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Massachusetts Supreme Judicial Court - 941 N.E.2d 40, 458 Mass. 637
Tags: Property, Foreclosure
tl;dr:
A seller that forecloses on a property must be the mortgage-holder at the time of the notice of sale and foreclosure sale. An interest in a mortgage-backed security is not sufficient.Video Summary
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U.S. Bank and Wells Fargo were unable to prove they were the mortgage holders at the time of foreclosure, resulting in the foreclosure sales being deemed invalid. The plaintiffs claimed ownership of the mortgages through securitization trusts but failed to provide sufficient evidence to support their claims. The court had to determine whether the documentation submitted by the plaintiffs met the requirements of a valid assignment. Failure to strictly follow the terms of the power of sale renders the sale wholly void. Only the present holder of the mortgage is authorized to foreclose on the mortgaged property, and failure to identify the holder of the mortgage in the notice of sale may render the notice defective and the foreclosure sale void. The Land Court allowed foreclosure to proceed, but Wells Fargo did not execute a statutory foreclosure affidavit or foreclosure deed until ten months after the foreclosure sale. The plaintiffs sought declarations of clear title, but had to prove their authority to foreclose under the power of sale and show their compliance with the requirements on which this authority rests.
The plaintiff banks failed to provide evidence that the assignments of mortgages they claimed entitled them to foreclose ever existed in any legally recognizable form before they exercised the power of sale. The court emphasized that foreclosure is a powerful act with significant consequences, and Massachusetts law requires strict compliance with governing statutes. The lack of actual unfairness to the mortgagors is not the point. The effect of the banks' conduct on a bona fide third-party purchaser who relied on the foreclosure title of the bank is a more complicated issue not addressed in this opinion. The requirements of Massachusetts law do not bar or burden the type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and ultimately the sale of mortgage-backed securities.
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