The Massachussetts Attorney General has cast herself as Perseus, hoping to slay the many headed banking Medusa that allegedly has been foreclosing upon Massachussetts citizens in violation of state recording and foreclosure laws. The December 1, 2010 Complaint alleges that lenders have sued to foreclose while falsely representing themselves as the "holder" of the indebtedness. The Complaint recites examples where the foreclosing lender did not take actual assignment of the mortgage until after the cases were filed, after important orders and affidavits were filed, or even after the foreclosure process was final. This is alleged to be a deceptive and unfair trade practice.
Unlike Maryland, the Commonwealth of Massachussetts requires that every transaction involving real property, including assignments of interests in the recorded liens, must hit the land records. Several lenders are being sued for deceptive and unfair trade practices for keeping MERS related assignments off record.
WWMD (what would Maryland do)? IHTS (it's hard to say). Read more after the jump.
I am not aware of any pending case alleging the failure to record assignments, or the reliance upon the MERS registration system is a deceptive practice that violates the Consumer Protection Act. I see it as "standing" issue. The lawyers and the courts simply need to vette any complaint brought to court on behalf of a lender to discern the true owner or holder of the debt instrument, or whether a servicer is entitled to act as agent for the owner. This firm does not handle foreclosures, but we do file a lot of cases involving title defects on behalf of lenders. Our own practice has evolved to require lenders and servicers to demonstrate standing to us, before we file a complaint or motion. A colorable claim is not enough, and I prefer not to "back and fill" after the papers are filed. It is not always an easy or pleasent task, but it's not in-house counsel or assistant-to-the-assistant vice president signing the pleadings! And we are especially wary when a document is executed by someone with the title "Document Signer." (we are not sure if this fellow was entitled to an office with windows overlooking the parking lot, or just a cubby next to the men's room).
Current Maryland law permits a "non-holder" in possession to foreclose and enforce a debt instrument. But this intermediate appellate court decision is very much at risk of reversal, since the Maryland Court of Appeals granted certiorari, last July. The foreclosing lender's status as a "non-holder" entitled to enforce the debt instrument remains in flux. The Anderson v. Burson case was argued before the Maryland Court of Appeals in September, and we remain on the edge of our seats awaiting the decision. If you have a few minutes to be enthralled, catch the webcast of the September 1, 2011 oral argument (No. 8).
The lesson throughout this foreclosure/standing/assignment mess remains constant- follow the trail of assignments and servicing rights and demand documentation for each step BEFORE filing anything resembling a pleading or motion on behalf of a purported "lender." And if you are on the other side of the "v" in litigation, ask the questions, do the discovery, and confirm standing of the parties seeking relief from your clients. These are not new litigation themes.