White Paper | An Evolving Foreclosure Landscape: The Ibanez Case and Beyond

The American Constitution Society for Law & Policy invites you to read:

An Issue Brief by
Peter Pitegoff & Laura Underkuffler

As news reports emerged today that foreclosure rates have surged, ACS releases “An Evolving Foreclosure Landscape: The Ibanez Case and Beyond,” an Issue Brief by Peter Pitegoff, Dean and Professor at the University of Maine School of Law, and Laura Underkuffler, J. DuPratt White Professor of Law at Cornell University Law School.  In this paper, the authors address criticism from the mortgage industry of several recent state court decisions invalidating foreclosures. Professors Pitegoff and Underkuffler contend:

[T]he decisions in these cases are not extreme examples of judicial hyper-technicality run amok.  Rather, they are attempts to address the radically new foreclosure realities in the age of mortgage securitization and subprime lending – realities that existing laws, on many levels, are inadequate to address.

The authors analyze the holdings in several recent cases that dismissed foreclosure actions for failure to provide adequate documentation, including a widely publicized Massachusetts case, U.S. Bank National Ass’n v. Ibanez. While the reasons for dismissal in these cases may appear “highly technical,” Pitegoff and Underkuffler explain, they are nonetheless crucial to ensuring that the burden of proof in foreclosure actions remains on the foreclosing party, that contracts involving housing are treated with a care that matches their societal importance, and that courts are more than just “automatons mindlessly processing paper motions in mortgage foreclosure actions.” “Neither Ibanez, nor any of the other cases discussed here, forbids mortgage securitization, multiple mortgage and note assignments, or other complex real estate financing transactions,” the authors write.  Professors Pitegoff and Underkuffler conclude, “The issue is not the blanket forbidding of complex transactions; it is the protection of all rights, including those of the property owner, when default and foreclosure are claimed.”

Full paper below…




An Evolving Foreclosure Landscape: The Ibanez Case and Beyond

3 Responses to “White Paper | An Evolving Foreclosure Landscape: The Ibanez Case and Beyond”
  1. lizinsarasota says:

    I would suggest this article to everyone. It is well-written and not hopelessly arcane or larded with high-faluting legalese. Coming from two distinguished law professors, it is appropriately weighty and, the great news is, they both come solidly down on OUR SIDE!!
    The white paper makes three concluding points:
    A. A home mortgage deals with shelter; as a result, it is a particular kind of contract that is imbued with particularly important social issues and imperatives.
    B. In foreclosure actions – particularly those that involve multiple assignments and securitized loans – the burden of proof regarding the right to foreclosure must be placed on the foreclosing party.
    C. In cases involving multiple assignments and/or securitized loans, judicial oversight of the foreclosure process is critical.
    My favorite take-away passage is follows. Accounting is at the heart of my squabble with WaMu (I start SIX years next month), so their reference to “other documents” was much appreciated. I’ve got almost identical standing issues as well, which I raised in court, and the court ignored (surprise!).
    From page 12:
    With such rampant problems, the approach that was taken in Ibanez and the other cases is the only one that is sensible: the burden of proving the right to foreclose must be placed on the foreclosing party. If a remote assignee or securitization trustee claims the right to foreclose, it must prove the legal basis for that claim. It cannot be the case that a remote party can claim the right to foreclose, with the property owner then forced to disprove its entitlement to that action. All of the documents and other knowledge of complex transactions are (to the extent that they exist) in the possession of the foreclosing party. As a result, as a practical matter – as well as a matter of fairness – the burden of proving the right to foreclose must be borne by the foreclosing party.

    Read it!

    And, if you’d like to hear more about the foreclosure defense event in Sarasota this weekend, here’s a great article:

  2. Readdocs says:

    I believe eventually the courts will discover using digital documentation will not
    suffice, as it will be easy to hack in and manipulate such digital documents. The
    only way to prove the realness of such documents will be through a forensic
    audit of the logs used to detail all activity on the server where the named digital
    documents are saved. When business is being done on a one on one basis where
    wet ink documents are the best and most effective procedures where due diligence
    must be done. This is not a time for a machine to machine situation, but a natural
    person to natural person.
    As to there not being a ban on securitizing morgtage, this too needs to be looked at
    differently because anything and everything that is done to the nature and property
    of that mortgage can have an impact on the borrower. There are plenty of opportunities
    for damage to be done to the properties of a mortgage that the borrower will never
    know about.

  3. The recent slip opinion of the Massachusetts Supreme Judicial Court in US Bank National as Trustee v. Ibanez, No DSJC 10694 (Sup.Jud.Ct.MA 2011) affirming the decision that the plaintiff which foreclosed the two properties involved did not have clear title because plaintiff was unable to demonstrate it was the holder of the mortgage at the time of foreclosure. Massachusetts is a title theory state and if the mortgage confers the power of sale upon the mortgagee, the mortgagee can exercise the power of sale in the event of default without the intervention of a court. The transfer of the mortgage is a conveyance of an interest in land which must be in writing and signed by the mortgagee of record.
    “Like the sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor. See G.L.c. 183, Section 3; Saint Patrick’s Religious, Educ. & Charitable Ass’n v. Hale, 227 Mass 175,177 (1917).” Id at
    This language would seem to prohibit transfer of a mortgage by a mortgagee to a successor in interest by electronic document because such a document is arguably not in writing if a “writing” must be written on paper and because the electronic document does not contain the wet ink signature of the transferor of the mortgage. However, it seems the Court was disturbed by the date of the citation and was cognizant that much had transpired since 1917.

    Accordingly, the Court stated:
    ‘Where a pool of mortgages is assigned to a securitized trust, the executed agreement which assigns the pool of mortgages, with a schedule of pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However there must be proof that the assignment was made by a party that itself held the mortgage. See In re Samuels, 415 B.R. 8, 20 (Bankr.D.Mass.2009). A foreclosing entity may provide a complete chain of assignments linking it to the record holder of the mortgage, or a single assignment from the record holder of the mortgage. See In re Parrish, 326 B.R. 708, 720 (Bankr.N.D. Ohio 2005). (“If the claimant acquired the note and mortgage from the original lender or from another party who acquired it from the original lender, the claimant can meet its burden through evidence that traces the loan from the original lender to the claimant.” Emphasis supplied.
    The substitution of the word “evidence” for assignment apparently means that other evidence may be used to demonstrate the requisite ownership of the notes. Such other evidence arguably includes electronic documentation. So long as the purchase agreement from the Depositor to the trustee of the securitized trust specifically includes and identifies the specific mortgage being foreclosed, electronic documents may be used to show the chain by which the Depositor beame the holder of the mortgage.

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