Massachusett’s highest court, the Supreme Judicial Court, recently issued a ruling favoring homeowners.
In US Bank N.A. v. Ibanez, which consolidated two appeals, Option One Mortgage Corp, created blank mortgage assignments and then sold the mortgages without recording them. In one case, Option One was the original lender, and in the other it was the first purchaser of the loan. In both cases, the loans were resold multiple times before the foreclosure.
Immediately before the foreclosure, the banks placed notices of the foreclosures in the local daily news paper. The banks sought judicial confirmation that such notice met state law requirements.
They were not expecting the courts’ response. Both the lower court and the Supreme Judicial Court determined that while the notice was sufficient, the banks “failed to make the required showing that they were the holders of the mortgages at the time of the foreclosures.” While it is unclear whether the banks involved can make the necessary showing, the important point remains: “there must be proof that the assignment was made by a party that itself held the mortgage.” Such a showing may be difficult in situations where loans are securitized, which is the common practice in the mortgage industry, because the securitization documents exchanged between banks may fail to demonstrate who was the holder of the note at the time of the attempted foreclosure sale.