941 N.E.2d 40 (Mass. 2011)
On December 1, 2005, Antonio Ibanez obtained a $103,500 loan secured by a mortgage on property at 20 Crosby Street in Springfield from Rose Mortgage, Inc., which was recorded the next day and later assigned in blank before being stamped to Option One Mortgage Corporation and recorded in June 2006.1 On May 19, 2005, Mark and Tammy LaRace gave Option One a mortgage on property at 6 Brookburn Street in Springfield to secure a $103,200 loan that was recorded the same day, followed by an assignment in blank five days later.2
According to the plaintiffs, the Ibanez mortgage passed from Option One through Lehman Brothers Bank, FSB, Lehman Brothers Holdings Inc., and Structured Asset Securities Corporation to U.S. Bank as trustee under a December 1, 2006 trust agreement described in a December 26, 2006 private placement memorandum, while the LaRace mortgage passed from Option One to Bank of America under a July 28, 2005 flow sale agreement, then to ABFC under an October 1, 2005 purchase agreement, and finally to Wells Fargo as trustee under a pooling and servicing agreement.3 The plaintiffs produced neither executed copies of the key agreements nor loan schedules identifying the specific mortgages.4
On July 5, 2007, U.S. Bank foreclosed on the Ibanez property and purchased it at the sale for $94,350 after publishing notice in the Boston Globe identifying itself as present holder. On the same day, Wells Fargo foreclosed on the LaRace property and purchased it for $120,397.03 after similar notice.5 Foreclosure deeds and affidavits were recorded in May 2008, and post-sale assignments were executed in May and September 2008, with the LaRace assignment declaring an effective date of April 18, 2007.6
In September and October 2008 the plaintiffs filed separate Land Court actions under G. L. c. 240, § 6 seeking declarations of clear title.7 The cases were heard together with a third case.8 Judgment was entered against the plaintiffs on March 26, 2009.9 The plaintiffs moved to vacate and submitted hundreds of pages of securitization documents at an April 17, 2009 hearing.10 The judge denied the motions on October 14, 2009, and the Supreme Judicial Court granted direct appellate review.11
Whether the plaintiffs were the holders of the mortgages at the time the foreclosure notices were published and the foreclosure sales were conducted?12
In Massachusetts, a mortgage holder may foreclose by exercise of the statutory power of sale without judicial authorization except for the limited Servicemembers Act procedure.13 One who sells under a power of sale must follow strictly its terms or the sale is void.14 The statutory power of sale may be exercised only by the mortgagee or his executors, administrators, successors or assigns under G. L. c. 183, § 21.15 Under G. L. c. 244, § 14 only a present holder of the mortgage is authorized to foreclose.16 Strict compliance is essential because the mortgagor is entitled to know who is foreclosing.17
No. The established facts demonstrate that the plaintiffs were not the holders of the mortgages at the time of notice and sale.18 On July 5, 2007, U.S. Bank foreclosed on the Ibanez property at 20 Crosby Street in Springfield after publishing notice in the Boston Globe identifying itself as the present holder. Yet the assignment from American Home Mortgage Servicing, Inc., as successor-in-interest to Option One, was not executed until September 2, 2008, and recorded on September 11, 2008.19 On the same day, Wells Fargo foreclosed on the LaRace property at 6 Brookburn Street in Springfield after similar notice identifying itself as present holder. But the assignment from Option One was executed on May 7, 2008, and recorded on May 12, 2008, even though it declared an effective date of April 18, 2007.20 The plaintiffs submitted hundreds of pages of securitization documents at the April 17, 2009 hearing.21 These documents did not include executed copies of the key trust agreement or pooling and servicing agreement nor loan schedules identifying the specific Ibanez and LaRace mortgages as assigned before the July 5, 2007 foreclosures.22
The judge found, based on the complaints and documents, that the plaintiffs acquired the mortgages by assignment only after the foreclosure sales.23 Thus they had no interest in the mortgages at the time of the publication of the notices or the sales.24 Because the plaintiffs were not the original mortgagees and claimed authority only as assignees, they lacked authority to exercise the power of sale under the plain language of G. L. c. 183, § 21, and G. L. c. 244, § 14 when the notices were published and the sales conducted.25
The plaintiffs were not the holders of the mortgages at the time the foreclosure notices were published and the foreclosure sales were conducted.26
Related opinions on this issue
Joined by Botsford, J.
Justice Cordy concurred to underscore that what is surprising is the utter carelessness with which the plaintiff banks documented the titles to their assets.27 He emphasized that before commencing foreclosure the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order.28 Although there was no apparent actual unfairness to the mortgagors, that is not the point.29 Foreclosure is a powerful act with significant consequences.30 Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it.31
The type of sophisticated securitization transactions are not barred by Massachusetts law.32 The plaintiff banks failed to prove that the underlying assignments of the mortgages were effectuated in any legally cognizable form before they exercised the power of sale.33
Whether the securitization documents submitted by the plaintiffs, including unsigned private placement memoranda and pooling and servicing agreements lacking loan schedules, established valid assignments of the Ibanez and LaRace mortgages prior to foreclosure?34
The assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor.35 Where a pool of mortgages is assigned to a securitized trust, an executed agreement assigning the pool with a schedule that clearly and specifically identifies the mortgage at issue may suffice.36 There must be proof that the assignment was made by a party that itself held the mortgage.37 The foreclosing entity must hold the mortgage at the time of the notice and sale.38
No. The securitization documents failed to establish valid pre-foreclosure assignments.39 For the Ibanez mortgage, U.S. Bank relied on a December 26, 2006 private placement memorandum that described a future trust agreement and stated mortgages will be assigned.40 The plaintiffs produced neither the executed trust agreement nor the mortgage schedule identifying the Ibanez loan among the 1,220 loans pooled.41 The last recorded assignment was from Rose Mortgage to Option One.42 Nothing showed Option One assigned the mortgage to Lehman Brothers Bank, FSB or any subsequent entity before the July 5, 2007 foreclosure.43 For the LaRace mortgage, Wells Fargo produced an unsigned pooling and servicing agreement and a loan schedule that lacked property addresses, mortgagor names, or any number corresponding to the LaRace loan.44 Wells Fargo provided no document showing that ABFC held the LaRace mortgage before purporting to assign it.45
The judge denied the motions to vacate on October 14, 2009, concluding that the newly submitted documents did not alter the conclusion that the plaintiffs were not the holders at the time of foreclosure.46 Because the documents furnished only evidence of intent to assign or incomplete chains without proof that the assigning entities held the mortgages, they did not meet the requirements of a valid assignment under Massachusetts law.47
The securitization documents submitted by the plaintiffs did not establish valid assignments of the Ibanez and LaRace mortgages prior to foreclosure.48
Whether post-foreclosure assignments executed in 2008, including one declaring an earlier effective date, could establish the plaintiffs' authority to foreclose?49
Acquiring the mortgage after the notice and foreclosure sale does not satisfy the Massachusetts statute.50 A postforeclosure assignment cannot be treated as a preforeclosure assignment simply by declaring an effective date preceding the notice and sale.51 An assignment of a mortgage is a transfer of legal title and becomes effective with respect to the power of sale only on the transfer.52 A confirmatory assignment cannot confirm an assignment that was not validly made earlier.53
No. The post-foreclosure assignments could not establish authority to foreclose.54 The September 2, 2008 assignment of the Ibanez mortgage and the May 7, 2008 assignment of the LaRace mortgage were both executed after the July 5, 2007 foreclosure sales.55 The LaRace assignment's declaration of an April 18, 2007 effective date did not retroactively confer authority.56 The plaintiffs initially asserted in their complaints that they became holders through post-sale assignments.57 Even after submitting additional documents they failed to prove any valid pre-foreclosure written assignment existed.58 Because the plaintiffs lacked authority at the time of publication and sale, their published claims to be the present holders were false.59 The later assignments were not confirmatory of earlier valid assignments.60
The judge did not err in rendering judgments against the plaintiffs and in denying their motions to vacate the judgments.61 The Supreme Judicial Court affirmed the judgments against the plaintiffs on the ground that they did not demonstrate they were the holders at the time they foreclosed.62
Post-foreclosure assignments executed in 2008, including one declaring an earlier effective date, could not establish the plaintiffs' authority to foreclose.63