The Massachusetts Supreme Judicial Court Lends a Helping Hand to Inadvertent Lender Omissions in the Execution of Mortgage Acknowledgements

Murtha Cullina

Massachusetts bankruptcy courts have invalidated mortgages containing defects, including the failure of lenders to observe strict formalities in the execution of mortgage acknowledgements.  See our prior post on this very topic at Lender Beware: The Tragic Consequences of Defective Mortgage Acknowledgements.

Recently however, the Massachusetts Supreme Judicial Court, determined that a properly recorded attorney’s affidavit, in certain circumstances, may cure mortgage defects.  In considering two questions presented by the United States Court of Appeals, the Supreme Judicial Court affirmatively answered that an attorney’s affidavit, in lieu of a properly executed acknowledgement form, may correct a mortgage that otherwise contains a material defect and provide constructive notice of the mortgage to a bona fide purchaser.

Recently the Massachusetts Supreme Judicial Court determined that a properly recorded attorney’s affidavit, in certain circumstances, may cure mortgage defects.

In Bank of America, N.A. v. Casey, 474 Mass. 556 (2016), the Court assessed a lender’s failure to insert the borrower’s name in the blank space of the mortgage acknowledgement and the lender’s subsequent attempt to correct the defect with an attorney’s affidavit pursuant to M.G.L. c. 183, §5B.  The court notably stated, “an attorney’s affidavit . . . that supplies the omitted names of the mortgagors, explains the circumstances of the omission, and confirms that in fact the affiant did witness the voluntary execution of the mortgage by the mortgagors on the date stated operates to cure the original defect.”  The court further ruled that the attorney’s affidavit, in combination with the mortgage, also served as “adequate constructive notice to a bona fide purchaser or . . . trustee in bankruptcy.”

So what does this all mean and why is it important?

Prior to Casey, lenders in Massachusetts faced severe consequences for not following strict formalities in the execution of mortgage acknowledgments—including potential loss of priority and avoidance of the mortgage by a bankruptcy trustee.  Following the Supreme Judicial Court’s holding in Casey, at least in situations where a party does not contest an attorney’s affidavit and the affidavit contains the requisite information necessary to cure the defect, a lender may use an attorney’s affidavit to preserve its rights.

While best practices dictate adhering to strict formalities in the execution of mortgage acknowledgements, the Casey decision provides a practical backstop for lenders with defective mortgage acknowledgements to avail themselves.  Such reliance is not without risk however, as the Supreme Judicial Court left open the possibility that in other circumstances the attorney affidavit will be insufficient to remedy prior mortgage defects.  Therefore, a prudent course of action dictates that a lender, upon discovering a potential mortgage defect, should consult with counsel before taking any further action.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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