*BANKS LOSE PIVOTAL FORECLOSURE CASE IN MASSACHUSETTS HIGH COURT

*MASSACHUSETTS TOP COURT DECIDES CLOSELY WATCHED IBANEZ CASE

*MASSACHUSETTS DECISION MAY AFFECT FORECLOSURE-CRISIS CASES

Here is why this is relevant:

This was an Amicus Curiae brief (friend of the court) filed by the Massachusetts Attorney General Martha Coakley. (see attached)



Page 10:

“Plaintiffs’ claims that the Land Court’s ruling will cause widespread confusion or significant cost to innocent parties are greatly exaggerated, and such reasoning does not warrant ignoring the plain requirements of the law designed to protect Massachusetts consumers. Indeed, it is the foreclosing entities themselves who will bear the greatest cost of clearing titled from their invalid foreclosures. Having profited greatly from practices regarding the assignment and securitization of mortgages not grounded in the law, it is reasonable for them to bear the cost of failing to ensure that such practices conformed to Massachusetts law.”





Page 4-5:

“Rose Mortgage was the original lender for the Ibanez mortgage and Option One Mortgage Corporation was the original lender for the LaRace mortgage. Rose endorsed the Ibanez note and property assigned the mortgage to Option One. Option One then executed an endorsement of both promissory notes in blank, making each “payable to bearer” and negotiated by transfer alone until specifically endorsed.” In both cases, Option One also executed an assignment of the mortgage in blank (i.e. without a specified assignee). These blank assignments were never recorded and were not legally recordable because they failed to identify the assignee [cites state law].”



“After Option One sold the Ibanez mortgage to Lehman Brothers. Lehman Brothers then sold the mortgage, together with hundreds of other loans, to Structured Asset Securities Corporation (“SASC”). SASC then sold these loans to the Structured Asset Securities Corporation Mortgage Loan Trust 2006-Z, of which plaintiff U.S. Bank National Association (“U.S. Bank”) was the Trustee. All off the supporting documents concerning the Ibanez mortgage were placed into a “collateral file” and presumably were transferred between the entities listed above as each transaction was completed. This collateral file contained the original promissory note, the Rose Mortgage endorsement of the promissory note to Option One, Option One’s blank endorsement of the promissory note, the mortgage issued to Rose Mortgage Inc., the assignment of the mortgage from Rose to Option One and Option One’s blank mortgage assignment”



[Goes through similar for the LaRace mortgage]



Page 8:

“The Land Court was correct to invalidate the foreclosure on two distinct grounds. First, the plaintiffs lacked the legal authority to conduct the foreclosures because they were not among the parties authorized to do so under either the statutory power of sale or under G.L.c. 244 §14. Second, even if the plaintiffs had the legal authority to foreclose (which they did not) the foreclosures would still have been invalid because the notices issued by the plaintiffs failed to name the present holder of the mortgage as required under G.L. c. 244 §14. To foreclose on a mortgage securing property in the Commonwealth, one must be the holder of the mortgage. To be the holder of the mortgage, one must be the original mortgagee or be the assignee under a valid assignment of the mortgage. It is not sufficient to possess the mortgagor’s promissory note. The Land court correctly held that the plaintiffs, U.S. Bank and Wells Fargo were not holders of the Ibanez and LaRace mortgages at the time of the foreclosure because they were not assignees of valid assignments of the mortgages. Without valid assignments, the plaintiffs lacked the legal authority to foreclose the mortgages. This, without more, is sufficient grounds on which to invalidate the foreclosures and the Land Court was correct to do so.”



Page 10:

“Plaintiffs’ claims that the Land Court’s ruling will cause widespread confusion or significant cost to innocent parties are greatly exaggerated, and such reasoning does not warrant ignoring the plain requirements of the law designed to protect Massachusetts consumers. Indeed, it is the foreclosing entities themselves who will bear the greatest cost of clearing titled from their invalid foreclosures. Having profited greatly from practices regarding the assignment and securitization of mortgages not grounded in the law, it is reasonable for them to bear the cost of failing to ensure that such practices conformed to Massachusetts law.”





Page 11:

“Plaintiffs had no legal authority to foreclose because they were not the original mortgagees, were not authorized by the power of sale, and because they lacked valid assignments of the Ibanez and LaRace mortgages.”



Page 12:

“Plaintiffs are not the mortgagees of the Ibanez or LaRace loans.”



Page 16:

“Neither plaintiff was authorized by the power of sale in the respective mortgages.”



Page 17:

“The assorted securitization documents do not establish or compromise valid assignments.”

Plaintiffs contend that various securitization documents constructively assigned to them the Ibanez and LaRace mortgages. Specifically, the plaintiffs contend that the Ibanez mortgage was assigned to U.S. Bank by way of a Trust Agreement that is not part of the record, but is purportedly evidenced by a Private Placement Memorandum. They contend that Wells Fargo received the LaRace mortgage via a Purchase and Sale Agreement. In each case, plaintiffs’ argument is without merit.”



The LaRace Securitization Documents

As the Land Court found, the LaRaces gave a mortgage to Option One when the loan was initially made. Thereafter, Option One executed an assignment of the mortgage “in blank,” i.e., without naming the party to whom the mortgage was to be assigned. As detailed above and by the Land Court, this “assignment in blank” was ineffective to transfer any interest in the mortgage. Wells Fargo contends that the LaRace mortgage was assigned to it by the Pooling and Servicing Agreement it entered into with Asset Backed Funding Corporation (“ABFC”). This agreement purports to transfer and assign all of the rights of ABFC to Wells Fargo. However, there is nothing the record that ABFC had any interest in the LaRace mortgage. Thus, even if the language in the Pooling and Servicing agreement was sufficient to transfer all of ABFC’s interests in the LaRace mortgage, the assignment would be ineffective because ABFC had no interest in the LaRace mortgage to transfer.”



Page 20:

“Not only did plaintiff’s lack legal authority to foreclose, but the foreclosures are invalid because the notices published prior to foreclosure are fatally deficient.”

- G.L. c 244, §14 requires that the notice identify the “present holder” of the mortgage

- Plaintiffs’ false identification of themselves as the “present holders” in their foreclosure notices renders the notices fatally deficient

- Plaintiffs’ argument that they held the mortgages notwithstanding the lack of valid, written assignments as of the date of the foreclosures is unsupported by law.





Page 27:

“There are no grounds on which to limit the Land Court’s decision to future cases”

- Plaintiffs request that if the Land Court’s decision is upheld, this Court limit its application only to future foreclosures. This argument is without any basis in law and should be rejected.”

- Notwithstanding the “industry practice” of subprime lenders and other who created mortgage backed securities, the statutory requirements at issue int his case are long –settled.





