the person submitting the notice of sale. o 2. A copy of each Notice of Federal Tax Lien (Form 668(Y)(c)) affecting the property to be sold, or the following information as shown on each such Notice of Federal Tax Lien;  (a) The internal revenue district named or the place where the notice was prepared and signed;  (b) The name and address of the taxpayer;  (c) The date and place of filing of the notice; o 3. With respect to the property to be sold, the following information should be included;  (a) A detailed description, including location of the property affected by the notice (in the case of , the street address, city, and state and the legal description contained in the title or deed to the property and, if available, a copy of the abstract of title).  (b) The date, time, place and terms of the proposed sale of the property; and, o 4. The approximate amount of the principal obligation, including interest, secured by the lien sought to be enforced and a description of the other expenses.

• Despite such notice, the IRS has the right to redeem the property within 120 days after the date of sale. Whenever such notice is not given or where the lien being foreclosed is junior to the tax lien, any sale will be subject to and will not disturb the lien of the United States.

• If a horticultural or agricultural tax lien providing a reduced tax rate is recorded at any time in your chain of title and has not expired or been waived and released, additional notice to the town must be given 45 days prior to the scheduled sale date.

• If the property in question is a condominium unit, notice must be given to the Condo Association.

• Housing Court records should be verified for any pending cases and the status of the same: www.masscourts.org . If there are any active cases pending, please contact the Underwriting Department before insuring the transaction.

Conclusion

There is no one size fits all checklist for reviewing any one foreclosure.

The underwriters at Stewart are happy to review any questions you may have and are available to review and resolve the same.

(updated 4/9/14)