Mortgage Foreclosures

REMINDER: The Middlesex North Registry of Deeds (and all state and municipal offices) will be closed this coming Monday, April 18, 2016, for the Patriot's Day holiday.

In other news, the number of foreclosures is increasing in the Middlesex North District. In the first quarter of 2016, the number of foreclosure deeds recorded rose 154% (up from 26 in 2015 to 66 in 2016) and orders of notice increased 58% from 81 to 128.

Because such an increase is worrisome, I took a closer look at the foreclosure deeds for properties in Lowell. The mortgages that were foreclosed had almost all been originated prior to 2008 when the real estate market collapsed, so the distressed owners have owned these homes for at least six years. Have they suddenly become unable to make their payments or have they been in trouble for longer periods of time? Someone suggested to me that the latter case is most likely and that banks have just deferred any action on the properties. Now that values are increasing, however, the banks may have decided to go forward with these foreclosures. Although people already deeply in financial distress will be unlikely to salvage their homes, those who are current or just slightly in arrears, might be aided by rising values. If the current value of a property exceeds the amount owed on the mortgage, a home owner unable to make current payments could always sell the property, pay off the debt with the proceeds of the sale, and get on with life. True, they would still need a place to live, but it's probably better to have emerged as an arms length seller than as a person who lost a home to foreclosure.  

Tax Takings

The city of Lowell has scheduled a tax lien auction for April 27, 2016 at 10 am in the city council chamber at Lowell City Hall. In today’s Lowell Sun, the city advertised 226 different properties to be included in the auction. Because the city offers the properties in large bundles at such auctions, potential bidders hoping to snag a particular parcel by itself may be disappointed. At past auction, bidders have typically been fairly large companies in the business of buying tax takings. These companies than aggressively pursue the extinguishment of the right of redemption and thereby gain full title to the property which is then sold to a third party buyer.

From the city’s perspective, these auctions generate an infusion of cash late in the fiscal year. In fact, many of the parcel owners will show up at city hall in the next two weeks and bring their taxes current in which case their property will be pulled from the auction. Historically, the city would just treat these tax takings as a lien on the property and await the property’s sale or refinance at which time the back taxes would be settled. Because this disrupted revenue estimates and cash flows, the city opted to introduce these tax auctions a few years ago. The only downside of the auction is that occasionally a long-time homeowner, usually elderly or disabled, ends up losing their property to back taxes that come nowhere near the fair market value of the property. However, since this process has already occurred several times and there has been no outcry about inequitable results, I can only assume that the risk of an unfair result is more theoretical than real.

The Use and Misuse of 5B Affidavits

Massachusetts General Laws chapter 183, section 5B states 

Subject to section 15 of chapter 184, an affidavit made by a person claiming to have personal knowledge of the facts therein stated and containing a certificate by an attorney at law that the facts stated in the affidavit are relevant to the title to certain land and will be of benefit and assistance in clarifying the chain of title may be filed for record and shall be recorded in the registry of deeds where the land or any part thereof lies.

Some registers of deeds across the state – including me - have found that these “5B” affidavits are sometimes used not to clarify the chain of title as required by the statute, but to cloud the title with information that, as a practical matter, constitutes an encumbrance on the property. Given the strong public policy against allowing encumbrances to be created without judicial or specific statutory authorization, do the registries of deeds have the authority to refuse to record a 5B affidavit that has the effect of tying up the property, not clarifying the title?

However, I am also of the opinion that by requiring an express, written certification by an attorney “that the facts stated in the affidavit are relevant to the title to certain land and will be of benefit and assistance in clarifying the chain of title,” the statute places the authority for making that determination on the attorney and that the registry of deeds may be powerless to second guess that determination.

The last sentence of the section – that such an affidavit “shall be recorded in the registry of deeds” – does raise a question of who the “shall” is directed to. Is it to the attorney, telling him or her that such an affidavit must be recorded? Or is it directed to the registry, commanding us to record a 5B affidavit, however, egregious we feel its content may be?

The registers of deeds association will discuss this in upcoming meetings. If any readers have an opinion on this issue, please share it here as a comment or send it to me directly at mailto:lowelldeeds@comcast.net.

Updating Massachusetts Deed Indexing Standards

The Massachusetts Registers and Assistant Registers of Deeds Association met on Tuesday at the Worcester Registry of Deeds to begin the task of updating the Massachusetts Deed Indexing Standards. Originally adopted on January 1, 2000 and revised in 2006 and 2008, the Indexing Standards continue to be a valuable tool for registries and for those who use registries. The new version, which we hope to make effective on January 1, 2017, should reflect the many technological, statutory, case-law, and registry practice changes that have taken place in the past eight years.

Our tentative timetable is to have a new draft tentatively adopted by the registers' association by the end of the summer and then publicly share the draft and solicit comments on it from those in the legal and conveyancing community. Once those comments have been received, the registers' association will adopt a final version and share it publicly prior to the end of 2016.

As milestones are met in this process, I will write about them here. In the meantime, if you are unfamiliar with the current Massachusetts Deed Indexing Standards, they are available in PDF form on the Middlesex North Registry of Deeds website.

Electronic Recording Statistics

Here are some statistics for electronic recording for the first three months of 2016:

In January, 49% of all documents (2130 of 4378) were recorded electronically. The busiest efile day was January 12, when 82% of all recordings (157 of 191) were electronic.

In February, 46% of all documents (1945 of 4236) were recorded electronically.

In March, 50% of all documents (2465 of 4945) were recorded electronically.

End of Month; End of Quarter Statistics

Here is our recording volume of certain document types for March 2016 compared to March 2015, followed by the same comparison for the first quarter of the year:

March 2015 v March 2016
Deeds were up 20% (486 v 580)
Mortgages were down 10% (982 v 886)
Foreclosure deeds were up 106% (16 v 33)
Orders of Notice were up 117% (24 v 52)
Total documents were up 3% (4796 v 4945)

1st Quarter 2015 v 1st Quarter 2016
Deeds were up 24% (1215 v 1507)
Mortgages were down 1% (2334 v 2319)
Foreclosure deeds were up 154% (26 v 66)
Orders of notice were up 58% (81 v 128)
Total documents were up 13% (11,952 v 13,559)