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Foreclosure Developments and Updated Guidelines PDF Print E-mail

Date:         December 4, 2013

To:            Massachusetts Agents & Approved Attorneys

From:        Underwriting Department

Re:            Massachusetts Foreclosure Developments and Updated Guidelines

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A variety of court decisions, as well as statutory and regulatory changes, regarding Massachusetts foreclosures requires an update to our underwriting guidelines.

In August 2012, Governor Patrick signed Chapter 194 of the Acts of 2012, An Act Preventing Unnecessary and Unlawful Foreclosures (the “Act”), which became effective November 1, 2012. Among other things, the Act amended M.G.L. c. 244 and introduced a statutory scheme with which a foreclosing mortgagee must comply in applicable circumstances to foreclosure its mortgage. The Act also requires the recording of affidavits certifying compliance with the Act, as applicable. Moreover, the Act modifies elements of both the Ibanez and Eaton holdings.

Pursuant to the Ibanez decision, a foreclosing mortgagee must become the holder of the mortgage prior to the first publication date of its foreclosure notice.  Consequently, any assignments of the subject mortgage must be executed and acknowledged prior to the first publication.  Under Ibanez, any such compliant assignment could be recorded after the recording of the foreclosure documents.


 

By amending M.G.L. c. 244, § 14, The Act codifies the Ibanez criteria by requiring that:

(I)n the event a mortagee holds a mortgage pursuant to an assignment, no notice under this section shall be valid unless (i) at the time such notice is mailed, an assignment, or a chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of deeds for the county or district where the land lies and (ii) the recording information for all recorded assignments is referenced in the notice of sale required in this section.

A critical distinction vis-a-vis the Ibanez ruling is that all mortgage assignments must be recorded before the mailing of the foreclosing mortgagee’s first foreclosure notice.  Hence, after November 1, 2012, the ability to record an assignment into the foreclosing mortgagee after the first publication is no longer possible.  Record reference to any mortgage assignments must also be made in any mailed or published notices of foreclosure.

The Eaton decision held that a foreclosing mortgagee must either hold the promissory note or be acting on behalf of the note holder from the date of the commencement of the power of sale (i.e., the giving of the first notice under c. 244, § 14) up to and including the date of the foreclosure sale.  By introducing a new § 35C to M.G.L. c. 244, the Act codifies a portion of the Eaton decision by requiring that:

A creditor shall not cause publication of notice of foreclosure, as required under section 14, when the creditor knows or should know that the mortgagee is neither the holder of the mortgage note nor the authorized agent of the note holder.

Prior to publishing a notice of foreclosure sale, as required by section 14, the creditor, or if the creditor is not a natural person, an officer or duly authorized agent of the creditor, shall certify compliance with this subsection in an affidavit based upon a review of the creditor’s business records.  The creditor, or an officer or duly authorized agent of the creditor, shall record this affidavit with the registry of deeds for the county or district where the land lies.

The Act also introduces a new § 35B to M.G.L. c. 244, which sets forth criteria by which a creditor must offer the mortgagor a means to avoid foreclosure with respect to “certain mortgage loans” as defined in said section. Compliance with this section is conclusively demonstrated by an affidavit certifying that:

            Prior to publishing a notice of foreclosure sale, as required by section 14, the creditor, or if the creditor is not a natural person, an officer, or duly authorized agent of the creditor, shall certify compliance with this section in an affidavit based upon a review of the creditor’s business records. The creditor, or an officer or duly authorized agent of the creditor, shall record this affidavit with the registry of deeds for the county or district where the land lies.


An affidavit of compliance compelled by §§ 35B and 35C requires that:

1. It is to be provided by the “creditor” as defined therein (usually the foreclosing mortgagee) or its duly authorized agent.

2. It must certify compliance with the applicable sections.

3. It must be based upon a review of the creditor’s business records.

4. It must be dated and acknowledged prior to the publication of the first foreclosure notice and recorded; however, it may be recorded after the foreclosure sale, with the other foreclosure documents.

 

Lastly, on October 11, 2013, the Division of Banks and Loan Agencies enacted new regulations at 209 CMR 18.00 et seq., entitled “Conduct of the Business of Debt Collectors and Loan Servicers”.  The relevant section for our purposes, is 209 CMR 18.21A entitled "Mortgage Loan Servicing Practices".  It concerns foreclosures by third party loan servicers, and provides in part:

 

A third party loan servicer shall ensure that all foreclosure affidavits or sworn statements are based on personal knowledge.

 

A third party loan servicer shall ensure that foreclosure affidavits or sworn statements shall set forth a detailed description of the basis of affiant's claimed personal knowledge of information contained in the affidavit or sworn statement, including sources of all information recited and a statement as to why the sources are accurate and reliable.

 

A third party loan servicer shall certify in writing the basis for asserting that the

foreclosing party has the right to foreclose, including but not limited to, certification of the chain of title and ownership of the note and mortgage from the date of the recording of the mortgage being foreclosed upon. The third party loan

servicer shall provide such certification to the borrower with the notice of intent

to foreclose provided pursuant to M.G.L. c. 244, § 35A, and shall also include a

copy of the note with all required endorsements.

 

Underwriting Requirements:

 

1.         Compliance with Ibanez:  Our underwriting requirements remain the same as those set forth in our prior Ibanez Memorandum dated March 11, 2011, except that assignments of the foreclosing mortgagee’s mortgage must be recorded before the first publication date of the foreclosure notice and  record reference to such assignments must be included in any mailed or published notices of foreclosure.

2.         Compliance with M.G.L. c. 244, §§ 35B and 35C: If §§ 35B or 35C apply (Footnote 1), an affidavit of compliance must be obtained and recorded as set forth above.  Appropriate use of affidavit Form 57A or Form 57B issued by REBA is acceptable.  Although neither of the affidavits specifically reference § 35C, the required representations relative to the status of the promissory note and its holder provide satisfactory compliance with § 35C.

If §§ 35B and 35C do not apply, an affidavit stating non-applicability must be obtained and recorded.

It is important to emphasize, however, that even though an affidavit is recorded evidencing compliance with, or non-applicability of, §§ 35B and 35C, the requirements of Eaton must still be satisfied.

 3.  Compliance with Eaton:  Our underwriting requirements are set forth in our Eaton Memorandum dated July 16, 2012. (Footnote 2) However, given the application of §§ 35B and 35C, additional caution should be taken with respect to affidavits used to demonstrate compliance with Eaton, as follows.

Eaton applies to all foreclosures, whether residential or commercial.  It requires the recording of an affidavit stating that the foreclosing mortgagee either holds the promissory note or is acting on behalf of the note holder from the date of the commencement of the power of sale (i.e., the giving of the first notice under c. 244, § 14) up to and including the date of the foreclosure sale. 

Since a §§ 35B or 35C affidavit must be dated prior to the first publication, it does not satisfy this requirement. 

Consequently, an additional affidavit (commonly referred to as an “affidavit of continuing noteholder status") must be dated and recorded on or after the date of the foreclosure sale.  This affidavit must state, among other things, that the foreclosing mortgagee held the note or was acting on behalf of the note holder as of the date notices of sale were initially sent pursuant to M.G.L. c. 244, § 14, through and including the date of the foreclosure sale.  If REBA Form 57A or Form 57B is used for this purpose, it must be revised to comply with these requirements.

4.  Compliance with 209 CMR 18.21A.  If (a) any foreclosure affidavit or sworn statement in the context of foreclosure proceedings, including the affidavits referenced herein, is provided by a third party loan servicer, or by a person or entity acting on behalf of a third party loan servicer, or (b) a third party loan servicer relationship is otherwise disclosed in any such affidavit or sworn statements, or in any other foreclosure document, then an additional measure is required:

 

Any such foreclosure affidavit, including REBA Form 57A or Form 57B, or otherwise, must be expanded to include: (i) a detailed description of the basis of the affiant's claimed personal knowledge of information, including sources of all information recited, and a statement as to why the sources are accurate and reliable, and (ii) a statement that the third party loan servicer has complied with all provisions of 209 CMR 18.21A(2).

 

5.  Affidavits.  Any affidavit referenced herein must be notarized by use of a Jurat.  Note that a Jurat is not the same as an Acknowledgment; in Revised Executive Order No. 455 (04-04), Standards of Conduct for Notaries Public, a Jurat is defined as follows:

           

“Jurat” means a notarial act in which an individual, at a single time and place:

 

(a)  appears in person before a notary public and presents a document;

(b)  is identified by the notary public through satisfactory evidence of identity;

(c)  signs the document in the presence of the notary public; and

(d) takes an oath or affirmation before the notary vouching for the truthfulness or accuracy of the signed document.

 

Also, with respect to any affidavit executed under a power of attorney or by an agent, the power of attorney must be recorded and/or relevant sections of the servicing or other agency agreement excerpted therein.

 

Summary:

1.      U.S. Bank National Association vs. Ibanez

 

Decided on January 7, 2011 by the Supreme Judicial Court of Massachusetts;

Applies to all foreclosures, retroactively and prospectively;

Any assignments of the subject mortgage to the foreclosing mortgagee must be executed prior to publication of the foreclosure notice of sale;

Prior to November 1, 2012, any such assignment could be recorded after the recording of the foreclosure documents; and

After November 1, 2012, because of amendments to M.G.L. c. 244, any such assignment must be dated and recorded prior to said first publication.

 

2.  Eaton v. Federal National Mortgage Association

 

Decided on June 22, 2012 by the Supreme Judicial Court of Massachusetts;

Applies to all foreclosures, prospectively only;

Requires foreclosing mortgagee to hold the note, or to be acting on behalf of the note holder; and

“Eaton” affidavit must be recorded.

 

3.  Chapter 194 of the Acts of 2012, An Act Preventing Unnecessary and Unlawful Foreclosures

 

     Effective November 1, 2012

     Applies to certain foreclosures, prospectively only; 

     If non-applicable, requires an affidavit of non-applicability; 

     Applies to foreclosures for which any Notice of Sale was sent, or publication of Mortgagee’s Notice of Sale made, on or after November 1, 2012; 

     If applicable, a M.G.L. c. 244 §§ 35B and 35C affidavit must be recorded; and

     Any assignments of the subject mortgage to the foreclosing mortgagee must be executed prior to the first publication of the foreclosure notice of sale, and recording information for the assignments must also be included in the notice of sale.

 

 

 

4.  209 CMR 18.21A

 

     - Enacted October 11, 2013 by the Division of Banks and Loan Agencies; 

           Applies to certain foreclosures, prospectively only; 

           Applies to mortgages held by loan servicers; 

           Requires additional detail in foreclosure affidavits and sworn statements; and 

           Requires a statement that the third party loan servicer has complied with any and all provisions of 209 CMR 18.21A(2).

Conclusion:

Foreclosure law is ever-evolving.  As changes arise, our underwriting requirements may need to adapt as well. We will continue to apprise you of such events as they unfold, but we urge you to also remain vigilant in this area of ongoing development.

To further assist in your analysis of foreclosures, please review the attached Updated Massachusetts Underwriting Guidelines for Insuring Titles Through Foreclosures or REOs.  Additional requirements may be necessary upon review of specific transaction details.

If you have any questions or concerns about foreclosure proceedings in any transaction you are being asked to insure, do not hesitate to contact our underwriting department.


Footnote 1:  As mentioned previously, § 35B only applies to “certain mortgage loans” as defined in said section.  Moreover, §§ 35B and 35C only apply to “residential property” as defined in each of said sections.

Footnote 2:  The Eaton Memorandum dated July 16, 2012 is hereby amended as follows:  (i) any requirement that an affidavit contain a M.G.L. c. 183, § 5B certification is deleted, (ii) the language “holder of the note or its attorney in fact if applicable” in the first sentence of Section II(1) is deleted and the word “mortgagee” is inserted in its place, and (iii) Section II(2) is deleted in its entirety.

 
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