'Ibanez' Issue Compels Bay State Bankruptcy Court To Vacate Unfavorable Earlier Ruling Against Homeowner Fighting Foreclosure
After conducting a trial on March 16, 2011 in an adversary proceeding fighting a foreclosure against HomEq Servicing and Deutsche Bank National Trust Company, Judge Melvin S. Hoffman dismissed Schwartz' lawsuit on all seven counts raised in the litigation.
Refusing to accept defeat, Ms. Schwartz moved for a new trial, claiming error in the judgment, said claim involving an 'Ibanez' issue.
After reviewing the evidence, Judge Hoffman found that Ms. Schwartz presented sufficient evidence of the existence of an 'Ibanez' issue and accordingly, vacated his earlier ruling and opened the judgment with respect to this count only, and announced that he will schedule a half-day trial for the banksters to make their
For the most recent ruling, see Schwartz v. HomEq Servicing (In re Schwartz), Case No. 06-42476-MSH, Adv. Pro. No. 07-04098 (Bankr. D. Mass., Central Div. April 7, 2011).
(1) The first episode of Ms Schwartz' marathon saga in the bankruptcy court was the subject of Judge Hoffman's predecessor, Judge Joel B. Rosenthal's, landmark decision, In re Schwartz, 366 B.R. 265 (Bankr. D. Mass. 2007). At that time, Deutsche Bank had bid-in its mortgage debt and purchased Ms. Schwartz' home, a 3-family house in Worcester, at a foreclosure sale. Unsuccessful since that time in its attempts to boot her out onto the streets of Worcester, it remains the record owner of the home in which Ms. Schwartz continues to reside. Schwartz v. HomEq Servicing, footnote 2.
(2) Judge Hoffman's ruling on the 'Ibanez' issue follows (bold text is my emphasis):
- A central question at trial was whether defendant Deutsche was the owner of the mortgage on the plaintiff's home during the foreclosure process which resulted in the foreclosure sale of the home on May 24, 2006.
The plaintiff introduced into evidence a document entitled "Assignment of Mortgage" dated May 23, 2006, which reflected the assignment of the plaintiff's mortgage from the original mortgagee, Mortgage Electronic Registration Systems, Inc., as nominee for First NCL Financial Services, LLC, to defendant Deutsche. During the plaintiff's case, all parties agreed that this assignment was dated prior to the date of the foreclosure sale. No party disputed its authenticity or validity.
Because the assignment was executed prior to the foreclosure sale and its validity was not questioned, I ruled at trial that the plaintiff had failed to carry her burden of proving that Deutsche was not the owner of the mortgage when it foreclosed.
In her motion for a new trial, the plaintiff argues that I misconstrued Massachusetts law, pointing out that the Massachusetts Supreme Judicial Court in U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 673, 941 N.E.2d 40 (2011) recently held that in order for a foreclosure sale to be valid the mortgage must have been assigned to the foreclosing entity not merely before the sale, but prior to the first publication of notice of that sale required by Mass. Gen. Laws. ch. 244, § 14. Ibanez, 458 Mass. at 647-48.
I agree with the plaintiff's interpretation of Ibanez and since the May 23, 2006 assignment was executed after the foreclosure notices had been published, I could not rely on the assignment exclusively in granting the defendants judgment on partial findings. In light of the foregoing I must determine whether and to what extent to open the March 6, 2011 judgment for the defendants.
In Count I of the complaint, the plaintiff seeks a ruling that the foreclosure sale was invalid. Not only does the March 23, 2006 assignment fail to establish the validity of the foreclosure sale, it constitutes the only evidence presented that at the time Deutsche began publishing notice of the sale, Deutsche was not the holder of the mortgage.
The defendants argue that the pooling and servicing agreement dated November 1, 2005 which is listed in the joint pretrial memorandum as a trial exhibit provides evidence that the mortgage on the plaintiff's property was assigned to Deutsche well before the foreclosure process had begun.
The excerpt of the pooling and servicing agreement that was admitted during the plaintiff's case in chief, however, provides no such evidence. The excerpt indicates that an entity defined as the "Depositor" assigned the "Trust Fund", which I presume included mortgages listed on a mortgage loan schedule not provided, to Deutsche, as Trustee for the benefit of the certificateholders of the Morgan Stanley Home Equity Loan Trust 2005-4.
In Ibanez, the Supreme Judicial Court held that where, as here, a recordable assignment was not executed prior to the first publication of a notice of a foreclosure sale, the foreclosing entity may nevertheless prove that it was the mortgagee at the relevant time. The Court observed:
[w]here a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage. Ibanez, 458 Mass. at 651 (emphasis added).
None of the evidence thus far presented at trial indicated that the plaintiff's mortgage was part of the Trust Fund, or how the Depositor acquired the Trust Fund.
I find that the plaintiff has presented sufficient evidence of the chain of title of the mortgage on her property to carry her burden of persuasion that the mortgage was not owned by Deutsche before the first publication of the notice of foreclosure sale. I must, therefore, vacate and open the judgment for the defendants on Count I of the complaint.