The Massachusetts Appeals Court recently reached an important decision on the assignability of mortgages by mortgagees. The issue arose out of a foreclosure case in which the plaintiff was attempting to challenge the legality of the process by attacking the underlying mortgage situation.
In the case, Shea v. Federal Nat’l Mortgage Assn., Mass. App, Ct. (2015), the plaintiff had purchased the property at issue in 2005. Then, as part of a refinance of the property, the plaintiff secured a mortgage loan from IndyMac Bank in the amount of $281,600.
Relevant to the case, the mortgage outlined the following. It defined IndyMac, the owner of the debt, as the “Lender.” It identified Mortgage Electronic Registration System, Inc. (MERS), as the mortgagee for purposes of the document.
Furthermore, it stated that the borrower recognized that MERS could foreclose and sell the property as part of its legal interests and rights in it, since MERS held the legal title. Thus, the underlying issue in the case consisted of the propriety of MERS selling the mortgage interest to a third party, which later foreclosed on the property. If MERS did not have the legal right to sell the interest, the transferring of the interest was improper, and any subsequent actions would be considered improper as well. The plaintiff attempted to argue that the foreclosure was improper, since the assignment was improper.
The lower court judge granted a motion to dismiss the lawsuit, to which the plaintiffs appealed.
Here, the Massachusetts Appeals Court found that the assignment was proper, in that it was clearly stated that MERS maintained the legal ownership of the underlying note, even though it did not own the debt itself. It stated explicitly that the so called “splitting” was appropriate. Furthermore, it held that a mortgagee is free to give its mortgage to another party unless there is a clause in the mortgage document itself that places limitations on the transfer. Since no restriction appeared in the mortgage at issue here, the assignment was deemed valid, and the court found that the granting of the motion to dismiss was proper, so it affirmed the decision.
The case is important, since if a foreclosure is improper, it may be reversible. Specific statutory requirements, including waiting periods, must be observed in order for the foreclosure to be valid.
The lawyers at Pulgini & Norton offer detail-oriented and client-centered representation in Boston property transactions. Our real estate lawyers draft agreements and negotiate provisions with your needs and goals in mind. We will work to overcome or prevent any foreseeable hurdles and protect your interests, while working towards a timely closing or resolution of your matter. We represent clients in Brookline, Lowell, and Malden, among other Massachusetts communities. Contact us today by calling 781-843-2200 or contact us online for a consultation.
More Blog Posts:
Appeals Court Rules: What Creates a Legally Enforceable Easement under Massachusetts Law?, Massachusetts Real Estate Lawyer Blog, published February 23, 2015
Younger Buyers Giving Boost to Massachusetts Real Estate Market, Massachusetts Real Estate Lawyer Blog, published February 16, 2015