Bulletin: MA2012003

Dear Associates:

The Supreme Judicial Court of Massachusetts’ much anticipated decision in Henrietta Eaton vs. Federal National Mortgage Association & another (SJC 11041) 462 Mass. 569 (2012) has defined foreclosing “mortgagee” under M.G.L. Ch. 244 as not only the mortgagee of record but also as the holder and owner of the note:

The meaning of the term “mortgagee” as used in the statutes is not free from ambiguity, but we now construe the term to refer to the person or entity then holding the mortgage and also holding the mortgage note or acting on behalf of the note holder. Id at 569.

The decision shall be applied prospectively to those foreclosures under the power of sale where the statutory notice is provided after June 22, 2012:

In the exceptional circumstances presented here, and for the reasons that we have discussed, we exercise our discretion to hold that the interpretation of the term "mortgagee" in G.L. c. 244, § 14, and related statutory provisions that we adopt in this opinion is to apply only to mortgage foreclosure sales for which the mandatory notice of sale has been given after the date of this opinion. Id. at 588.

On August 3, 2012, the legislature passed Chapter 194 of the Acts of 2012, An Act Preventing Unlawful and Unnecessary Foreclosures (the “Act”) which rewrote M.G.L. Ch. 244, §14 (see Underwriting Rules for Reviewing Floreclosures in Massachusetts) and added M.G.L. Ch. 244, §§35B and 35C which provides for third party reliance on Affidavits as “conclusive evidence that the creditor has fully complied with [sections 35B and 35C] and [that] the mortgagee is entitled to proceed with foreclosure of the subject mortgage under the power of sale contained in the mortgage and any 1 or more of the foreclosure procedures authorized in this chapter.” The newly added §35C requires that a creditor shall not cause publication of notice of foreclosure, as required under M.G.L. Ch. 244, §14, when the creditor knows or should know that the mortgagee is neither the holder of the mortgage note nor the authorized agent of the note holder. The Act took effect on November 1, 2012.

Underwriting Guideline:

In addition to previously stated guidelines, as updated below, when insuring a title derived from a foreclosure under power of sale commenced after June 22, 2012, Stewart will require an Affidavit executed by an “officer”¹ of the foreclosing mortgagee certified under the pains and penalties of perjury by the foreclosing mortgagee or its authorized agent which contains a certification by an Attorney for the foreclosing mortgagee to be recorded with the proper Registry of Deeds as follows:

1) The Affidavit is dated prior to the first publication under M.G.L. ch. 244, §14;

2)  If the foreclosing mortgagee is the current holder and owner of the Note which the mortgage secures, the Affidavit certifies that the foreclosing mortgagee is in possession of the Note;

3)  If the foreclosing mortgagee is acting as the authorized agent of the note holder, the Affidavit certifies that the authorized agent has reviewed the business records of the holder of the Note and certifies that the mortgagee of record is currently in possession of the Note;

4)  If the foreclosing mortgagee is acting as the authorized agent of the note holder, the foreclosing mortgagee must record an appropriate POA or relevant Servicing Agreement authorizing the foreclosing mortgagee to act on behalf of the note holder;

5)  For those mortgage foreclosures conducted between June 22, 2012, and November 1, 2012, the foreclosing Lender must be prepared to produce the original Note² with the allonge attached thereto, as appropriate, as evidence of ownership of the Note;

Currently, the Land Court is not accepting any foreclosures post June 22, 2012 other than on a case by case basis. See Land Court Memo attached. Until such time as the Land Court promulgates a Guideline or releases a more formalized Memo relative to this matter, Affidavits will need to be maintained in the file relative to registered land titles and our agents will need to review those Affidavits to confirm compliance with this bulletin.

As this is an ever evolving area, while we await the Land Court Guidelines, pending case law, REBA Title Standards, etc., we reserve the right to amend this bulletin as industry standards change.  Please continue to be on the lookout for updated bulletins and check with our Underwriting Department for updates.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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¹ For purposes of this Affidavit, "officer" shall mean any "officer" as defined in M.G.L. Ch. 183, §54B.

²A certified original, certified by the noteholder is acceptable.

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