Massachusetts Ibanez ruling sets stage for mortgage ownership remedy
Banking analysts said the Massachusetts Supreme Court ruling last week will not significantly impact foreclosure practices but instead clears a path to establish securitization trustees as holder of a mortgage.
The ruling, commonly referred to as the Ibanez ruling for homeowner Antonio Ibanez, voided two foreclosures from U.S. Bank ($35.13 0.46%) and Wells Fargo ($40.11 0.2299%), declaring the two banks could not prove they held a valid assignment of the mortgage before filing. Bank of America Merrill Lynch analysts said the ruling leaves the door open to fix the chain of ownership issues in the secondary market.
The court did not suggest that an assignment must be in recordable form at the time a notice of foreclosure sale is issued, but it did say that the executed agreement that assigns the pool of mortgages to a holder would suffice to establish the trustee as the mortgage holder.
"With respect to chain of assignment of mortgages, the decision by the courts seems clear cut: Proper assignment needs to be in place before a foreclosure can be initiated in Massachusetts," the analysts said.
Still, there are unsolved issues in the mortgage documentation process. Proper assignment could take time, extending already record-long foreclosure timelines, which would dump more costs on servicers and trustees as they get their paperwork in order. Also, analysts said, more lawsuits are possible from borrowers who may have been foreclosed on improperly in the past.
Still, the foreclosure process going forward will not be significantly impacted, according to JPMorgan analysts.
"Based on our conversations with local counsel in Massachusetts, attorneys in foreclosure cases have been following the procedure of getting a 'current assignment' on loans for some time, in part as a response to this court case," according to their report.
Both BofAML and JPMorgan analysts said the ruling only applies to Massachusetts law, citing that while a ruling in one state may set precedent, it does not carry over to others.
Write to Jon Prior.
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