By Ilyce Glink and Samuel J. TamkinBy Ilyce Glink and Samuel J. TamkinAugust 2, 2017
Four years ago my husband and I refinanced our home with a mortgage broker, who immediately sold it to a big box lender, to whom we have been paying our mortgage payment for years. I happened to look at the records for our county recorder of deeds, but I don’t see any evidence of the transfer to the big box lender.
Shouldn’t I expect to see a recording of transfer from the mortgage broker to the big box lender and a recording of a satisfaction of the mortgage to the mortgage broker?
We’ll start with the easy part of your question. When a lender sells your loan or transfers the servicing of your loan, the loan or the lien that secures your loan is not “satisfied.” So you’d never expect to see a release of your mortgage due solely to your lender selling off or transferring servicing rights to a different lender. As you have not repaid your loan, there is no release to be seen. You’ll see a release of the mortgage at the time the loan is paid off in full.
Now what you could expect to see when you looked up the property records from your home is an assignment of the mortgage from the mortgage broker to the big box lender. That assignment might be a simple, one-page document indicating that the loan was assigned from the mortgage broker to the big box lender, including the name of the old lender and the name of the new lender along with certain other identifying information about the recorded mortgage.
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Here’s where it gets a bit more complicated: Over the last 15 years or so, lenders have tried to automate the system of assigning mortgages and a group of lenders created the Mortgage Electronic Registration Systems (MERS). The goal was to have MERS act as the agent on the recording side and have lenders transfer loans among and between them without having to record the assignment of the mortgage with each individual property.
So if one property’s mortgage was packaged with 500 other loans in a portfolio for sale, the buying entity of that portfolio wouldn’t have to worry about recording 500 assignments of mortgages — one for each property. MERS would streamline the system from the lender’s side, but the public would not actually know who the owner of the loan was without the assignment. The Great Recession and the resulting loan defaults showed some of the limitations of the MERS system, as courts required that lenders record the assignment of a mortgage on each property. Not all courts in all states required the recording, but many did.
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With that in mind, lenders will use MERS, but when they need to file suit against the homeowner for a loan default, they will now file the assignment of the mortgage against the property.
As for you, if you know who your lender is, you’ll make payments to that lender. If you need proof that the new lender is your lender, and you didn’t receive a letter from your original lender — the mortgage broker — telling you that your loan had been sold and giving you the information on the new lender, then you can call the old lender and have them research the transaction.
In turn, the new lender should contact you with the information you would need to make your future mortgage payments. We can’t tell you whether your jurisdiction would require the assignment of mortgage or not, but know that you shouldn’t expect to see a release of the original mortgage. Hope this information helps you.
Ilyce Glink is the creator of an 18-part webinar/e-book series called “The Intentional Investor: How to Be Wildly Successful in Real Estate” and the author of many books on real estate. She also hosts the “Real Estate Minute” on her YouTube channel. Samuel J.Tamkin is a Chicago-based real estate attorney. Contact them at ThinkGlink.com.
Strawbridge v. Bank of NY Mellon: Appeals Court Justice Peter Agnes Gives Judicial Blessing to MERS Assignment System, Rejects Other Foreclosure Challenges
The most recent foreclosure case heard by a Massachusetts appellate court should allow title underwriters and foreclosing lenders to sleep better at night. In Strawbridge v. Bank of NY Mellon, No. 16-P-1244, embedded below, Appeals Court Justice Peter Agnes upheld the MERS system of holding and assigning mortgages in Massachusetts as a “nominee.” Judge Agnes also ruled that the borrower lacked standing to raise defects in the pooling and servicing agreement by which the bank created a securitized mortgage trust, because she is not a party to that intra-lender agreement. This ruling should simultaneously benefit the housing market, while taking away a major weapon for foreclosure defense attorneys.
The case was brought by well-respected foreclosure defense attorney Glenn Russell, Esq. who represented the borrower, Sandra Strawbridge. Attorney Russell’s cases are typically on the cutting edge of foreclosure defense law, and thus, should always be read with interest.
Strawbridge challenged the foreclosure on the grounds that the Bank did not comply with Massachusetts foreclosure law after the SJC’s decision in Eaton v. FNMA which held that a foreclosing lender must establish it holds both the promissory note and the mortgage. (Title companies have issued comprehensive underwriting guidelines after the Eaton ruling). Strawbridge also claimed that MERS’s assignment of her mortgage to the Bank was void because the assignment occurred after a date established in the pooling service agreement (PSA) of the securitzed trust.
Countrywide-MERS Assignment System
In 2007, Strawbridge obtained a $370,000 mortgage from Countrywide Home Loans. The mortgage designated Mortgage Electronic Systems, Inc. (MERS) as the nominee for Countrywide. In 2009, Strawbridge defaulted on her note by failing to keep up with her mortgage payments. In February, 2010, MERS assigned Strawbridge’s mortgage to Bank of New York Mellon which held the mortgage as part of a securitized trust. A MERS “Assistant Secretary and Vice President” executed the assignment, which was notarized and recorded at the appropriate registry of deeds. Later, in March, 2015, a “Second Assistant Vice President” at the Bank’s loan servicer executed an “Affidavit Regarding Note Secured by Mortgage Being Foreclosed.” That affidavit states that the Bank is the holder of the note. In addition, in April, 2015, the Bank’s loan servicer executed a “Certificate Relative to Foreclosing Mortgagee’s Right to Foreclose Pursuant to 209 C.M.R. 18.21A(2)(c),” which certified that the Bank is the “holder of the Mortgage” and “the holder of the Note or is authorized agent of the Note holder with the specific authority to enforce payment and pursue foreclosure of the Mortgage on behalf of such Note holder.” Finally, in July, 2015, the Bank sent Strawbridge a notice of foreclosure sale, informing her that a foreclosure sale would take place in August. The borrower challenged the sale in the Superior Court which ruled against her.
On appeal, Judge Agnes ruled that “MERS’s nominee status does not preclude it from validly assigning the mortgage, or does it limit MERS’s power to exercise a right of [foreclosure] sale.” The Court also rejected the borrower’s argument that the Bank is required to provide a complete chain of assignments of the mortgage, opting instead to hold the Bank to a less onerous standard of merely producing a single assignment directly from MERS, the last holder of record. Lastly, the judge ruled that the borrower lacked standing to raise defects in the pooling and servicing agreement because she is not a party to that intra-lender agreement.
The impact of this decision is a reaffirmation that the MERS system of assigning mortgages remains legal and binding in Massachusetts. MERS mortgages account for the vast majority of conventional mortgage financing in Massachusetts. This ruling will also make it more difficult for distressed homeowners to challenge foreclosures, clearing the way for banks to sell REO property. I spoke to Attorney Russell about the case, and he indicated that he is considering taking an appeal up to the Supreme Judicial Court. So this may not be the last word on the matter.
Strawbridge v. Bank of NY Mellon by Richard Vetstein on ScribdRich
Tagged as: Glenn Russell attorney, Judge Peter Agnes, Massachusetts foreclosure defense attorney, Massachusetts foreclosure law