Banks who buy mortgages may not be able to foreclose
Attorney Michael Goldstein one of the Massachusetts Bankruptcy attorney’s who works with Legal Administrative answers posted a very interesting Blog article on his site, regarding banks trying to buy foreclosed properties but then conduct the sale themselves. It would appear that this is not allowed in Massachusetts.
A common practice in the mortgage industry is to buy and sell mortgages. This practice has a specific legal term, “assignment”. What many lenders have tried to do though is to buy mortgages that have a foreclosure order already on record. The new lender then buys the loan at a very deep discount and tries to sell the house though the foreclosure process. This slick strategy on the part of lenders has been deemed illegal in Massachusetts. More importantly, pursuant to a recent Massachusetts Land Court case, any foreclosure on record that is assigned has been reversed and ordered void.
More specifically, in the Land Court case of, US Bank National Association v. Ibanez (Misc. Case No.384283), where the foreclosing lender was assigned a mortgage dated prior to the date of publication of notices under M.G.L.c. 244, Section 14, the mortgagee had no title to foreclose. Basically, the court has effectively invalidated every foreclosure sale where the foreclosing party could only produce an assignment dated after the date of the publication but with the stated effective date of the assignment prior to the publication date.
The legal ramifications of the aforementioned case are highly significant. As long as the assignment vesting the title into the mortgagee did not physically exist at the date of the publication of foreclosure sale notices, the foreclosing entity was not the mortgagee within the meaning of M.G.L.c. 244, and thus had no authority to foreclose.