An Evolving Foreclosure Landscape: The Ibanez Case and Beyond

Abstract

Mortgage securitization, subprime lending, a persistently weak housing market, and an explosion of residential mortgage defaults – today’s homeowners and banks face a new and challenging landscape. Recently, courts in several states have issued decisions that alter the terrain for mortgage foreclosures. In Massachusetts, New Jersey, and New York, among other states, courts have dismissed foreclosure actions on the basis of what might seem to be highly technical deficiencies in the pleading or proof. The most well-known–and controversial–in this cluster of cases is U.S. Bank National Ass’n v. Ibanez, decided by the Supreme Judicial Court of Massachusetts this year. In Ibanez, the court held that two assignee banks failed to obtain legal title to foreclosed properties because they failed to prove that they held valid assignments of the foreclosed mortgages at the moment that the foreclosure proceedings were begun.

Keywords: mortgage, subprime lending, banking, foreclosure, finance

JEL Classification: R38, K23, R51