New Foreclosure Decision by Appeals Court

The Massachusetts Appeals Court held today that a homeowner was precluded from litigating in a Superior Court action issues related to the legality of the foreclosure process and to the alleged negligence of his lender in processing the homeowner’s mortgage modification application where the homeowner failed to raise those same issues in an earlier eviction proceeding between the same parties in the District Court.

 
The case is Santos v US Bank, Massachusetts Appeals Court case 15-P-334. The full decision is available here. 

Midyear Revenue Collections

Besides recording documents, the registry of deeds also takes in revenue for the Commonwealth in the form of recording fees, excise taxes, surcharges for the Community Preservation Act matching fund, and a few others. Revenue for the first six months of calendar year 2016 is significantly higher than the same six months in 2015. Here are some particulars:

Overall revenue is up 19%, from $6,320,680 in the first half of CY15 to $7,520,323 of CY16;

Recording fees are up 5%, from $2,021,201 to $2,123,125;

The big increase is in deeds excise tax collections which increased 31%, from $3,450,603 to $4,518,864. Because the number of deeds recorded is only up slightly, this indicates that home prices are up considerably since the excise tax is calculated based on the sales price of property sold.

Middlesex North: 2016 Midyear Statistical Summary

The number and type of documents recorded at the Middlesex North Registry of Deeds during the first half of 2016 remained stable compared to the same period in 2015 although foreclosure-related documents were up by about one-third. Here are the numbers for major document types:

Deeds were up 17%, rising from 3018 in the first half of 2015 to 3520 in the first half of 2016;

Mortgages were up just 1%, with 5434 recorded in 2015 and 5505 recorded in 2016;

Foreclosure deeds were up 26%, rising from 86 in 2015 to 108 in 2016;

Orders of Notice were up 33%, rising from 185 in 2015 to 246 in 2016;

Overall documents were up 5%, from 28,249 in the first half of 2015, to 29,674 in the first half of 2015.

Electronic recording continues to grow. Of the 29,674 documents recorded in the first half of 2016, 14,701 (50%) were recorded electronically. About half of all deeds (1703 of 3520) were recorded electronically, but 68% of all mortgages (3735 of 5505) came to the registry electronically.

Major SJC decision on acknowledgements

HUGE decision from the SJC today in Bank of America v Casey

http://www.mass.gov/courts/docs/sjc/reporter-of-decisions/new-opinions/11943.pdf

Massachusetts Supreme Judicial Court answers questions certified to it from US 1^st Circuit of case originating in bankruptcy court. For registry of deeds purposes, the main issue is that the SJC holds that an acknowledgement clause that does not name the person or persons whose acknowledgement is being taken is DEFECTIVE and SHOULD NOT be recorded.

However, the decision also holds that an attorney affidavit properly drafted in accordance with MGL c.183, s.5B, may cure that defect on an already recorded document with a defective acknowledgement.

May recording statistics

Here are some recording statistics from May 2016 compared to numbers from last May:

This May, there were 635 deeds recorded, a 26% increase from last May (502)
. . . there were 1031 mortgages, a 15% increase from last May (895)
. . . there were 20 foreclosure deeds, a 17% decrease from last May (24)
. . . there were 48 orders of notice, a 55% increase from last May (31).
. . . there were 5194 documents recorded, a 12% increase from last May (4643).

Year-to-date, there were 2734 deeds recorded, a 22% increase from last year (2249)
. . . there were 4346 mortgages, a 3% increase from last year (4222)
. . . there were 96 foreclosure deeds, a 37% increase from last year (70)
. . . there were 213 orders of notice, a 50% increase from last year (142).
. . . there were 23631 documents recorded, a 10% increase from last year (21541).

April 2016 recording statistics

Recording activity remained stable in April compared to the prior month and to the same month last year.  Here are the numbers:

592 deeds were recorded in April 2016, a 11% increase from the 532 recorded in April 2015;
996 mortgages were recorded in April 2016, nearly the same as the 993 in the previous April.
10 foreclosure deeds were recorded, a 50% decrease from the 20 in the previous April
37 orders of notice were recorded, a 23% increase from the 30 recorded the previous April.


For year-to-date figures (January, February, March, and April of 2016) compared to the same four months in 2015:

Deeds were up 20%, from 1747 to 2099;
Mortgages were down slightly from 3327 to 3315;
Foreclosure deeds were up 65%, from 46 to 76;
Orders of notice were up 49%, from 111 to 165;
Overall documents were up 9%, from 16898 to 18437.

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.