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Underwriting Guidelines for Reviewing Foreclosures in Massachusetts

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Underwriting Guidelines for Reviewing Foreclosures in Massachusetts Underwriting Guidelines for Reviewing Foreclosures in Massachusetts These guidelines apply whether the foreclosure appears in your back title or is the immediate source of title Start by comparing the deed 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 deeds 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 liens 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 law 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.
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