I thought it would be a good idea to list my Top 10 favorite websites, blogs and other internet sites for real estate. These include law blogs, local and national real estate sites, and even marketing blogs. Feel free to bookmark this post!
You can’t go wrong with the Wall Street Journal, right? Some of the best real estate reporters and commentators contribute to this site. A must read on your Google Reader list.
This is the main portal into the vast majority of the Massachusetts Registries of Deeds. From here you can look up the deeds, mortgages and liens on virtually any property in the state. If you need a guide to searching the online registry of deeds and a full listing of every registry, read this post.
I really love this frequently updated blog by the team of tech savvy agents at Charles Gate Realty. It’s also a great resource for rentals which is often ignored in the blogosphere.
An online real estate magazine with a robust editorial staff, covering a wide range of topics, including tech and social media, business news, and also good op-ed pieces.
Maintained by well-known mortgage banker, Brian Cavanaugh of RMS Mortgage, this is one of the best mortgage lending blogs out there, frequently updated with current news on the mortgage market.
This is Boston.com’s popular real estate blog managed by buyer’s agent, Rona Fishman, and reporter/writer Scott Van Voorhis. The blog has a very active group of trolls commenters who frequently stir up lively debate. Disclaimer: I contribute a weekly post to this blog.
The very experienced group of attorneys at the venerable real estate firm of Rackemann, Sawyer are one of the few large firms who blog, and thankfully they do, because they have a wealth of knowledge and information to share. The blog is managed by Donald Pinto, who’s one of the best real estate attorneys in the Commonwealth and a really good guy.
Real estate agent bloggers and wanna-be’s, pay close attention. This is how you blog. This is a great and frequently updated blog all about “the city squares of Cambridge, Somerville and Medford and the town centers of Arlington, Watertown and Belmont.” Written by Elizabeth Bolton, Realtor.
Must read for keeping up with the latest in real estate technology, marketing, and social media. Contributors includes the well-known social media evangelists, Chris Smith and Katie Lance.
Another standout blog from the Cambridge-Somerville area. Realtor Lara Gordon is a smart, witty writer who keeps her blog frequently updated with urban gems such as the worst places for bike crashes (Harvard Square, of course!), the Somerville Foodie Crawl, and her own photos of the new Charlestown-Cambridge footbridge (I wish more agents did this).
Our sole entry west of I-495, Lesley Lambert has been blogging and tweeting forever, mixing posts about the Berkshire County lifestyle with a peek into her personal “Dancing Queen” passion.
This is a nationally syndicated blog with a local feel. Recent posts include the opening of Southie’s Gate of Heaven Gym, a new Mexican joint in Brookline and new fixer-upper in Inman Square.
Well, that’s my list. Feel free to add your favorite sites to the comments, and we can expand this list!
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Richard D. Vetstein, Esq. is a Massachusetts real estate attorney who is passionate about staying up to date on real estate issues, nationally, regionally and locally.
My kids (ages 9 and 6) are really into Halloween this year, convincing me into spending over $100 on laughing tombstones, zombies and other decorations at iParty over the weekend. I love Halloween, and enjoy when people go all out on decorating their homes.
But what if your house is truly haunted? Or you are a broker trying to sell a home which may have a paranormal past, like the scene of a murder of suicide? How can you protect yourself from buying a haunted house?
In Massachusetts there’s a law for that! Seriously….
Under Massachusetts law, real estate brokers and sellers are under no legal obligation to disclose that a property was the site of a felony, suicide or homicide, or has been the site of an alleged “parapsychological or supernatural phenomenon,” i.e., a haunted house.
The fact or suspicion that real property may be or is psychologically impacted shall not be deemed to be a material fact required to be disclosed in a real estate transaction. “Psychologically impacted” shall mean an impact being the result of facts or suspicions including, but not limited to, the following:
(b) that the real property was the site of a felony, suicide or homicide; and
(c) that the real property has been the site of an alleged parapsychological or supernatural phenomenon.
No cause of action shall arise or be maintained against a seller or lessor of real property or a real estate broker or salesman, by statute or at common law, for failure to disclose to a buyer or tenant that the real property is or was psychologically impacted.
Thus, real estate agents have no legal duty to inform buyers that a house has a paranormal past. (I’m sure some agents would so inform their buyers, but legally buyers are on their own to discover these types of stigmas).
Of course in this digital era, an easy way to determine whether a house is truly “haunted” is to Google the property address and the last few prior owners and see what comes up. If there was a murder or suicide–or even ghosts– it should reveal itself. Of course you can always hire Ghostbusters.
Richard D. Vetstein, Esq. is a Massachusetts real estate attorney. He is debating between dressing up as Darth Vader or the Pirate Jack Sparrow this Halloween.
All Politics Aside, It’s Time To Bring Housing & Real Estate Back To the Forefront
In the most tweeted, Facebook-ed and instant polled Presidential Campaign ever, there is one topic which has been met with surprisingly deafening silence: the U.S. Housing and Real Estate Market. During last week’s debate, we heard a lot about tax plans and cuts, energy, health care and jobs, but nothing on the real estate market. Nothing…This year’s presidential candidates have mostly avoided discussing an industry that’s largely responsible for the last five years of economic pain. But why?
For sure, the subject of housing remains an extremely sensitive one. President Obama might prefer that the real estate market, whose imbalances sparked the financial crisis, to remain a ghost issue because of a lackluster record at combating the foreclosure epidemic. He is also blamed for not doing enough on the loan modification front with the dismal HAMP and HARP programs. Mitt Romney, meanwhile, might like to steer clear of the topic because a hard stance on housing could alienate voters whom he needs to win. I’m not here to debate one particular side or candidate, but rather to simply pose the question of why no talk on real estate?
Obama Falls Short of Expectations?
“Obama’s major housing initiatives have fallen short of expectations, and so Obama doesn’t have big victories to point to,” said Jed Kolko, chief economist for listing service Trulia. “The housing market is still struggling in many parts of the country, so this is not a problem that’s been solved.” The administration’s flagship relief program, the Home Affordable Modification Program (HAMP), has helped 1 million homeowners obtain lower interest rates, principal reductions, more time to pay their mortgages or any combination of the three. But that pales in comparison to the 3 to 4 million homeowners whom the program was supposed to help. Meanwhile, the Home Affordable Refinance Program (HARP), designed to help 5 million homeowners refinance their mortgages into lower interest rates, has benefited only about 1.5 million homeowners.
Romney Gun-Shy On Housing?
Romney’s housing platform includes the potential elimination of Fannie Mae and Freddie Mac, and that prospect may be just too scary and radical to everyday voters and homeowners who have relied on the government giants to stabilized the formerly free-falling real estate market. “To stake out what you think Fannie and Freddie’s future is is to alienate somebody,” commented Mark Calabria, director of financial regulation studies at the Cato Institute. “Realtors and home builders tend to be politically active — and Republicans,” noted Mr. Calabria. Indeed, Romney’s free-market stance on housing, if articulated bluntly, could unsettle many distressed homeowners as well. He has said that he believes that the housing market should naturally “hit bottom,” and has harshly criticized Obama’s relief programs.
Let’s Get The Housing Dialogue Going!
Over the past several months, I’ve enjoyed healthy (and even civil) political discussion on the issues on my Facebook feed. (Please join in!). The real estate market and housing alwayscomes up, whether it’s in the context of folks not able to refinance their underwater mortgages, the loss of their equity, or the impact of unemployment on the general real estate sector. Granted, the real estate market has made significant gains since the bottom fell out in 2008, but folks are still hurting out there and it’s really been the Fed and its low interest rates which have largely kept the market from imploding. So, we shouldbe talking about all the issues. And that means federally assisted refinancing for underwater mortgages, Fed policy on interest rates, and the future of the GSE’s. Oh and by the way, where did all that foreclosure crisis settlement money go? I have yet to hear about anyone who has received any assistance from that fund.
Well, if Obama and Romney aren’t going to talk housing and real estate, we can do it here on this blog. Feel free to post your comments, diatribes or soapbox speeches in the comment section below. You can use the Facebook comments too. Keep the debate civil please!
Fate of New Long Wharf Waterfront Restaurant At Stake
A neighborhood fight to preserve prime public waterfront space at the tip of Boston’s Long Wharf will be heard by the Supreme Judicial Court (SJC) in November. Ten North End neighbors — termed the “North End Ten” — have been battling the Boston Redevelopment Authority (BRA) and the Department of Environmental Protection (DEP) for six years over the city’s plan to lease the space to a restaurateur who wants to build “Doc’s Long Wharf,” a new pub style restaurant and bar at the scenic location. Residents argue that the state constitution requires a two-thirds vote of the Legislature before public open space can be converted to other uses.
The legal issues in the case are rather complicated, dealing with historic uses of Long Wharf and whether it was dedicated to public use as open space and is thus protected under Article 97 of the Massachusetts Constitution, requiring a two-thirds vote of the Legislature to effect a disposition or change in use of the land. The BRA’s original proposal was for a 220-seat pub that would have replaced the pavilion located beyond the Marriott Long Wharf hotel and Chart House restaurant. BRA officials have argued that the restaurant would help activate the waterfront. Residents argued it would create more noise and disturbance in a picturesque park area.
This case really exemplifies why Massachusetts and the City of Boston have a bad reputation for real estate permitting. If you ever been down to this area at the tip of Long Wharf, you know it’s screaming out for better use. Right now, it’s often inhabited by skateboarders and vagrants, annoying folks trying to soak in the beautiful views of Boston Harbor. I think that a nice restaurant with stunning harbor views and an outdoor patio area would be amazing and a great addition to the under-utilized end of that pier. Under the proposed Chapter 91 license, the proposed use would maintain public access along the wharf. It was the same situation with Rowes Wharf decades ago, and now look at that space. It is a model of waterfront mixed use development.
But 10 neighborhood activists disagree, and the travesty is that they can derail this project for years. Indeed, the lead plaintiff, Sanjoy Mahajan, lives a mile away from Long Wharf on Jackson Street. The other plaintiffs are scattered throughout North End proper, buffered from the proposed restaurant by the massive Marriott Long Wharf, the harbor and Christopher Columbus Park. These activists are not remotely affected by the proposed restaurant in terms of noise and the like. Notably, not one resident of Harbor Towers, the residential condominium closest to Long Wharf, have participated in this legal challenge.
I hope that even if the SJC rules that a 2/3rds legislative vote is required here, that our elected officials will not cave in to the whims of a few locals at the expense of the public at large.
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Richard D. Vetstein, Esq. is a Massachusetts real estate and zoning attorney. Mr. Vetstein frequently represents Boston residents and companies in zoning matters before City of Boston zoning and licensing boards.
Court Will Consider Mortgage Servicer/MERS Standing and Statutory Foreclosure Affidavits
The Supreme Judicial Court has a busy Fall Term with several important foreclosure cases on the docket. Here’s a quick summary.
HSBC Bank v. Jodi Matt (SJC-11101)
The SJC is considering whether a mortgage servicer holding a securitized mortgage has standing to even begin a foreclosure action in the Land Court under the Servicemembers Civil Relief Act–one of the first steps in the Massachusetts foreclosure process. I wrote about this case in a prior post here. This ruling will affect just about every conventional mortgage foreclosure in the state. The lower court Land Court opinion can be read here. The court asked for friend-of-the-court briefs, and the Real Estate Bar Association filed a brief supporting the foreclosing lenders. Glenn Russell’s brief for the appellant Jodi Matt can be read here.
Oral arguments were held in early September, but unfortunately the webcast is unavailable. One of my sources told me that the justices were very active and peppered both attorneys with lots of questions.
Following the recent Eaton v. FNMA case, which held that a mortgage servicer may foreclosure upon a showing of proper agency and authority, I predict that the Court will ultimately hold that servicers and lenders holding rights to securitized mortgages have legal standing to start the Servicemembers Civil Relief Act proceeding, even if they merely hold a contractual right to the actual mortgage. The most compelling rationale for such a ruling is that the only purpose of the Servicemember proceeding is to ascertain whether the borrower is in active military service. It is not intended to be a forum to litigate issues relating to the propriety of securitized mortgage transfers and contractual standing.
Federal National Mortgage Ass’n v. Hendricks (SJC 11234)
This case has the potential to change Massachusetts foreclosure practice. The issue presented is whether the long-standing Massachusetts statutory form foreclosure affidavit that the foreclosing lender has complied with the foreclosure laws is on its face sufficient. The case will also decide whether the statutory power of sale form, originally drafted in 1912, is also facially sufficient. The docket and briefs filed in the case can be found here.
The case originated from the Boston Housing Court where Hendricks fought his post-foreclosure eviction by Fannie Mae, asserting that the affidavits filed by Fannie Mae reciting compliance with the foreclosure statute were inadmissible and insufficient. A Housing Court judge disagreed, and upheld the foreclosure and the eviction.
With the well-publicized robo-signing controversy looming in the background, I would not be surprised if the SJC rules in favor of Hendricks here and in the process tightens up the requirements for filing foreclosure affidavits. Indeed, that is the trend with the Legislature’s recent passing of the Foreclosure Prevention Act. As with the Eaton v. FNMA ruling, the Court should likely make its ruling prospective and not retroactive so as to not disrupt titles in the Commonwealth.
Galiastro v. MERS (SJC DAR 20960)
The SJC just accepted direct appellate review from the Appeals Court in this interesting case. This case will finally decide whether Mortgage Electronic Registration Systems (MERS) has standing to foreclose in its own name. The case, however, is somewhat mooted because MERS no longer forecloses in its own name, but there are plenty of MERS foreclosures in back titles. The SJC has announced that it will solicit friend-of-the-court briefs on the issue of “whether MERS “has standing to pursue a foreclosure in its own right as a named ‘mortgagee’ with ability to act limited solely as a ‘nominee’ and without any ownership interest or rights in the promissory note associated with the mortgage; whether the prospective mandate of Eaton v. Federal National Mortgage Association, 462 Mass. 569 (2012), applies to cases that were pending on appeal at the time that case was decided.” This case will be argued in April 2013. I will have analysis after that.
Condo Sales May Get Slight Boost, But Financing Rules RemainTight
Responding to lender, condominium association and consumer outcry that the existing FHA condominium lending guidelines are too strict, the Federal Home Administration (FHA) on September 13, 2012 announced a round of changes which will hopefully make it easier for borrowers to qualify for FHA condo loans. The full FHA announcement can be found here.
While some of the changes are a step in the right direction, I think overall they are a mixed bag, as FHA left some of the most onerous provisions intact. I’m skeptical that these new changes will have a major impact on condominium sales, but of course, any loosening of the strict requirements is a good thing.
Condo Fee Delinquency Rule Increased to 60 Days Overdue
FHA is softening its stance on delinquent monthly condo fees and home owner association (HOA) dues. FHA is now allowing up to 15% of a project’s units to be 60-days delinquent on condo fees, up from just 30 days delinquent under the prior rule. This change acknowledges the depressed economy which has caused many condo unit owners to have trouble paying their condo fees. This is definitely a good change.
Expanded Investor Purchasing Allowed
Under the new rules, investors can come in and buy more units in a project than they could previously. They can now buy up to 50% of the project units, up from just 10% before, but with an important caveat: the developer must convey at least 50% of the units to individual owners or be under contract as owner-occupied.
Owner Occupancy Limits and Total FHA Financing Percentage Unchanged
The biggest disappointment of the new rules is that the main impediment to FHA condo financing remains unchanged, and that’s the 50% rule. Before any new buyer can obtain FHA financing, 50% of a project’s units be sold to third party buyers. This is what I’ve called the Catch-22. FHA provides the most first time home financing, so how can a developer expect to sell out his project if he cannot offer initial FHA financing? Doesn’t make any sense. I agree with the National Association of Realtors and the Community Association Institute on this one. Get rid of the 50% rule or decrease it to 25% or less.
Another restriction that hasn’t changed is the number of units that can have an FHA-backed loan. Only half the units can have FHA financing, so a borrower can’t get FHA approval if his unit would put the number of FHA financed units over 50%. That limitation remains unchanged, and that’s a killer for a lot of projects.
Spot Approvals Remain Dead
Mortgage lenders used to love FHA “spot approvals” which could by-pass the involved standard FHA approval process in order to get individual unit financing. Problem was is that they love spot approvals way too much, and they got abused. Ah, a few bad apples ruin it for everyone. FHA did not resurrect spot approvals from the dead on this go-around. Maybe they will be back when the economy gets better.
More Commercial Space OK
Projects can also have more space devoted to non-residential commercial uses than before. You see this a now in Boston with Starbucks and a bank office on the ground floor of a new condominium building. Up to this point, only 25% of project space could be used for commercial purpose. Now 50% of the project can be commercial, although certain authority for approval is reserved for the local FHA office. This will benefit the newer mixed use projects in urban markets.
Fidelity Insurance Coverage Required
Important for all condominium professional management companies. If the condominium engages the services of a management company, the company must obtain its own fidelity coverage meeting the FHA association coverage requirements or the association’s policy must name the management company as an insured, or the association’s policy must include an endorsement stating that management company employees subject to the direction and control of the association are covered by the policy. This is a substantial change to the previous requirements that required management companies to obtain separate fidelity insurance for each condominium.
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Richard D. Vetstein, Esq. is an experienced Massachusetts condominium attorney who regularly advises condominium associations on FHA certification issues. Please contact Mr. Vetstein at [email protected].
Worcester Diocese Allegedly Pulled Out of Deal Over Possibility Of Gay Marriages at Mansion
James Fairbanks and Alain Beret, married business partners from Sutton, had been searching for the perfect property for nearly two years when they discovered Oakhurst, an aging mansion on 26 beautiful acres in Northbridge. The former retreat center, which was affiliated with the Diocese of Worcester and had been on the market for some time, would be the ideal spot for their next venture: an inn that would host weddings and other big events, as reported by the Boston Globe. When the Diocese of Worcester unexpectedly dropped out of negotiations with them in June, Fairbanks and Beret were shocked — and flummoxed. Then, they say, a church attorney inadvertently forwarded their broker an e-mail from Monsignor Thomas Sullivan, chancellor of the diocese, advising a church broker that he was no longer interested in selling to Fairbanks and Beret “because of a potentiality of gay marriages” there.
Sullivan wrote: “I just went down the hall and discussed it with the bishop. Because of the potentiality of gay marriages there, something you shared with us yesterday, we are not interested in going forward with these buyers. I think they’re shaky anyway. So, just tell them that we will not accept their revised plan and the diocese is making new plans for the property. You find the language.”
Today, the gay couple filed what could be a landmark lawsuit in Worcester Superior Court against Sullivan, the bishop, the church’s real estate agent, and the nonprofit retreat center, the House of Affirmation, alleging they discriminated against Beret and Fairbanks on the basis of sexual orientation in the course of a real estate negotiation, violating state law. A copy of the Complaint in Fairbanks, et al. v. Roman Catholic Bishop of Worcester, et al. is embedded below.
A spokesperson for the church told the Globe that the church, as a matter of policy, will not sell properties where Masses have been celebrated to people who plan to host same-sex weddings. The church will not sell to developers who plan to transform them into abortion clinics either, he said — or to bars, lounges, or other kinds of uses that church officials deem inappropriate. “We wouldn’t sell our churches and our properties to any of a number of things that would reflect badly on the church,” he said. “These buildings are sacred to the memory of Catholics.”
In an even more ironic twist, the Diocese previously used the mansion for a retreat center for pedophile priests, according to Banker & Tradesman.
Watching this case play out will certainly be very interesting both from a legal and political perspective. Massachusetts — the birthplace of gay marriage — is one of the few states in the country which outlaws housing discrimination based on sexual orientation. One of the questions will be whether the Church is covered under the anti-discrimination law given their historical stance against homosexuals and gay marriage.
Also, as I pointed out to a reporter covering this story, the church could have negotiated a restriction on the future use of the property, which is common for sales involving open space, recreational use and such. It appears that the church did not do this, but instead came up with a pre-textual reason after the fact to support their decision not to proceed with the sale due to the gay marriage issue. We will be monitoring this interesting case!
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Richard D. Vetstein, Esq. is a Massachusetts real estate attorney with offices in Framingham and Needham, Mass. He can be reached at [email protected].
School is back and summer is over. September 1 and the start of the new rental cycle is right around the corner. It’s time to review my best practices to get trouble-free, paying tenants in your Massachusetts rental property.
Screening Prospective Massachusetts Renters: What You Can and Cannot Ask
Landlords canlegally ask prospective renters about the following:
income and current employment
prior landlord references
credit history
criminal history
Your rental application should include a full release of all credit history and CORI (Criminal Offender Registry Information). Use CORI information with caution, however, and offer the tenant an opportunity to explain any issues. Landlords should also check the Sex Offender Registry as they can be held liable for renting to a known offender. Use the rental application and other forms from the Greater Boston Real Estate Board.
Landlords cannotask about the following:
race, color, national origin, ancestry, or gender
sexual orientation
age
marital status
religion
military/veteran status
disability, receipt of public assistance
children.
If you deny a renter’s application, it should be based on financial reasons, such as questionable credit, income or rental history. Stay away from reasons related to children, public assistance and the like. Be aware that this time of year the Massachusetts Commission Against Discrimination and Attorney General’s Office send out dummy rental applicants in an attempt to catch unwary landlords who deny housing for discriminatory reasons.
Students, especially undergraduates, often create problems for landlords. It’s important to meet with students personally before signing the lease and firmly explain a “no tolerance” policy against excessive noise, parties and misbehavior. Remember, under a two year old Boston zoning ordinance, no more than four (4) full time undergraduate students may live together in a single apartment.
Careful screening of tenants is far less expensive than the cost of evicting a problem tenant.
My Property Has Lead Paint. Can I Refuse To Rent to Tenants With Small Kids?
Under the Massachusetts Lead Paint Law, whenever a child under six years of age comes to live in a rental property, the property owner has a responsibility to discover whether there is any lead paint on the property and to de-lead to protect the young children living there. A property owner or real estate agent cannot get around the legal requirements to disclose information about known lead hazards simply by refusing to rent to families with young children. They also cannot refuse to renew the lease of a pregnant woman or a family with young children just because a property may contain lead hazards. Landlords cannot refuse to rent simply because they do not want to spend the money to de-lead the property. Any of these acts is a violation of the Lead Law, the Consumer Protection Act, and various Massachusetts anti-discrimination statutes that can have serious penalties for a property owner or real estate agent.
For more information about Massachusetts rental screening, landlord-tenant law and evictions, please read these articles or contact me below. I would be happy to help you get good tenants.
Coakley Expects Fed’s Compliance with New Loan Modification Law
Attorney General Martha Coakley is picking a very public fight with federal mortgage giants, Fannie Mae and Freddie Mac, in the wake of the new Massachusetts Foreclosure Prevention Act passed earlier in August. The new law requires that lenders first explore loan modifications before starting foreclosure proceedings.Fannie and Freddie control approximately 60% of all U.S. residential mortgages.
In a letter broadcast to the press yesterday, she demands that “Fannie Mae and Freddie Mac, like all creditors, to comply with these statutory obligations as they conduct business in Massachusetts. These loan modifications are critical to assisting distressed homeowners, avoiding unnecessary foreclosures, and restoring a healthy economy in our Commonwealth,” Coakley said. Stefanie Johnson, a spokeswoman for the Federal Housing Finance Agency, said, “We are reviewing the letter and will respond soon.”
The fact that AG Coakley had to write the letter begs the question. Will Fannie and Freddie comply with the new Massachusetts foreclosure law? Maybe not, if past performance is any indicator of future results.
The Federal Housing Finance Agent (FHFA), the federal regulator overseeing Fannie and Freddie, has been acting like some sort of federal rogue agency of late. Last month, the agency publicly rejected the new Obama principal reduction plan, to the chagrin of Treasury Secretary Tim Geither. And in June, it came up with a method to skirt the new tough foreclosure law passed in Hawaii. It seems that the sole concern of FHFA is to get foreclosures completed and REO properties sold off as quickly as humanly possible, homeowners be damned.
If Fannie and Freddie blow off Coakley, this will seriously dilute the new Foreclosure Act. We will monitor the situation as always.
On August 3, 2012, Massachusetts Governor Deval Patrick signed into law what’s been called the new Foreclosure Prevention Law. The text of the law can be found at House Bill No. 4323. The new law makes significant changes to existing foreclosure practices, and also attempts to clean up the recent turmoil surrounding defective foreclosure titles after the U.S. Bank v. Ibanez and Eaton v. FNMA rulings, an issue for which I’ve been advocating for years. It goes into effect on Nov. 1, 2012. A quick summary is as follows with details below:
New requirement that mortgage assignments be recorded
New mandatory requirement to offer loan modifications and mediation to qualified borrowers
New Eaton foreclosure affidavit confirming ownership of note/mortgage loan
Protection for third party buyers of foreclosed properties
Mortgage Assignments Must be Recorded
Going forward, a foreclosure may not proceed unless the entire chain of mortgage assignments from the original mortgagee to the foreclosing entity is recorded. This is a statutory codification of the recommendation of the SJC in U.S. Bank v. Ibanez case, and should provide some well-needed clarity for titles. Under the new law, no foreclosure notice will be valid unless “(i) at the time such notice is mailed, an assignment, or chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of deeds . . . and (ii) the recording information for all recorded assignments is referenced in the notice of sale required in this section.”
Unfortunately, the new law does not address defective foreclosure titles created before the Ibanez decision, as we were hoping. Accordingly, folks who are still waiting for legislative help to cure their defective foreclosure titles may be left without a remedy.
Mandatory Loan Modification Efforts
In a provision pushed hard by housing advocates, the new law will require mortgage lenders to attempt to offer loan modifications instead of foreclosing. The qualification standards are rather complex and beyond the scope of this post. In sum, if the net present value of a modified mortgage exceeds the anticipated net recovery at foreclosure, the lender has to offer the borrower a modification.
Importantly, the new law provides immunity in favor of bona fide purchasers of foreclosed properties from claims by disgruntled borrowers that the lenders did not follow the loan modification rules.
New Eaton Affidavit
The new law also incorporates the SJC’s recent holding in Eaton v. Fannie Mae, where the SJC held that a foreclosing lender must be both the assignee of the mortgage and be either note holder or acting on behalf of the note holder. New Section 35C prohibits a creditor from publishing a foreclosure notice if 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.” It also requires the creditor to record an affidavit swearing to its compliance with the new section. The affidavit will shield third-party buyers from title claims, but will not shield creditors from potential liability to the borrowers. Eaton suggested the use of affidavits, but now the statute requires it. Creditors cannot pass the cost of any corrective documentation upon borrowers or third parties.
Impact?
As with any major reform legislation, there will be a learning curve for foreclosing lenders and foreclosure attorneys to get documentation and systems in place to comply with the new requirements. We could potentially see additional litigation coming out of this new law brought by borrowers who feel they were not given a “fair shake” at a loan modification. From a real estate title perspective, the new law is a step in the right direction, but I was very disappointed that nothing was done to help folks who are still saddled with Ibanez title defects. This was the perfect opportunity to address that issue, and I’m afraid it won’t come up again.
Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney with an expertise in foreclosure related issues. You can contact him at [email protected].
Effective Preparation and Historical Timeline Key To Trial
I just completed a four day jury waived trial in an adverse possession case in Superior Court. I wanted to share some of my experience as a Massachusetts adverse possession attorney, and what I learned during this case. (For confidentiality reasons, I will not disclose the name of the case or the county in which it was brought). We are waiting for a decision from the judge, which will take several months.
Side Property Line Dispute
The case was a fight over land between two homes in a suburban town. The dispute arose after my client, “Ms. Jones,” surveyed her property in anticipation of doing an addition project. The survey unfortunately revealed that a portion of the driveway and nearby retaining wall owned by her next door neighbor, “Mr. and Mrs. Smith,” encroached the side lot line. Efforts to resolve the encroachment dispute were unsuccessful, and the Smiths ultimately filed the adverse possession lawsuit, claiming that they had used not only the small encroached area, but a much larger 2,200 square foot area of Ms. Jones’ side yard, for more than 40 years.
Tracking Down Old Owners
Since the Smiths were claiming adverse possession going back to the 1960’s, the first and most important thing we had to do was to track down all the old owners of my client’s property and put together an accurate historical timeline of the property. Including my client, there were seven owners of the property! This was the only way my client could mount a defense against the Smith’s claim, since the Smiths owned their property all that time. One of the old owners lived in Florida, and he came up to testify about having pig roasts near the disputed area, among other stories. Other former owners testified and a few were not exactly thrilled to be dragged into court. That’s the nature of the beast.
Proving The Timeline
Next, we had to demonstrate the historical use of the disputed area over four decades. These are very factually intensive cases. The key to every adverse possession case is what and how the parties actually used the disputed area. The parties’ knowledge or lack thereof of the true boundary line is really not the important issue. Generally, the more intense the use and the more the claimant takes action to exclude the other party from using the disputed land, the better the claim for adverse possession. Conversely, the less intense the use, the less successful the claim. Still, adverse possession is a very difficult claim to win as the law does not favor taking someone’s land.
Some important questions in any Massachusetts adverse possession case are: Did the plaintiff mow the lawn? Did they maintain any landscaping? Did they install a fence or other barrier? Did they demarcate where they used the land? Did they make any permanent improvements to the disputed area? Did they plant anything or install a garden? Did they clear brush? Did they cut down trees or plant new trees? Did the defendant grant permission to use the disputed area. (Permissive use destroys an adverse possession case).
Preparation Is Key
Compared to my opposing counsel, I had a lot more work on my side with triple the number of testifying witnesses and cross examination of the claimants. I prepared for a solid two weeks before this trial, and by the trial, I knew every blade of grass and rock on the disputed area. I also had deposition testimony of the claimants which I used to impeach them when they inevitably changed their stories or failed to remember key details. I also had blowups of aerial photos of the property from Bing Maps which were very helpful. Lastly, I convinced the trial judge to take a “view” of the property, and he did visit the property with counsel the day after the trial was over.
We are filing post-trial briefs at the end of August, and then the judge will make a decision. I’ll let you know how it turns out.
Local Groups Wield Much Power Over Real Estate Permits & Projects
If you have ever had to deal with zoning or permitting in the City of Boston, you have probably come across local neighborhood “civic associations” in which the fate of your project or permit may unwittingly rest. There is the Beacon Hill Civic Association, the Allston Civic Association, and the St. Marks Area Civic Association (Dorchester), to name a few. Each neighborhood or district has them. They are constituted by various neighborhood activists, watch-dogs, and concerned residents, etc. Many board members go back decades and some groups unfortunately lack younger members representing the new generation of city dwellers.
You will rarely find mention of these groups in the Boston Zoning Code, however, their influence looms large. When you file for a Boston variance or special permit or propose a new project in Boston, the City or BRA will tell you that you must first present your application or project before whatever local civic association has “jurisdiction” over the neighborhood. These groups sit almost as a second zoning board of appeals, except without any rules, regulations or guidelines as to what they may or may not “approve” or “deny.” To their credit, the associations typically have a good sense as to what’s appropriate for the neighborhood and these folks care deeply about their areas. But some members are outwardly hostile to new development and some are even obsessed with conspiracy theories of what developers have planned for their neighborhoods.
A negative review of your project at the local civic association meeting can make your application “dead on arrival” at the Zoning Commission or other licensing board. At the board meeting, the board members will always ask whether the local association are in support or opposition to the project. Only rarely will the board approve a project without the civic association’s full support – and that only occurs if the local pols or Mayor’s Office are in support. As with most real estate issues in the City of Boston, savvy politicking plays a large role.
I’m interested to hear if our readers have had experience with any of these local civic associations, good or bad? Are they a good/bad thing? Should there be a set of rules or regulations governing how they consider projects?
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Richard D. Vetstein, Esq. is an experienced real estate attorney who has handled numerous special permit, variance and permitting applications in the City of Boston.
“My life is like a stroll on the beach…as near to the edge as I can go.”
— Henry Thoreau
No Massachusetts summer is complete without some good times spent on the beach, be it on Cape Cod, Ipswich, or Duxbury. But what happens when you are taking a nice stroll on the beach and hit one of those “No Trespassing — Private Beach” signs? Can you continue walking? Can you walk on the water’s edge or wet sand? What about swimming, fishing or boating? Most folks are unaware of Massachusetts’ archaic beach access laws, and I will try my best to explain them in this post.
Origins To Colonial Days: General Rule, No Public Access To Private Beach Areas
Massachusetts has a unique set of laws giving coastal property owners more extensive private rights to beachfront area than other states. In most coastal states, there is unlimited public access to beachfront areas and you can walk unfettered along the beach. In Massachusetts, however, that is not the case. Here private coastal property owners own the beach area adjacent to their properties down to the mean low tide area, with some limited public access exceptions. This is how the concept of “private” beach areas have been established.
The origin of this law dates back to the Mayflower days. In order to facilitate coastal development, under the Colonial Ordinances of 1641-47, the Massachusetts Bay Colony conveyed most, but not all, rights of ownership to the area between the average or mean high water mark and the low water mark (up to 100 “rods,” or 1,650 feet, from the high water mark) to all private coastal landowners. The land—but not the water—between the two tide marks is known as “private tidelands.” This typically includes all of the wet sand area on beaches.
The general rule is that with some limited exceptions explained below, beach-goers in Massachusetts cannot access any private beach area down to the low tide water mark without the permission of the beachfront property owner.
Limited Public Beach Access Between Low and High Tide Area for “Fishing, Fowling and Navigation”
The Colonial Ordinance reserved three specific and important rights of public use within the private tidelands for “fishing, fowling and navigation.” Those permissible uses have been broadly interpreted by Massachusetts courts to include: (1) the right to fish or to collect shellfish on foot or from a vessel; (2) the right to navigate, including the right to float on a raft, windsurf, or sail; and (3) the right to hunt birds for sport or sustenance, on a boat or on foot. (Though there is no court decision on point, the Attorney General maintains that this right also covers bird-watching.)
Accordingly, the public has access to any so-called “private” beach or any private tideland area as long as you are legitimately engaging in “fishing, fowling, or navigation.”
These antiquated Massachusetts beach access laws have created many disputes between public beach-goers and wealthy coastal property owners who have attempted to enforce a “private beach” regime. Under the Colonial Ordinance, no private property owner may deny access to someone who is fishing or hunting for birds or even surfing or launching a kayak. Indeed, knowledgeable beach-goers are often seen walking with beach with fishing rods in hand or shellfish equipment, so as to claim access rights under the Colonial Ordinance. What About Swimming?
Swimming rights are a bit confusing. According to the courts, swimming in the intertidal zone is included within the reserved public right of navigation, but only so long as your feet don’t touch the bottom! And you don’t have a right to walk along the wet sand area solely for the purpose of gaining access for swimming. So basically you have the right to swim into a private beach area provided you continue to swim and don’t stand or walk into the private tidelands zone. So try not to drown..
Can I Walk Below the Low Tide Line?
Yes, private property owners cannot interfere with the public’s right to walk along the submerged lands that lie seaward of the low tide line. With few exceptions, they don’t own that land; the public does. But this is tricky because the mean low tide area is seldom marked and changes historically.
I own beachfront property. I don’t mind the public walking along my wet sand area even if they are not “fishing, fowling, or navigating,” so long as by allowing this, I don’t lose any property rights in the process. Is there some way that I can be a ‘good citizen’ and still retain my property rights?”
Yes. What you appear to be worried about is the legal concept known as “prescription” or “adverse possession.” I have written a detailed post on adverse possession here. This is the idea that if someone uses your property for a sufficiently long time, they may be able to claim a property interest in it. For someone to be able to make this claim, however, their use has to be without your permission. Therefore, openly allowing the public to walk across your land (e.g., by “posting” such permission) is usually the best way of defeating someone’s ability to accrue such a right. Posting the land in this manner, of course, would not affect any access rights that anyone had already obtained before the posting.
Under existing state law, a property owner who allows the public to use his or her land for recreational purposes without charging for such use is shielded from liability for injuries sustained during that use so long as the property owner did not act with such “fault” that his or her conduct constituted “wilful, wanton or reckless conduct.”
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Well, that’s it on the rather complicated topic of Massachusetts beach access law. Enjoy your beach day and perhaps start carrying a fishing rod or line when you take a long walk!
Richard D. Vetstein, Esq. is an experienced real estate litigation attorney who’s handled numerous adverse possession and beach access cases in Land Court and Superior Court. Please contact me if you are dealing with a Massachusetts real estate dispute.
Insured Gets The Short End Of The Insurance Coverage Stick For Parking Lot & Building Flooding
The Massachusetts Supreme Judicial Court has not been too kind to insureds these days. For the second time in 2 months, the SJC has upheld the denial of a property owner’s claim in connection with flooding, this time in the commercial setting. In Surabian Realty Co. v. NGM Insurance Co., the Court ruled that a commercial property owner’s claim for flooding caused by a blocked parking lot catch basin was not covered under an “all risk” commercial/business insurance policy.
Blocked Drain
Surabian Realty owned an office building in Foxborough. During heavy rains in 2009, rainwater stopped flowing down the parking lot drain. The drain had become clogged with debris. Rainwater then ponded in the lot and seeped under the door of the building, flooding its lower level. The flooding caused damage to the carpeting, baseboards, and walls, totaling approximately $34,000.
Surabian made a claim under its “all risk” commercial insurance policy which had a special indorsement for this type of situation, which provided, “The most we will pay for loss or damage caused by water that backs up or overflows from a sewer, drain or sump is $25,000 for any one occurrence.” The insurance company, however, denied the claim on the grounds that the flooding was still excluded from coverage as it was caused by “surface water.”
Court Rules For Insurance Company (Again)
The SJC took an electron microscope to the policy language, parsing the language almost to a fault and unfairly (in my opinion) against the insured. The Court held:
“Construing these clauses in combination, we interpret the insurance contract, as amended by the indorsement, to exclude damage caused by flood waters that spread over the surface of the ground without having entered a drain, but to cover damage caused by water that backed up after entering a drain.”
So basically, the court said that the rainwater has to actually enter the drain, then backup, while a blocked drain that doesn’t allow water to fall down the pipe won’t be covered. Um, ok…. A better rationale would have been that the claim wasn’t covered because maintaining and keeping the drain free of debris was really the responsibility of the insured property owner, not a risk that the insurance company assumed. But I’m not the judge.
This is also the second instance in the last few months where the Court has relied upon the policy’s “anti-concurrent” clause which excluded coverage where the damage results from the combination of a covered peril and an excluded peril.
Lessons For Property Owners
Aside from making sure catch basins are cleaned, the tough lesson for property owners here is that your supposed “all risk” insurance policy isn’t really “all risk” as you probably perceive it. It seems that these days a lot of insurance claims are denied or insureds are scared of even making a claim lest they get cancelled by the insurance company. It’s a tough predicament.
Concise Disclosures Aimed At Reducing Borrower Confusion and Helping Comparison Shopping
As part of a continuing overhaul of the home mortgage market, the Consumer Financial Protection Bureau on Monday issued proposed rules to bolster fairness and clarity in residential lending, including requiring a new good-faith estimate of costs for homebuyers and a new closing settlement statement.
My understanding is that the new “loan estimate” would replace the current Good Faith Estimate (GFE) and the current Truth in Lending Disclosure (TIL). The new closing disclosure would replace the current HUD-1 Settlement Statement. The new disclosures are open to industry and public comment for 120 days, after which they will be finalized and codified as law. For more details on the new disclosures, go to the CFPB site here.
69 Year Old Woman Found Dead After Neighbor’s Handyman Cuts 30-foot Arborvitaes; Estate Recovers $150,000 Wrongful Death Settlement
In a tragic case out of Somerset, Massachusetts reported by Massachusetts Lawyers Weekly, a woman’s estate has recovered a $150,000 wrongful death settlement after she dropped dead when her neighbor cut down a row of trees which she and her husband planted 40 years ago.
According to Taunton lawyer Claudine A. Cloutier, who represented the woman’s estate, the neighbor hired a worker to remove some of the trees. When the woman discovered they had been cut down, she apparently became emotionally distraught. Her son found her dead in a chair the next day. There were no signs of trauma. Her estate brought negligence and tort claims against the neighbor, alleging wrongful death partially caused by stress arising from the destruction of the plants. The case went to mediation, and was settled before trial for $150,000.
Massachusetts Illegal Tree Cutting Law
Disputes over tree pruning and cutting are very common in Massachusetts. Indeed, Massachusetts has one of the oldest tree cutting and trimming laws on the books which provides for triple damages for any illegal cutting:
A person who without license willfully cuts down, carries away, girdles or otherwise destroys trees, timber, wood or underwood on the land of another shall be liable to the owner in tort for three times the amount of the damages assessed therefor; but if it is found that the defendant had good reason to believe that the land on which the trespass was committed was his own or that he was otherwise lawfully authorized to do the acts complained of, he shall be liable for single damages only.
Nevertheless, at common law, a neighbor may remove branches extending over a shared property line onto his or her own property. Also, the neighbor has no liability for roots growing into your yard and causing damage. Massachusetts law does not allow a person to cross or enter a neighbor’s property for these purposes without the neighbor’s consent, nor to remove any branches or other vegetation within the confines of the neighbor’s property. You can trim the branches and roots back, but you cannot kill the tree. This is the “Massachusetts Rule.”
Damages are assessed that either the market value of the timber or the replacement cost of the trees. Replacement cost typically requires the assistance of an expert arborist or landscaper. In a case out of Martha’s Vineyard, the appeals court upheld a $30,000 award for the replacement cost of 10 mature oak trees. Upon a finding of maliciousness under the tree cutting law, those damages were tripled.
Before cutting, trimming or pruning trees on or near your property line, it’s always a good idea to consult your plot plan or survey and speak to your neighbor before taking out the chain saws.
Utility Tree Cutting
I’ve been reading about many recent disputes between property owners and utility companies (Wayland v. NStar) over tree cutting within utility easements. The law provides a public utility the right to remove or trim your tree if it interferes with the necessary and reasonable operation of the utility. Furthermore, the utility is required to perform tree trimming as part of its program to maintain reliable service for its customers. The National Electric Safety Code requires utilities to trim or remove trees growing near power lines that threaten to disrupt service. Proper and regular tree trimming helps prevent the danger and inconvenience of outages.
Richard D. Vetstein, Esq. is an experience real estate attorney who has litigated numerous illegal tree cutting cases. If you are dealing with a Massachusetts unlawful tree cutting or trimming situation, please contact him at 508-620-5352 or via email at [email protected].
Feldberg v. Coxall: First Case To Apply New UETA (Uniform Electronic Transactions Act) To Real Estate Transactions
“This case involves the intersection between the seventeenth century Statute of Frauds and twenty-first century electronic mail.” –Justice Douglas Wilkins
Massachusetts courts have been grappling with the question of “when is a deal a deal” for a long time. With the vast majority of communication in real estate now done via email and other electronic means, it was just a matter of time before a court was faced with the question of whether and to what extent e-mails can constitute a binding and enforceable agreement to purchase and sell real estate. The real estate community has been waiting a few years for a case like this to come down, and now it’s here.
In Feldberg v. Coxall (May 22, 2012), Superior Court Justice Douglas Wilkins ruled that a series of e-mail exchanges between the buyer’s and seller’s attorney, the last one attaching a revised, but unsigned, offer to purchase, arguably created a binding agreement entitling the buyer to a lis pendens (notice of claim). This is also one of the first cases applying the new Massachusetts E-Sign law to preliminary negotiations in real estate deals.
This is a very interesting and important decision for anyone dealing in residential real estate in Massachusetts. The immediate take-away is that now anything sent in an e-mail can potentially create a binding deal, even if no offer or purchase and sale agreement is ultimately signed.
Vacant Lots In Sudbury
Feldberg, the buyer, was interested in purchasing 2 undeveloped lots in Sudbury owned by Coxall, the seller. The parties’ attorneys, via email, began negotiating the terms of the deal. (Apparently, brokers were not involved in the offer stage).
The buyer’s attorney e-mailed the seller’s attorney and attached a “revised offer with changes to reflect the conversations we have had today.” The revised offer appeared to be comprehensive inasmuch as it contained an agreed upon purchase price of $475,000 and a firm closing date. The email ended with the suggestion that both attorneys work “to have the final offer form finalized in time for my client [the buyer] to sign it and get deposits checks to you before the end of the day tomorrow.”
The seller’s attorney emailed back the next day, stating that “we must have a written approval letter from the bank today by 5pm and I think we are ready to go (I assume they will provide a closing date with the approval). We are almost there.” That same afternoon, the buyer’s attorney provided a commitment letter from Village Bank with standard conditions.
Apparently, before the seller signed the offer, he backed off and refused to proceed with the transaction. The buyer sued, and sought a lis pendens, which is a notice of claim filed with the registry of deeds. In most cases, a lis pendens will prevent a seller from conveying litigated property to another buyer.
Statute Of Frauds Intersects With E-Mail
As Judge Wilkins eloquently noted, this case involves the “intersection between the seventeenth century Statute of Frauds and twenty-first century electronic mail.” The Statute of Frauds is the genesis of the saying “always get it in writing.” The ancient law, originating in England, provides that all real estate contracts must be in writing signed by the party (or agent) to be charged. In the “old” days, application of the Statute was quite simple. If there wasn’t a written agreement signed in wet, ink signatures, there was no binding deal. Now with e-mail it’s much more complicated.
As the judge noted, this is uncharted territory for the courts as there has been a dearth of precedent on point. The Massachusetts Uniform Electronic Transactions Act (UETA) provides that parties to a real estate transaction may consent to conduct the transaction electronically via email or electronic signature technology if they use such technology in their dealings (which everybody does these days). They even may even switch to a traditional hard copy agreement at the end of negotiations like Feldberg and Coxall did here. The UETA requires some form of “electronic signature.” The judge ruled that an email signature block or even the “from” portion of the email may constitute a valid electronic signature. Accordingly, the judge found that the buyer had made a sufficient case that a binding deal had been reached, despite the seller refusing to sign the hard copy offer. (Update: the case was settled out of court by the parties).
Take-Away: Emails May Come Back To Bite You
I think that some Realtors and even some attorneys have assumed that negotiations by email leading up to an offer are preliminary and not binding until the offer is actually signed by both parties. This ruling throws that conventional wisdom out the window.
What can you do to prevent your emails from creating binding obligations? Well, apart from not using email in the first place, one thing you can do right now is to insert a disclaimer in your email signature. Here’s one that I just came up with:
Emails sent or received shall neither constitute acceptance of conducting transactions via electronic means nor shall create a binding contract in the absence of a fully signed written contract.
Feel free to use it. Other than that, you need to watch what you say in your emails, especially when you represent a seller who is considering multiple offers. Make it clear and in writing from the outset that there is no deal until an offer is signed by both buyer and seller.
Score One For Lenders and Mortgage Servicers In Long-Awaited Eaton v. Fannie Mae Case
The Massachusetts real estate community has been waiting 8 long months for a decision from the Massachusetts Supreme Judicial Court (SJC) in the much anticipated Eaton v. Federal National Mortgage Association(link) case. The decision came down June 22, and now that the dust has settled, I don’t think there is any question that lenders and the title community have been given a judicial Maalox. ((Some smart foreclosure defense folks disagree with me, but I’m confident in my analysis.))
The SJC held that lenders must establish they hold both the promissory note (indebtedness) and mortgage (a major problem for securitized or MERS mortgages where the note and mortgage are split between securitized trust and servicer). However, responding to pleas from the real estate bar, the Court declined to apply the new rule retroactively, thereby averting the Apocalyptic scenario where thousands of foreclosure titles would have been called into question. This would have been disastrous for folks who purchased distressed and foreclosed properties.
Even better, the Court outlined new procedures, including filing a statutory affidavit, to ensure that foreclosures are fair to borrowers going forward. The ruling gave lenders and the foreclosure industry a huge pass for past errors, and will clear the way for foreclosures to accelerate and run their course in Massachusetts and possibly other states if this case is followed. Let’s break it down.
Background: Borrower Used “Produce the Note” Defense To Stop Foreclosure
As with many sub-prime mortgage borrowers, Henrietta Eaton had defaulted on her mortgage to Green Tree Mortgage. This was a MERS mortgage (Mortgage Electronic Registration System) originally granted to BankUnited then assigned to Green Tree.
Ms. Eaton was able to obtain an injunction from the lower Superior Court halting her eviction on the grounds that Green Tree did not possess the promissory note underlying the mortgage when the foreclosure occurred. This is the “produce the note” defense and has been gaining steam across the country. Superior Court Judge Francis McIntyre bought into that argument, and stopped the foreclosure. Given the importance of the case, the Supreme Judicial Court granted direct appellate review.
FHFA Files Amicus Brief and SJC Asks For More Guidance
This case garnered substantial local and national attention from the lending, title and real estate community on one side, and housing advocates on the other side. Notably, the Obama Administration’s Federal Housing Finance Agency filed a rare friend-of-the-court brief in a state court proceeding, arguing for a ruling in favor of lenders. Spirited oral arguments were held back in October which I briefed here.
In January, when a decision was expected, the Court surprisingly asked the parties for additional briefing on whether a decision requiring unity of the promissory note and mortgage would cloud real estate titles. This was the apocalyptic scenario that the real estate bar and title community urged the Court to avoid. (The Court listened, as I’ll explained below).
The Opinion: Unity Endorsed, A Foreclosing Lender Must “Hold” Both Note & Mortgage
The first issue considered by the court was the fundamental question of “unity” urged by the Eaton side: whether a foreclosing mortgagee must hold both the promissory note (underlying indebtedness) and the mortgage in order to foreclose. After reviewing Massachusetts common law going back to the 1800’s, the Court answered yes there must be unity, reasoning that a “naked” mortgagee (a holder of a mortgage without any rights to the underlying indebtedness) cannot foreclose because, essentially, there is nothing to foreclose. If the Court stopped there, lenders and MERS would have been in big trouble. But, as outlined below, the Court significantly limited the effect of this decision.
Disaster Averted: Ruling Given Prospective Effect
Swayed by the arguments from the Massachusetts Real Estate Bar Association that retroactive application of a new rule would wreak havoc with existing real estate titles in Massachusetts, the SJC took the rare step of applying its ruling prospectively only. As Professor Adam Levitin (who drafted an amicus brief) noted on his blog, this “means that past foreclosures cannot be reopened because of this case, so the financial services industry just dodged billions in liability for wrongful foreclosures and evictions, and the title insurance industry did as well.” So going forward, lenders must establish unity of both note and mortgage, but past foreclosures are immune from challenge.
MERS System Given Blessing?
Ms. Eaton’s mortgage was a MERS (Mortgage Electronic Registration System) mortgage. MERS is a private system created by the largest national lenders and title companies to track assignments and ownership of loans as they are bought and sold in the secondary mortgage market. MERS has come under fire from distressed homeowners and registrars of deeds (especially our own Essex County Registrar John O’Brien) for robo-signing and bungled foreclosures. Although the Court did not specifically rule on the validity of the MERS system, the decision cited several new MERS policies and said that lenders who follow these new policies will likely be in compliance with the court’s holding. So MERS will continue doing business in Massachusetts for the foreseeable future.
Make Way For the “Eaton” Affidavit
The most important aspects of the Eaton ruling, in my opinion, are what came after the two “headline” rulings above. First, the Court made the explicit point that lenders do not have to physically possess both note and mortgage to be deemed a “holder” able to foreclose. This is huge given the pandemic paperwork deficiencies common with securitized mortgage trusts.
Second, the court also stated in a very important footnote that it will “permit one who, although not the note holder himself, acts as the authorized agent of the note holder, to stand “in the shoes” of the “mortgagee” as the term is used in these [foreclosure statute] provisions.” This footnote opens the door wide open for servicers and MERS to establish that they are authorized to foreclose, and acting on behalf of, the securitized trusts who hold legal title to the mortgages.
Lastly, the court approved the use of a statutory affidavit filed at the county registry of deeds in which the note holder or mortgage servicer confirms that it either holds the promissory note or is acting on behalf of the note-holder. We will surely be seeing these “Eaton” affidavits being prepared and recorded in connection with foreclosures.
Potential Bad News For U.S. Bank v. Ibanez Defect Victims
The Court’s ruling may be bad news for those property owners stuck with defective title issue stemming from a botched foreclosure under the seminal U.S. Bank v. Ibanez case. Last year, the Court, in Bevilacqua v. Rodriguez, suggested that owners could attempt to put their chains of title back together and conduct new foreclosure sales in their name to clear their titles. The legal reasoning behind this remedy is rather complex, but essentially it says that the current owner would be granted the right to foreclosure by virtue of holding an “equitable assignment” of the mortgage foreclosed upon. The Eaton v. Fannie Mae ruling, however, may have killed that remedy because the current owner now needs to hold both the promissory note and the mortgage. Ibanez titles remain toxic, and I am hearing that title insurers who are on the hook for them are not even willing to try to fix them until a legislative fix.
What’s Next?
As a real estate and title attorney, what I appreciate about this decision is that the SJC took into account the disastrous effect a retroactive rule would have on past titles (now held by innocent third party purchasers) and came up with new ground rules for foreclosing lenders to follow going forward. It’s like the court said “what’s done is done, now let’s move forward doing it the ‘right’ way.” We will definitely see foreclosures that were in a holding pattern resume again. On the closing side, when I am reviewing a title with a past foreclosure, my client and I can sleep better knowing that the risk of a defective title just got a reduced substantially. This is good for the housing market and it makes more properties marketable.
However, this is not the end of foreclosure litigation in Massachusetts. As with most landmark cases pronouncing a new rule of law, subsequent litigation to clarify what the court meant is likely to follow in this case. Some remaining unanswered questions include:
Is the produce the note defense truly dead for previously completed foreclosures–even where promissory notes are lost and not produced?
If challenged, what further documentation, if any, will suffice to establish agency for MERS and mortgage servicers of mortgages held in securitized trusts.
Will borrowers be able to challenge new “Eaton” affidavits which appear to be fraudulent or robo-signed?
All things considered, I will agree with Prof. Levitin who opined: “In the immediate term, I’d score the case as a major victory for the financial services industry, which avoided liability for its failure to comply with state law foreclosure requirements. Going forward, however, things are more complicated.”
Huge Sigh of Relief For Mortgage and Foreclosure Industry
The much awaited opinion by the SJC in Eaton v. Fannie Mae has just been released, and it is a huge Maalox for the banking and real estate community. Case embedded below. I have written a more detailed analysis here but here are the highlights:
Although the Court adopted some of the Eaton side’s arguments, I believe that lenders and MERS ultimately came out as the winners, as initial reports indicate. The Court basically gave lenders a pass on prior defective foreclosures and created new “rules of the road” for foreclosures going forward. There will definitely be more litigation after this case to sort out what foreclosing lenders and servicers need to prove in order to foreclose.
Agreeing with the Eaton/homeowner side, the Court ruled that going forward, lenders will have establish that they “hold” both the mortgage and promissory note, in order to foreclose. However, the court endorsed several methods in which lenders will be able to satisfy this requirement, thereby potentially creating several exceptions which will swallow the general rule.
Agreeing with lenders and Fannie Mae, the Court took the rare step of declining to apply the the key holding retroactively. The ruling will apply prospectively and will have no impact on previously completed or in process foreclosures. Those foreclosures will likely be immune from challenge along the lines Eaton asserted. This saved the lender and title insurance industry millions of dollars in claims.
Critically for the lending and title community, the Court ruled that lenders do not need to physically hold both note and mortgage at time of foreclosure, striking a huge blow to the “produce the note” defense: The court acknowledged that the Massachusetts foreclosure statute, enacted well before the proliferation of securitization and MERS, was unclear in the modern era of securitizing mortgages.
The court essentially blesses the current MERS and current servicer system where mortgage servicers can show that they have legal authority to act on behalf of mortgage holder/lender to foreclose. The SJC overturned the injunction against the lender and the case was remanded below where the servicer, Green Tree, will have the opportunity to establish they have the legal authority and agency to foreclose on behalf of the mortgage holder.
We will see new attorney and custodian of records affidavits being filed and used to establish the chain of ownership the court said would comply with the foreclosure laws.
Real Estate Crash Has Resulted In Many More Forms and Disclosures
These days buyers are leaving closing rooms with not only their keys but a mild case of carpal tunnel syndrome! The reason for sore forearms and wrists is the voluminous stack of closing documents which are now required to be signed and notarized at every Massachusetts real estate purchase or refinance closing.
One of my opening “break the ice” lines at closings is to suggest that the buyers start massaging their writing hands. Then I show them the 2 inch stack of documents they must review and sign, and they usually say, “Are you serious? We have to sign all that?” Yep, I reply. You can thank Fannie Mae and the real estate collapse for that! All the new rules and regulations passed in the last 5 years have resulted in, you guessed it, more forms. Do you think the Feds and state ever eliminate old or out-dated forms? Nope.
Let me quickly go over some of the more important — and less important — documents signed at a typical Massachusetts real estate closing.
The Closing Documents
HUD-1 Settlement Statement. This is arguably the most important form signed at closing. It breaks down all the closing costs, lender fees, taxes, insurance, escrows and more. We did a full post on the HUD-1 and all the closing costs you can expect to pay here. Under the newer RESPA rules, most closing costs must be within 10% tolerance of the Good Faith Estimate provided by the lender (which you will also re-sign at closing).
Promissory Note & Mortgage. These two documents form what I like to call the “mortgage contract.” The promissory note is the lending contract between borrower and lender and sets the interest rate and payment terms of the loan. It is not recorded at the registry of deeds. The Mortgage or Security Instrument is a long (20+ page) document and provides the legal collateral (your house) securing the loan from the lender. The Mortgage gets recorded in the county registry of deeds and is available to public view. Read a full explanation of the Note and Mortgage in this post.
Truth in Lending Disclosure (TIL). The Truth in Lending should really be called “Confusion In Lending,” as the federal government has come up with a confusing way to “explain” how your interest rate works. This is a complex form and we’ve written about it extensively in this post. Your closing lawyer will fully explain the TIL form to you at closing.
Loan Underwriting Documents. With increased audit risk on loan files, lenders today are requiring that borrowers sign “fresh” copies of almost all the documents they signed when they originally applied for the loan. This includes the loan application, IRS forms W-9 and 4506’s.
Fraud Prevention Documents. Again, with the massive mortgage fraud of the last decade, lenders are requiring many more forms to prevent fraud, forgeries, and straw-buyers. The closing attorney will also make a copy of borrowers’ driver’s licenses and other photo i.d. and submit the borrower’s names through the Patriot Act database. They include Occupancy Affidavit (confirming that borrowers will not rent out the mortgaged property), and the Signature Affidavit (confirming buyers are who they say they are or previously used a maiden name or nickname).
Escrow Documents. Unless lenders waive the requirement, borrowers must fund an escrow account at closing representing several months of real estate taxes and homeowner’s insurance. This provides a cushion in case borrowers default and the taxes and insurance are not paid.
Title Documents. For purchase transactions, Massachusetts requires that the closing attorney certify that a 50 year title examination has been performed. Buyers will counter-sign this certification of title, as well as several title insurance affidavits and documents which the seller is required to sign, to ensure that all known title problems have been disclosed and discovered. Of course, we always recommend that buyers obtain their own owner’s title insurance which will provide coverage for unknown title defects such as forgeries, boundary line issues, missing mortgage discharges, etc.
Property Safety Disclosures. In Massachusetts, buyers and sellers will sign a smoke/carbon monoxide detector compliance agreement, lead paint disclosure, and UFFI (urea formaldehyde foam insulation) agreement. These ensure that the property has received proper certifications and will absolve the lender from liability for these safety issues.
Servicing, EOCA and Affiliated Business Disclosures. Chances are that your lender will assign the servicing rights to your mortgage to a larger servicer, like JP Morgan Chase or CitiMortgage. You will sign forms acknowledging this. You will be notified of the new mortgage holder usually within 30-60 days after closing. In the meantime, the closing attorney will give you a “first payment letter” instructing you where to send your first payment if you don’t hear from the new servicer. You will also sign forms under the federal and state discrimination in lenders laws and forms disclosing who the lender uses for closing services.
Well, those are most of the documents that buyers will sign at the closing. Sellers have a slew of their own documents to be signed at closing, and I’ll cover that in a future post. As I said, at your closing, massage your signature hand, grab a comfy pen, and sign your life away!
Richard D. Vetstein, Esq. is regarded as one of the leading real estate attorneys in Massachusetts. With over 25 years in practice, he is a four time winner of the "Top Lawyer" award by Boston Magazine, a "Super Lawyer" designation from Thompson/West, and "Best of Metrowest." For Rich's professional biography, click here. If you are interested in hiring Rich or have a legal question, email or call him at [email protected] or 508-620-5352.
1. HousingWire
2. Wall Street Journal Developments
4. Charles Gate Realty’s Boston Real Estate Blog
5. Agent Genius
7. Boston.com Real Estate Now Blog
8. Massachusetts Land Use Monitor
10. Inman Next Agent
Richard D. Vetstein, Esq. is a Massachusetts real estate attorney who is passionate about staying up to date on real estate issues, nationally, regionally and locally.
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School is back and summer is over. September 1 and the start of the new rental cycle is right around the corner. It’s time to review my best practices to get trouble-free, paying tenants in your Massachusetts rental property.
