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Foreclosure ruling could wreak ‘havoc’

By Phillip Bantz
Massachusetts Lawyers Weekly

Boston – A recent decision from Massachusetts’ highest court could impact courts across the country and lead to a flood of overturned foreclosures, exacerbating the mortgage mess.

The Massachusetts court is the first state supreme court to rule that only the holder of a mortgage may foreclose on a property, upholding a Massachusetts Land Court judge’s earlier decision in U.S. Bank v. Ibanez.

The opinion invalidates foreclosure sales by two banks that had been assigned mortgages on the properties, and calls into question the validity of countless other foreclosures.

In the decision, Judge Ralph D. Gants wrote that the foreclosure sales in question were invalid because the banks failed to show that they held the mortgages at the time of foreclosure.

“As a result,” he said, “they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties.”

The banks had claimed that “securitization documents” they submitted established valid assignments that made them the holders of the two mortgages before the notice of sale and the foreclosure sale.

But the court disagreed.

“The [Land Court] judge did not err in concluding that the securitization documents submitted by the plaintiffs failed to demonstrate that they were the holders of the … mortgages, respectively, at the time of the publication of the notices and the sales,” Gants said.

A “foreclosing entity must hold the mortgage at the time of the notice and sale” to establish authority to foreclose.

Right to foreclose

While foreclosure law varies from state to state, the Massachusetts decision highlights an important universal rule, said Henry J. Sommer, supervising attorney at the Consumer Bankruptcy Assistance Project in Philadelphia.

“The basic fact, which I think is true anywhere, is that if you don’t own a mortgage and note, you don’t have a right to foreclose on somebody’s house,” he said. “That is really what this decision boils down to.”

In a concurring opinion, Judge Robert J. Cordy noted “the utter carelessness with which the plaintiff banks documented the titles to their assets.” He said the banks failed to prove that the underlying mortgage assignments “ever existed in any cognizable form before they exercised the power of sale that accompanies those documents.”

Sommer cautioned that the decision, while well-intentioned, may tempt unscrupulous mortgage servicers to backdate documents in an attempt to validate illegal foreclosures.

“That’s my biggest concern,” he said. “We’ve seen all sorts of fraud and bad practices by the services. Now that they have all these foreclosures in question, I wouldn’t be surprised if there’s a flurry of backdating documents to justify that the assignments took place before the foreclosures when, in reality, they didn’t.”

Phillip Bantz can be reached at


  1. Finally, a well-reasoned and common-sense decision that achieves actual justice. I fail to understand why requiring an institution that wants to take away your home to produce the legal instrument that confers upon it the right to do so is such a radical concept. The banks are the ones that sold, securitized, and re-sold mortgages, and yet now they complain because they cannot find the paperwork! If a bank can foreclose on your home without having to prove it actually owns the mortgage, then why even make them go to court to do so? Their position is tantamount to declaring..”trust us…we are a bank…we wouldn’t lie or deceive, would we?”

  2. As a practitioner who used to work in this area I can attest to the fact that these resold mortgages often are traded without the needed formalities. The banks just do what some kid in a New York suit told them to do because it is more convenient for him rather than on assigning the mortgages and notes properly.

    The banks/securitized bondholders have no hesitation about enforcing every letter of the law against a debtor; why should we feel bad about them being required to follow the law, too?

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