A Foreclosing Lender Must “Hold” Both Note & Mortgage

In a case with national implications, 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. 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. Even better, the Court outlined new sensible procedures, including filing a statutory affidavit, to ensure that foreclosures are compliant going forward. The ruling clearly favors lenders and the foreclosure industry, and will clear the way for foreclosures to accelerate and run their course in Massachusetts and possibly other states if the ruling is followed.