Tax Stamp procedures

Massachusetts law imposes an excise tax on the sale of real estate.  The tax is based on the sales price of the property and is assessed at the rate of $2.58 per $500 of consideration.  The seller is liable for the tax which is collected by the registry of deeds upon the recording of the new deed.  Recently someone from a registry that uses a computer system different than ours (which is the ACS system), me to describe the tax stamp mechanics of our system.  Here's how I responded:

We use the ACS system for recorded land, registered land, and as our electronic recording interface with the rest of the world (although me receive efiles from multiple vendors).  All phases of the ACS system require the person inputting the data (registry clerks or customers efiling) to enter the amount of consideration any time DEED is selected as a document type.  Based on the amount of consideration entered, the system automatically calculates the tax due.  From this point on, recorded land and registered land work one way and efiling works another.

First, recorded & registered land.  When we have completed data entry at the recording counter and have collected the fees and taxes due from the customer, we "save" the transaction which prompts the ACS system to print a 1" x 3" label that contains (for recorded land) the document number, the book and page, the number of pages in the document and the date/time of recording. For registered land documents, that label contains the document number, the certificate number with which the document is affiliated, the book and page of that certificate and the date/time of recording.

Whenever a tax stamp is required, the ACS system automatically prints a second label for the transaction.  This label contains the name and DOR code for this registry (Middlesex North #14001), the date time of issuance, a DOR control number that's automatically assigned by the ACS system, the document number of the document with which the tax stamp is affiliated, the amount of the tax stamp ("Fee") and the consideration stated on the deed ("Cons").

Electronic recording uses a slightly different system, mostly because with electronic recording, we have no tangible document to which we can affix one of our labels.  Instead, we had the ACS technicians alter the system to print the recording information and tax stamp (where applicable) directly on the document.  When we began electronic recording way back in 2005, there was less flexibility as to where that information could be printed.  Because we do not have strict document formatting standards which results in unpredictable margins, I chose to use a cover sheet with electronic recording.  The ACS system automatically inserts this cover sheet at the start of an electronically filed document.  The ACS system prints on this cover sheet all recording information and all tax stamp information (when applicable). 

Regarding the electronic recording cover sheet, I'm not sure that any other registry uses it with their electronic recordings.  I like it because it clearly distinguishes an electronically recorded document from all the others. 

A few final notes.  There is no electronic recording with registered land documents.  We do not number the individual pages of a document; we just state at the beginning how many pages the document has and put that on the first page.  We do not have any type of "end of document" imprint or insert my signature onto every document.

Registry Revenue

The Registry of Deeds collects revenue for the Commonwealth through recording fees, excise tax stamps and surcharges for the Community Preservation Act and the Technology Fund.  The amounts of money collected in these various categories can be used as indicators of trends in real estate.

Thus far in 2014 the registry has collected $9,026,581 in total revenue which averages $1,128,323 per month.  If the eight month total was projected out over the full year, a total of $13,539,871 should be collected.  This would be a 6% decline from last year when we collected a total of $14,367,410.  The decline is mostly in recording fees.  In 2013, the monthly average of recording fees received was $463,542; over the first eight months of 2014, the monthly recording fee average is just $304,859.  This decline is consistent with the overall decline in documents being recorded.  On a more positive note, the amount collected for excise tax stamps is trending upward.  The monthly average of tax stamps in 2013 was $558,363 while the monthly average through August 2014 is $694,434.  Since the tax stamp liability is based on the sales price of the property, this increase suggests that prices are rising.  The higher the price, the higher the tax paid. 

Electronic recording in August

Again in August 40% of the documents recorded at the Middlesex North Registry of Deeds came to us electronically.  That's the third month in 2014 that we've hit that number.  Here are the monthly percentages for this year:

January - 35%
February - 33%
March - 34%
April - 40%
May - 34%
June - 35%
July - 40%
August - 40%

Of the 4730 documents recorded in August, 1914 came in electronically.  That averages out to 91 electronic documents of a daily average total of 225.  The highest percentage of electronic recordings - 52% - came on Wednesday, August 27.  The most documents received electronically in a single day came on Friday, August 29 with 152.  The highest daily document total came on Friday, August 15 with 369 documents.

August recording statistics

Here's a look at the total number of various types of documents that were recorded in August compared to the same month in 2013:

DEEDS - In August 2014 there were 635 deeds recorded; in August 2013 there were 637.  Statistically there was no change.

MORTGAGES - In August 2014 there were 865 mortgages recorded; in August 2013 there were 1085.  That's a decline of 20%.

FORECLOSURE DEEDS - In August 2014 there were 15 foreclosure deeds recorded; in August 2013 there were 11.  That's an increase of 36% (but given the small number overall, it would be best not to make any conclusions of trends based on these numbers).

ORDERS OF NOTICE - In August 2014 there were 31 orders of notice recorded; in August 2013 there were 39. That's a decrease of 21% (but see comment to Foreclosure Deeds above).

TOTAL DOCUMENTS - In August 2014 there were 4730 documents recorded; in August 2013 there were 5917.  That's a decrease of 21%. 

If you project the eight months of recordings to date (34,731) out over this entire year, it would give us 52,096 for the year.  In 2013 we recorded 67001 for the year.  That would be a decline of 22%.  It would also be the fewest documents recorded in a single year since 1991 when we recorded 52019.

Foreclosure trends in 2014

We haven't heard much about foreclosures recently.  Most likely that's because the volume of foreclosure activity is down.  By foreclosure activity I mean the numbers of orders of notice and foreclosure deeds that are recorded month by month.  Below are the numbers for both - orders of notice are listed first and foreclosure deeds second. 

For the entire district:

January 2014 - 14 orders of notice - 10 foreclosure deeds
February 2014 - 25 orders of notice - 17 foreclosure deeds
March 2014 - 19 orders of notice - 10 foreclosure deeds
April 2014 - 38 orders of notice - 14 foreclosure deeds

May 2014 - 29 orders of notice - 12 foreclosure deeds
June 2014 - 28 orders of notice - 5 foreclosure deeds
July 2014 - 36 orders of notice - 10 foreclosure deeds
August (to 8/25) - 22 orders of notice - 10 foreclosure deeds

For Lowell only:

January 2014 - 4 orders of notice - 3 foreclosure deeds
February 2014 - 8 orders of notice - 9 foreclosure deeds
March 2014 - 5 orders of notice - 6 foreclosure deeds
April 2014 - 15 orders of notice - 5 foreclosure deeds
May 2014 - 9 orders of notice - 6 foreclosure deeds
June 2014 - 10 orders of notice - 4 foreclosure deeds
July 2014 - 10 orders of notice - 4 foreclosure deeds
August (to 8/25) - 9 orders of notice - 9 foreclosure deeds

Electronic Recording stats for July

The Middlesex North Registry of Deeds recorded 5028 documents.  Of them, 2013 (40%) were recorded electronically.  This percentage is on the high side of our monthly averages for this year.  Here are the percentages of documents recorded electronically for each month this year:

January - 35%
February - 33%
March - 34%
April - 40%
May - 34%
June - 35%
July - 40%

During July, the day with the highest percentage of electronic recordings was Friday, July 25 with 56%.  The second highest percentage was Thursday, July 31 with 52%.  It's interesting that the two days that are traditionally the busiest for recording - the last day of the month and the last Friday of the month - are the two days with the highest percentages of electronically recorded documents.  

Globe reports Senate Bill 1987 "dead" for now

I've written several posts recently (on July 30 and on August 12) about Senate Bill 1987, "An Act clearing titles to foreclosed properties" including that Governor Patrick had returned the bill to the legislature with a proposed amendment.  The Boston Globe reports today that the governor's action effectively killed the bill since the legislature is now out of session and is unlikely to reconvene to take up the amendment to this bill.  Here's the key line from the Globe story:

Patrick returned the bill to lawmakers with an amendment, asking them to give consumers 10 years to sue over titles instead of three. Patrick’s action effectively kills the legislation since the Legislature, which adjourned for the year at the end of July, is not expected to take up the amended bill. 

Securitizing non-performing loans

The practice of securitizing mortgages was one of the key drivers of the real estate bubble of a decade ago.  By bundling thousands of mortgages together as the principal of a bond fund and then selling shares of that fund to investors, Wall Street revved up an engine that demanded more and more mortgages for fuel.  The securitization process had been around long before 2004 but it seemed to have achieved new levels of intensity and innovation (not necessarily a good thing, as it turned out) in the early years of the 21st century.

One would think that the collapse of that bubble would have caused a reassessment of the securitization process as an investment vehicle.  According to today's entry in the Deal Book blog on the New York Times' website, that's not the case.  We now have a market for securitizing non-performing mortgages that are either in foreclosure or on the verge of foreclosure.  Last year more than $11 billion dollars worth of assets passed through this process.  There is an estimated $660 billion more in value tied up in nonperforming mortgages so this type of investment may become more popular.

It seems irrational to use "nonperforming" loans as in investment.  Where's the cash flow?  Well, there is none that comes in the form of monthly mortgage payments.  Instead, there are the proceeds from the auctions that occur as the mortgages are foreclosed.  Deal Book says these funds have been returning a 4% investment with a payout in 2 years.

Like I said, this all seems strange to me but anything that moves homes from the stagnation of non-perfoming mortgages to the potential of new, solvent owners is generally a good thing.  

Back to the drawing board for An Act Clearing Titles?

As this year's session of the state legislature came to a close at the end of July, it seemed that Senate Bill 1987, An Act clearing titles to foreclosed property, would be enacted.  Back then, I wrote a blog post explaining the details of the bill.

Although the bill passed the House on a unanimous voice vote in the closing hours of the session, it turned out to be a controversial measure.  Advocates for victims of improper foreclosures objected to what was essentially a three year statute of limitations to challenge a foreclosure.  They take the position that the current statute of limitations is 20 years which is the case for an action of ejectment (used most often in adverse possession cases) and offered an amendment making the time limit 10 years.  Proponents of the bill argued that the shorter time period was necessary to make titles that have a foreclosure in their recent past marketable and that on balance, the public interest was best served by assisting innocent third party purchases of these properties with the shorter time limit.

According to Attorney Richard Vetstein on his Massachusetts Real Estate Blog, Governor Patrick did not sign the bill but sent it back to the legislature with a proposed amendment that would make the time limit 10 years.  Attorney Vetstein surmises that this will effectively kill the bill at this time since it's unlikely that its proponents will agree to the longer time limit.  If that occurs, proponents could refile the bill in the next legislative session, hope that it passes in its current form and hope that the new governor will go ahead and sign it.   

Attorney Arthur L. Eno, Jr. 1924 – 2014

One of the leading Massachusetts real estate lawyers of the second half of the twentieth century, Lowell-native Arthur L. Eno, Jr., passed away on August 6, 2014.  While there are no calling hours, relatives and friends are invited to attend his committal service on Tuesday, August 12, 2014 at 1 p.m. in the Chapel at St. Joseph Cemetery, 96 Riverneck Rd., Chelmsford.  The following is the full text of his obituary from the Martin Funeral Home website:

Attorney Arthur L. Eno, Jr. was born in Lowell April 27, 1924 and died August 6, 2014, a stone’s throw from where he grew up—overlooking the Merrimack River in the city he loved.

As the firstborn son of Arthur L. and Claire (Lamoureux) Eno, Sr. his first language was French. He attended St. Joseph Grammar School and Keith Academy in Lowell and his childhood buddy was Jack Kerouac, another of Lowell’s Franco-American sons.

While Jack’s destiny was to leave Lowell, Louis’ destiny was to stay. Except for college and the war, he never lived more than 20 minutes from the city. Gifted with a strong intellect and an indomitable work ethic, he was accepted into Harvard at age 14. At the suggestion he prepare a bit more socially, he took an additional year of studies at Phillips Academy Andover.

Never one for dawdling, he completed his undergraduate Classics degree in three years; served in the Signal Section of the Army in Morocco, Italy, France and Germany for three years (he was in Paris at the end of the war); spent a year studying at the Sorbonne and returned to enter Harvard Law School, which he completed in just over two years.

After admission to the Massachusetts Bar in 1948, he became an Assistant Professor of Law at Northeastern University at age 24, just as he was opening his own private law practice in Lowell. Then, for the next 53 years, he commuted every day to the same neighborhood, many of them in his bright orange VW bug. In 1994, he created a firm, Eno Boulay and Martin (now Eno Martin Donahue) and retired in 2001.

In 1957, friends masterminded a fateful meeting with Ann Fitzpatrick of New Rochelle, New York. He called her at her New York City office to ask if she could arrange theater tickets for his girlfriend and him. This interesting tactic somehow worked and he successfully wooed Ann to Massachusetts. While the couple couldn’t have been more different in temperament or outlook, they were married 56 years and raised three children, John, Madeleine and Will.

One of their proudest achievements was to move a 300-year-old house from Amesbury to Carlisle, Mass. Louis heard that a beautiful old home was up for auction due to the construction of Route 495. He carefully tucked two sealed bids, one low and one high, into his jacket pocket. When it came time to present bids, he forgot which was which, but still managed to win the house. He and Ann dismantled and moved it—board by board, brick by brick—and painstakingly recreated it on acreage in Carlisle.

Civic involvement was important to him, and he served on numerous professional organizations and political groups: the Lowell School Committee (1951-1955), the Lowell Historic Board (1984-1993), and the Middlesex Canal Commission. He was a Trustee of the Central Savings Bank, a Director of the Jeanne d’Arc Credit Union (1972-1992), President of the Lowell Humane Society, President of the Middlesex Canal Association (1962-1972) and President of the Mass. Conveyancers Association (1982-1984).

While law was his vocation, the history of Lowell was his passion. He edited Cotton Was King, a compilation of essays about Industrial Revolution-era Lowell, published in 1976. He translated Immigrant Odyssey from French to English. Antiquarian books, bottles, and artwork all with the common theme of Lowell lined the bookshelves of the living room, and his office was a veritable museum to the city.

His numerous awards include Honorary Oblate of Mary Immaculate (1979), the Richard Johnson Award (Mass. Conveyancers Association), Lawyer of the Year (Greater Lowell Bar Association, 1991) and Franco-American of the Year (2000).

He was also co-author of Massachusetts Real Estate (WestGroup) and editor of annual supplements for the publication for dozens of years. He edited the Massachusetts Real Estate Sourcebook (published by Mass Continuing Legal Education).

Deeply religious, Louis rarely missed attending Mass, even while traveling. In his rare spare time, he took the family in the station wagon to explore the canals and locks of the eastern seaboard.

Until he lost his sight several years ago, reading was his ultimate pleasure. All he needed for a happy vacation at the family cabin in Vermont was his tall glass of ice tea and a tall stack of library books. 

He read quickly and remembered details. His 10-year-old daughter once asked him to read Charlotte’s Web so she could discuss it with him. He sat on the porch and read it in a single sitting while she watched. A lifetime classics student, he gave his young children Peanuts books in Latin for Christmas.

He loved lobster, croissants, Paris, Quebec, speaking French, reading the Greek philosophers, sci-fi movies, Bennie Hill, large dogs and his family. There was very little about the world, history, or politics that he did not know. For the past several decades, he met his friends Lenny and Jay for lunch, jokes and political talk just about every Saturday.

His baby granddaughter was making her entrance into the world at the very moment he departed.

Surviving him in addition to his beloved wife, Ann, are his children John (Jeanne Palanza) of North Andover, Madeleine (John Roper) of Sandy, Oregon, Will (Maria Dizzia) of Brooklyn, NY, and brand-new granddaughter, Albertine Eno. His brother, Paul A. (Janice) Eno of Taunton, MA and dozens of nephews, nieces, and grandnephews and grandnieces, each of whom he adored. He was preceded in death by his beloved sister Jacqueline.

July 2014 recording statistics

Here are the number of various document types recorded in July 2014 compared to the number from July 2013.

For the entire registry district:

There were 650 deeds recorded in July 2014, a 6% decline from 688 in July 2013
There were 915 mortgages in July 2014, a 28% decline from 1279 in July 2013
There were 10 foreclosure deeds in July 2014, a 29% decline from 14 in July 2013
There were 36 orders of notice in July 2014, a 71% increase from 21 in July 2013

For Lowell only:

There were 157 deeds recorded in July 2014, a 10% decline from 175 in July 2013
There were 179 mortgages in July 2014, a 33% decline from 269 in July 2013
There were 4 foreclosure deeds in July 2014, a 56% decline from 9 in July 2013
There were 10 orders of notice in July 2014, a 100% increase from 5 in July 2013

July year-to-date document totals since 2000

With July wrapping up in a few minutes, I took a quick look at the total number of documents recorded this year from January 1 until July 31 (seven months) and compare that to the number of documents recorded for the same period for each year back to 2000.

2014 - 29,833 documents
2013 - 42,111
2012 - 39,453
2011 - 32,531
2010 - 33,334
2009 - 39,435
2008 - 35,339
2007 - 40,886
2006 - 42,779
2005 - 49,646
2004 - 58,844
2003 - 93,024
2002 - 61,806
2001 - 52,186
2000 - 39,633

An Act clearing titles to foreclosed properties

Ever since the Ibanez decision by the Supreme Judicial Court several years ago, the validity of the title to homes that have a foreclosure in their recent past has been put into doubt.  Ibanez held that a mortgage being foreclosed must have been assigned to the foreclosing lender at least before the first publication of the notice of mortgagee's sale.  To be clear, the SJC's decision did not require that a formal assignment be recorded at the registry of deeds prior to that date; just that the assignment had been made between the original mortgage holder and the foreclosing lender.  Establishing compliance with this holding is a question of fact on a case by case basis and there's no easy or efficient way to make that determination.  Innocent third parties who purchased homes that had a foreclosure somewhere in the background are now locked into those homes until questions about the title can be resolved.  Also, many homes that are still owned by the foreclosing lender are unmarketable which further contributes to the lethargy of the real estate market.

In response to this predicament, the Massachusetts legislature is on the verge of passing Senate Bill 1987 entitled "An Act clearing titles to foreclosed properties."  Essentially, the bill establishes a three year statute of limitations for challenging the validity of a foreclosure.  After the passage of three years (from the later of the date of the foreclosure or of the enactment of this bill), the prior homeowner and everyone else would be barred from challenging the foreclosure.  This would resolve the title defects lurking in the back titles of so many foreclosed properties after three years, at least.

The Globe today has a front page story of the prospects of passage of this bill.  The full text of the bill is available on the state legislature's website.

Why you should hire a lawyer to create a deed

Almost every day a customer comes to the registry of deeds and announces "I want to add a name to my deed."  When we reply "you should hire a lawyer to do it." At that, many become indignant.  We explain that there are no blank forms of deeds available and that there are many variables and details that go into creating a new deed so while anyone could conceivably do it, we strongly recommend against it.

Today I came across an example of why it's inadvisable to start one's legal draftsmanship career with a deed.  The particular deed I saw conveyed the property to "John Smith and Mary Smith as husband and wife."  That was it.  There was no "tenants by the entirety."  Fortunately, the couple had conveyed away the property while both were still alive because that deed would have created a tenancy in common.  (Simply identifying the parties as "husband and wife" means nothing without the "tenants by the entirety" language).  Had one of the spouses passed away while still owning the property under that deed, the decedent's half of the property would have passed through his or her estate and not to the surviving co-owner.

Flood Insurance Premium Relief

Governor Patrick signed a new law yesterday that provides some potential relief to people who own homes in flood zones.  Previously, lenders could and often did require homeowners to obtain flood insurance for the entire value of the property.  This new law, however, gives the homeowner the option of obtaining flood insurance only in the outstanding amount of the mortgage.  For example, if someone owns a home that's worth $200,000 but only owes $100,000, that person can opt to obtain only $100,000 in flood insurance.  Of course, if the house is destroyed by flood, the homeowner's equity would vanish, but when the alternative is flood insurance premiums so high that people are driven to foreclosure, many will be willing to take that risk.  More information about this new law is available in this story from the Patriot Ledger. 

Two way traffic coming to downtown Lowell

This August the traffic pattern in downtown Lowell will undergo a big change.  The web of one way streets that have been in place for a half century will become two way.  The streets involved in this transition are as follows:

Central Street from Market to Merrimack which is currently one way heading towards Merrimack will become two way;

Merrimack Street from Prescott to Dutton which is currently one way heading towards City Hall will be two way;

Shattuck Street which runs from Merrimack to Market and is one way heading towards Market will be two way;

Market Street from Shattuck to Central which is one way heading towards Central will be two way. 

Dutton Street will remain two way and Middle and Palmer Street will remain one way as will Prescott Street. 

There will be new lane markings, cross walks, "no left/right turn" signs, and new parking regulations.  It will take a while for those who have known only the current system to get used to these changes and their consequences.  There are several reasons the change is being made.  One is to make navigating downtown Lowell easier and more direct; two is to calm traffic and thereby promote pedestrian activity; and three is that research has shown that retail districts do better with two way traffic.

Condo Docs

Today's Globe business page has a story about a bill pending in the legislature that would create financial incentives for condominium associations to quickly get condo owners copies of paperwork related to the operation of the condominium such as insurance policies and budgets when requested.  The bill seems to be in response to complaints that delays by associations (or by the management companies employed by associations) create major inconveniences and sometimes financial losses for owners trying to sell or refinance their units.

I'm not aware of the particulars of the bill but it's long been apparent from here at the registry of deeds that many condo associations have difficulty keeping up with the requirements imposed on them by law.  This is particularly true of smaller condo developments which lack the scale needed to make the employment of a management company affordable.  Individual homeowners trying to run the association on their own face a real challenge.  We constantly receive calls from people seeking copies of their "condo docs."  For us, that term means the master deed that first created the condominium and the declaration of trust that created the condominium association.  These can usually be found on our website (under the name of the condominium development or association) and can be downloaded and printed from there.  These two documents, however, often exceed 100 pages combined.  Other documents that are often lacking are those tracking changes in the makeup of the condominium board.  With each change there should be a document that details the departure of the former trustee and the election/acceptance of the new trustee.  This does not seem to be done routinely and often results in a last minute scramble when such documentation is needed by someone.

I'm not sure the legislation cited in the Globe story addresses these issues.  Perhaps some type of consumer handbook for condominium owners that simplifies the legal requirements of maintaining a condominium association would be worthwhile. 

Electronic Recording Statistics

Electronic recording continues to be a major part of our operations.  Here's a month-by-month breakdown of the number of documents recorded electronically to the total number recorded by all means:

January: 1373 of 3919 documents recorded electronically (35%)
February: 1126 of 3382 documents recorded electronically (33%)
March: 1307 of 3886 documents recorded electronically (34%)
April: 1683 of 4227 documents recorded electronically (40%)
May: 1516 of 4476 documents recorded electronically (34%)
June: 1766 of 5095 documents recorded electronically (35%)

First half of 2014: 7398 of 21066 documents recorded electronically (35%)

Mid year statistics

With the month of June in the past we can now look at statistics for the first six months of 2014 compared to the same period in 2013.  The trends are not good.

The number of deeds recorded in the first six months of 2014 was down 8% from the number recorded in 2013 (3045 vs 3313)

The number of mortgages recorded in 2014 was down 48% from the number recorded in 2013 (3948 vs 7623)

The number of foreclosure deeds recorded in 2014 was down 20% from the number recorded in 2013 (68 vs 85).

The number of orders of notice recorded in 2014 was down 26% from the number recorded in 2013 (153 vs 207)

And the overall number of documents recorded in 2014 was down 30% from the number recorded in 2013 (24973 vs 35884).

Back to blogging

For a couple of weeks I've refrained from posting here.  It started as only a day or two that was missed but then grew.  Future posts might not come every day but I will be consistently updating this site with new posts.  Thanks for sticking with it.