A foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale (or the foreclosing entity must be one of the parties authorized to foreclose under Mass. Gen. Laws ch. 183, § 21, and Mass. Gen. Laws ch. 244, § 14).
Trustees that had foreclosed on properties and purchased them at the foreclosure sales, filed separate complaints asking the Suffolk Land Court Department (Massachusetts) to declare that they held clear title to the properties in fee simple. Defendant mortgagors did not initially answer the complaints, and plaintiffs moved for entry of default judgment. The trial court ruled the foreclosure sales were invalid because the notices of the foreclosure sales named trustees as the mortgage holders, but they had not been assigned the mortgages until after the sales. Trustees unsuccessfully moved to vacate the judgments, proffering documents which they claimed established that they had been assigned the mortgages before the foreclosures.
Were the foreclosure sales valid?
The Supreme Judicial Court noted that under Massachusetts Law, the trustees had the authority to exercise the power of sale contained in the mortgages only if they were the assignees of the mortgages at the time of the notice of sale and the subsequent foreclosure sale. Although the mortgage loans were pooled together in a trust and converted into mortgage-backed securities, the mortgages securing the notes were still legal title to property and had to be treated as such. As the securitization documents plaintiffs submitted to the trial court post-judgment did not establish valid assignments that made them the holders of the mortgages before the notice of sale and the foreclosure sale, they had not been entitled to a declaration of clear title.