Judge Long of the Massachusetts Land Court recently reaffirmed his groundbreaking May decision (Ibanez) invalidating a foreclosure sale due to a lack of properly-recorded proof of assignment. The assignment issue boiled down to this. Due to the bundling of mortgages for sale and trading on Wall Street, mortgages have been transfered more and more frequently. Under Massachusetts law, these mortgage transfers must be documented in a registry of deeds and only the record owner of the mortgage has the right to foreclose a mortgaged property. Before Judge Long’s ruling the practice had been to backdate the various mortgage assignments after a foreclosure sale to clean up the chain of title. Judge Long held that this was impermissible and that the assignments had be properly recorded on the date of the foreclosure.
What does all this mean for consumers? Two things. First, the validity of many mortgage foreclosures have been conducted over the past few years have been put into doubt. This has the potential to create big problems for many parties, including the people who purchased foreclosed properties. It is at least theoretically possible to challenge the validity of a foreclosure sale where there was a backdated assignment and seek to cure the mortgage arrears in a Chapter 13 bankruptcy. However, this would be anything but a run-of-the-mill case.
The second way that the decision will affect consumers who have defaulted on their mortgages is that it will create delay. Putting together and recording all the proper assignments will take time and will allow consumers more time to save their homes from foreclosure.
Another blog addressing this opinion that includes a link to the opinion can be viewed here.
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