June 13, 2013
The Potentially Far Reaching Affects of The Ibanez Holding on Foreclosure Proceedings
The holding in U.S. Bank National Ass’n v. Ibanez, 458 Mass. 637, 941 N.E.2d 40 (2011) potentially may have far reaching affects on foreclosure litigation outcomes across the nation.
Although a state case, Ibanez has national implications for several reasons; the Massachusetts Supreme Court is one of the most respected state supreme courts in the country, a majority of states have laws similar to Massachusetts, and the questions in the case stemming from irregularities in the residential securitized mortgage industry are wide spread.
In Ibanez the Massachusetts Supreme Court was faced with the issue of the validity of foreclosures when the mortgages are part of securitized mortgage lending pools. It is typical practice for mortgages to be bundled and dealt to Wall Street investors. The ownership of mortgage loans are then divided and transferred numerous times with little to no restrictions. However, the mortgage loan transfers’ recordation and documentation often times lag far behind.
The mortgage assignment in the case of Ibanez was executed “in blank” and was not actually recorded until over a year after the foreclosure process had begun. The court’s major problem with the banks was that they did not possess – and could not establish evidence of – a legally effective mortgage assignment showing that they actually held the mortgage. The banks did not posses the mortgage note, thus they lacked standing to sue. Additionally, the banks put the endorsement in blank, without naming the entity to which they were assigning the mortgage. This was a violation of Massachusetts’s law.
Accordingly, the court found that the plaintiff banks – who were not the original mortgagees – failed to make the required showing that they were the holders of the mortgages at the time of foreclosure. As a result their requests for a declaration of clear title were denied.
The court explicitly held that there must be evidence of a valid assignment of the mortgage at the time the foreclosure process commences. However, the court did not specify exactly what type of evidence would suffice to establish what evidence satisfies this requirement.This holding, if applied in its broadest sense, has the potential to ban most securitized mortgages in the country from being foreclosed upon.
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