The title errors from the housing bubble starting to become evident. In two cases this month, the issue of broken chains of mortgage assignments are creating questionable ownership rights. The routine practice of securitized loan instruments created a number of methods of transferring mortgagee interests, some without specific recording. Nominee trustees and mechanisms such as the Mortgage Electronic Registration System (MERS) were intended to streamline the process. Instead, these methods created confusion and ambiguity. It is becoming more common that a foreclosing lender realizes that their interests is not clear in the land records, and rushes to record an assignment to them self at the last minute. In some cases it comes too late.
Just this week, in Massachusetts, a judge invalidated a foreclosure because the assignment was recorded after the foreclosure was commenced. Any reasonably informed title abstractor would know this would be a problem, but some attorney went ahead with it anyway. "First in time, first in right" is one of the basic premises of records priority in searching.
From the article:
“In transferring that interest (the mortgage payments), the bank is responsible to assign its interest at the Registry of Deeds by recording an “assignment.” However, due to the complexity of secondary-mortgage financing, recording an assignment becomes daunting to an investor. As a matter of fact, these notes/mortgages are packaged and sold on Wall Street, thus complicating the problem.”
“Massachusetts Land Court Judge Keith Long invalidated a foreclosure that took place in Springfield. In his decision, he reasoned that since an assignment was recorded after the foreclosing documentation, the foreclosing attorney did not file the foreclosure correctly, thus creating an invalid foreclosure.”
“In the Springfield case, the foreclosing attorney started the foreclosure proceedings without recording the assignment(s). In technical terms, the foreclosure that took place was on behalf of the wrong bank (investor) because the assignments were not recorded at the Registry. As a matter of fact, the foreclosing attorney recorded the assignments after the property was foreclosed on. In his ruling, the judge commented that “the problem the lenders face is entirely of their own making …
This problem is not exclusive to the single family residential market. A multi-million dollar property in Manhattan is tied up in litigation over the same process.
- “Defendant Adrian George, appearing pro se, defaulted on a mortgage payment for the building located at 34 West 128th Street in Manhattan. The mortgage was issued by Credit Suisse First Boston Financial Corporation in 2005 (Notice of Motion for Reargument, Exhibit B). At the time that defendant George defaulted on the mortgage, the loan was held by Mortgage Electronic Registration Systems, Inc., as nominee for Credit Suisse First Boston Financial Corporation, its successors and assigns. By decision dated January 6, 2009, Judge Carol Edmead denied both plaintiff’s motion for summary judgment, and defendant George’s cross-motion. The denial of plaintiff’s motion was predicated on a claimed failure to address Adrian George’s claim that plaintiff no longer holds the note and mortgage for the subject property.
- “The papers submitted in this action indicate that plaintiff was assigned the mortgage at issue on February 27, 2008, and that the assignment of the mortgage was recorded on March 7, 2008. The instant action, however, was commenced on February 21, 2008, roughly a week before the assignment took place and more than two weeks prior to its recording. Although plaintiff claims that it was always the holder of the subject mortgage, there are no documents annexed to any of the current or prior papers submitted in this action substantiating this claim. In the absence of this type of documentation, plaintiff, contrary to its contentions, fails to demonstrate an entitlement to a judgment of foreclosure as a matter of law because it appears that they did not hold the mortgage and note when they commenced this action on February 21, 2008.”
I expect that this pattern of out-of-order recordings will plague the clear determination of ownership claims for years, and expert abstractors will be needed to untangle the chain of assignments, and even property transfers.