Tuesday, January 11, 2011

More thoughts on Ibanez

Here are more of my thoughts on the SJC's Ibanez decision: I don't think the result is as apocalyptic as many may portray it although it still presents a substantial glitch in the land records system. Certainly the most prudent course for any future foreclosure is to be sure the proper assignments in their traditional form are completed and recorded in the proper sequence - that's the only way to "foreclose" an endless stream of questions and doubts from future attorneys who are assessing the state of the title. But that's not what the SJC ruling requires which is a good thing since so many parties to the securitization chain either no longer exist or exist only as a different corporate entity. If the original lender no longer exists, how can it produce a valid assignment if one didn't exist before its demise?

What the SJC requires is sufficient evidence that the assignment was completed before the assignment actually took place. That evidence must be a writing, signed by the party doing the transfer that adequately describes the mortgage being transferred. What might satisfy that evidentiary requirement is almost limitless. It might be an email or a cover letter or a computer printout. So the first problem is one of evidence. Who has custody of all of this documentation (in both paper and electronic form) and who can find it? As the whole robo-signing controversy shows, this industry paid little attention to the details of documenting these transactions so trying to reconstruct what was shoddy documentation in the first places is a big obstacle.

The second big issue is who is to be the judge of this evidence? For every non-traditional assignment (meaning anything that is not the written, signed, notarized document recorded at the registry of deeds) someone has to determine whether the evidence presented is sufficient. Does it have to be a judge? Or will the title insurers come to some type of consensus on what constitutes adequate proof - will an affidavit by an attorney attaching copies of email, printouts, etc, that establish the chain of ownership of the mortgage that all then gets recorded at the registry of deeds be sufficient? Obviously the affidavit is a lot less burdensome than a formal judicial petition. With so much antagonism towards the lending industry, however, I don't think too many people will be worried about what's easiest for them.

Ultimately, I believe the solution must be a legislative one. Back in 2004, the state legislature amended MGL c.183, s.54 regarding mortgage discharges. Back then, many homeowners found it almost impossible to obtain mortgage discharges because of turbulence in the lending industry. In this statutory amendment, the legislature enumerated specific types of documentation that could be used, often in conjunction with an attorney affidavit, in lieu of a traditional discharge. I suspect that might be the best solution to this issue, although it will take a year or more to enact.

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