Monday, October 24, 2016

In Defense of MERS

By Paul F. Alphen

In a recent Lawyers Weekly article by Kris Olson on Epps vs. Bank of America, it was suggested that MERS (Mortgage Electronic Registration Systems Inc) is “controversial.”  On the contrary,  case law in Massachusetts continues to support the conclusion that Mortgage Electronic Registration Systems, Inc. (“MERS”) and the MERS® System database operate in compliance with Massachusetts law.

By way of background, MERS (a wholly-owned subsidiary of MERSCORP Holdings, Inc.)_ serves as mortgagee in the land records for mortgages registered on the MERS® System database on behalf of lenders and investors that own mortgage loans that are traded in the secondary market. MERS holds the secured interest in the property pledged as collateral for the repayment of the loan in the capacity as nominee (a limited form of agency) for the lender making the mortgage loan and for subsequent purchasers (“beneficial owners”) of the mortgage loan. The MERS® System database is a national electronic database owned and operated by MERSCORP Holdings that tracks changes in mortgage servicing rights and beneficial ownership interests in mortgage loans secured by residential real estate.  Certainly, when MERS documents first appeared of record in our local Registries of Deeds about fifteen (15) years ago many old school conveyancers like I had questions and concerns; we are conservative by nature and slow to adopt new technologies in general. Nevertheless, with the passage of time and experience we grew to understand and appreciate the system.

Notwithstanding MERS success in both federal and state courts and the fact that MERS assigns its mortgage lien interest prior to the commencement of foreclosures, legal challenges against MERS related to foreclosure actions continue to be raised here in Massachusetts. Assertions that MERS was not the lawful mortgagee were raised and dismissed by the trial court, and affirmed recently by the Appeals Court of Massachusetts in Epps v. Bank of America (2015-P-1095).  This is the very same case where Olson questioned the validity of MERS.  In Epps, the Appeals Court ruled against the proposition that only the original “Lender” can be the mortgagee, based on both the mortgage’s contractual terms and as a matter of law in Massachusetts. This decision, rendered on Oct. 11, 2016, held MERS was the legal mortgagee under the express terms of the homeowner’s mortgage until MERS assigned its interest in the mortgage to a subsequent party. 

Further supporting the Epps holding are several other decisions by the Appeals Court that reject the theories underlying Epps’s action and appeal, such as Sullivan v. Kondaur, 85 Mass. App. Ct. 202 (2014) (“Sullivan”), Shea v. Federal Nat’l Mort. Ass’n, 87 Mass. App. Ct. 901 (2015) (“Shea”), and others.  Prior to Epps, the Appeals Court made clear in Shea that MERS may serve as mortgagee with authority to assign the Mortgage, even though MERS never held the Note.  87 Mass. App. Ct. at 902-03. And, in Sullivan, the Appeals Court (in confirming the validity of a MERS assignment just like the Assignment here at issue) determined that MERS was the original mortgagee with power to assign the mortgage, and it needed no instruction from the owner of the debt in order to do so.  See 85 Mass. App. Ct. at 208-09. 

Just recently, the United States District Court of Massachusetts held the mortgage’s express language provided that MERS was the mortgagee and authorized MERS to assign the mortgage. The court also noted that, pursuant to First Circuit precedent, a note and mortgage need not be held by the same entity and that MERS can validly assign a mortgage.  See Hayden v. HSBC Bank USA, N.A Hayden v. HSBC Bank USA, N.A., No. 16-11492-DJC, 2016 U.S. Dist. LEXIS 135977 (D. Ma. Sept. 30, 2016).

Today, there are more than 5,000 lenders, servicers, sub-servicers, investors and government institutions using MERS and the MERS® System database, including MassHousing, the Commonwealth’s independent, quasi-public agency created to provide financing for affordable housing in Massachusetts.  Far from controversial, the validity of MERS is settled law.

Paul Alphen is an Emeritus member of the REBA Board of Directors and a member of the Association’s Strategic Planning Committee.  Paul can be contacted by email at

Thursday, October 20, 2016

Suburban Foreclosures

By Richard P. Howe Jr.

The number of foreclosure deeds recorded in the Middlesex North Registry of Deeds during the first nine months of 2016 increased 29 percent from the same period in 2015, rising from 133 to 172. Projecting that number across the entire year would yield 229 foreclosures, far below the 639 that occurred in 2008 with the collapse of the economy, but far more than the 51 in 2005 when real estate was booming.

Urban foreclosures tend to get the most attention, but troublesome mortgages in the suburbs pose a significant problem as well. While many of the 2016 Middlesex North foreclosures were properties in the Gateway City of Lowell, 114 came from the nine suburban towns (Billerica, Carlisle, Chelmsford, Dracut, Dunstable, Tewksbury, Tyngsborough, Westford, and Wilmington) that make up the rest of the registry district.

The vast majority of these foreclosures – 81 of 114 – were of refinanced mortgages. That status was determined by comparing the date of the mortgage being foreclosed with the date of the deed by which the borrower became owner of the property. In cases where the person who lost the home had acquired title through inheritance or gift, the first full-consideration deed into the family, not any subsequent no-consideration deeds, was used in this analysis. If the foreclosed mortgage was recorded on the same day as the deed, it was deemed to be a purchase mortgage. If the mortgage was recorded at some later time, it was deemed to be a refinanced mortgage.

Of the 81 refinanced mortgage foreclosures studied, 30 homeowners (or their family predecessors) had acquired title during the 2000s; 24 during the 1990s; 12 in the 1980s; three in the 1970s; five in the 1960s; three in the 1950s; and four in the 1940s. No matter when title was acquired, all of the refinanced mortgages that were foreclosed in 2016 originated during the 2000s. If we measure the housing bubble from the start of 2003 through the end of 2007, 68 of the 81 refinanced mortgage foreclosures originated then. Only one came before, 11 came after.

Comparing the original purchase price of the property with the amount borrowed on the refinanced mortgage, and the length of time between that mortgage and acquisition of title, provides context for these foreclosures. For the 30 people who purchased homes in the 2000s, quickly refinanced, and then lost their homes to foreclosure, the median amount borrowed on the refinanced mortgage was $249,000, while the median purchase price of the home was $247,450, a difference of just $1,550. This suggests that refinancing these newer mortgages may have been driven by lower interest rates or different terms rather than borrowing a larger sum

For the 24 people who purchased their homes in the 1990s, eventually refinanced, and then lost their homes to foreclosure this year, the median amount borrowed on the refinanced mortgage was $244,000, while the median purchase price of the home was $125,000, a difference of $119,000. The median time between purchase and refinancing for this group was 10.5 years (I did not count how many times they refinanced).

For the 27 people who acquired title before 1990, the median amount borrowed on the refinanced mortgage was $267,200 and the mortgage was obtained 25 years after acquisition of title. Because many homeowners in this group acquired title through inheritance or gift, it was difficult to ascertain the purchase price of these properties. Most likely, these homeowners paid little or nothing, suggesting that the amounts borrowed with these mortgages would most likely be all cash to the homeowner. 

As for the 33 foreclosures that involved purchase mortgages, 28 of the homes were purchased during the 2003-2007 bubble, none were purchased before, and five were purchased after. The median sales price of these homes was $276,000 and the median mortgage amount was $241,900. Eight homeowners financed 100 percent of the purchase price; six financed between 90 and 99 percent; ten financed between 80 and 89 percent, and nine financed less than 80 percent.  

Registry records do not explain why these foreclosures occurred, nor do they disclose why they occurred now. Did longtime homeowners suddenly experience some catastrophic disruption of family cash flow that precipitated the loss of the house? Or did these loans have defective mortgages that required time for lenders to rectify title problems prior to foreclosure?

One thing that is clear from the record is that many longtime homeowners took advantage of rising values to extract equity from their homes. Most of these loans were obtained during the real estate bubble when values were at levels so high that current values still lag. Many homeowners with mortgages from this period, not just those who have experienced foreclosure, remain underwater, unable to realize enough from the sale of the property to pay off the existing mortgage. For that reason, the relatively high number of foreclosures seen this year will probably remain with us for several years to come, and other underwater home owners, those who remain current on their mortgages, will remain frozen out of the housing market, thereby contributing to the continuing lack of inventory that plagues the market today.

Dick Howe has served as Register at the Middlesex North Registry of Deeds for more than 30 years.  His periodic thoughtful commentaries on   Massachusetts real estate market and foreclosure trends, have been a regular and welcome feature in REBA News.  He has also been a panelist at REBA’s twice-yearly conferences. Dick has also served as president of the Massachusetts Registers and Assistant Registers of Deeds Association  Dick can be reached by email at

Tuesday, October 18, 2016

Municipal Modernization Act a Smorgasbord of Changes on Environment and Land Use

By Olympia Bowker

On August 9, 2016 Governor Baker approved HB 4565, “An Act Modernizing Municipal Finance and Government,” signing into law what is now Chapter 218 of the Acts of 2016. This newly enacted legislation tweaks, modifies, and streamlines several existing statutes governing cities and towns.

The statutes amended are many and varied, modifications that real estate attorneys and other professionals and their clients should know about. Here are select features of HB 4565, (“MMA”) with a focus on changes in municipal environmental and land use laws.

Local Agricultural Commissions are modified by three separate sections of the MMA. Section 23 of the MMA modified G.L. c 40 by adding § 8(L), which gives municipalities the explicit authority to establish a municipal agricultural commission, and further outlines the authority of such a commission. Section 215 of the MMA modified G.L. 111 § 31 to accommodate the existence of any subsequently created municipal agricultural commissions. Finally, Section 243 of the MMA garners the same authority established in G.L. c. 40 for new municipal agricultural commissions, to ones that predated the legislation.

Municipal Procurements are affected by sections 2-4, and 6-12 of the MMA. These changes increase the dollar threshold for contracts requiring less than full competitive bidding. Sections 2-4 of the MMA alter G.L. 30 § 39M by replacing subsection (a) with a new language that mandates all public construction valued at less than $10,000 be obtained through the sound business practices defined in G.L. c. 30B §2. In addition, contracts for construction that are above $10,000 must be awarded to the lowest eligible responsible bidder. The new § 39M  (a) also includes specifics regarding notice requirements, and blanket contracts.

Sections 6-12 of the MMA also alter the dollar threshold for contracts. G.L. 30 § 4 is modified so procurement for a supply or service for between $10,000 and $50,000 needs at least three written quotes from providers.

Prior to the MMA, under G.L. c. 30B § 5 (which governs competitive sealed bidding procedures) procurement contracts must have been valued at a minimum of $35,000 to fall under the listed procedures. The MMA altered this provision so the procurement contracts must be valued at least $50,000 to be required to conform to the competitive sealed bidding procedures set forth in G.L. c. 30B § 5. The MMA also altered G.L. c. 30B § 6, which now allows a chief procurement officer to enter into procurement contracts in the amount of $50,000 using competitive sealed proposals—a bump from the previous dollar threshold of $35,000.

A municipality’s ability to deny local licenses and permits to delinquent taxpayers has been altered by sections 37 and 38 of the MMA. Prior law allowed municipalities to deny local licenses and permits to taxpayers that had neglected or refused to pay taxes for at least one year. This new change allows municipalities to a mirror a “good standing” requirement, and removed the one year waiting period.

The MMA also alters G.L. c. 40 by adding a new § 60B. This new section allows adoption and implementation of a workforce housing special tax assessment (“WH-STA”) plan, to “encourage and facilitate incased development of middle income housing.” The new provision goes on to outline the applicability and prescribed parameters of such a plan.

The MMA also amends G.L. c. 59 § 5 by adding clause fifty-eighth, which mandates that taxes on property included in a WH-STA plan only be assessed to the portion of property not exempt under G.L. c. 40 § 60B.

The Municipal Affordable Housing Trust Fund Law, G.L. c 44 § 55C, is amended by the MMA so that G.L. c. 44B funds, from the Community Preservation Act (“CPA”), appropriated to local affordable housing trust funds are subject to the same restrictions as other CPA monies. In addition, at the end of each fiscal year the Municipal Affordable Housing Trust must ensure that all uses of 44B funds are reported to the community preservation committee so they are included in the CP-3 form to the department of revenue.

The newly enacted MMA also modifies Community Preservation Act surcharge exemptions in G.L. c. 44B § 3(e). In doing so, the MMA set a deadline for persons submitting applications for surcharge exemptions, which is the same deadline set under G.L. c. 59, §59.

G.L. c. 58, § 8C, which governs Affordable Housing and Real Estate Abatements, is modified to allow a municipality to establish an agreement regarding an abatement of up to 75% of the outstanding real estate tax obligations and up to 100% of the outstanding interest and costs on the sites.

The MMA imposes some interesting changes to G.L. c. 61A. The MMA created G.L. c. 61A, § 2A, which allows installation and operation of renewable energy on c. 61A land. However, there are several caveats for the location of the energy production, the amount of energy that can be produced, and the application of the energy produced.

In addition, G.L. c. 61A, § 13 was amended regarding the application of roll-back taxes, so they will now apply to agricultural land used or converted to renewable energy generation under the new § 2A.

The MMA also amends Section 276 of Chapter 165 of the Acts of 2014, to extend a special exemption from the annual gross sales requirement for cranberry bogs from 2017, to 2020. Essentially, the cranberry bog owners don’t have to meet minimum requirements for crop production and sales to maintain the tax benefits of c. 61A.

The amended statutory provisions listed above are just a sample of the many changes created by the MMA—the complete text can be found at Not all provisions of the MMA are effective simultaneously, so landowners, developers, lenders, investors and of course their attorneys should ascertain the timelines associated with the most noteworthy amendments.

Olympia Bowker is of Counsel at McGregor & Legere, P.C. in Boston, and works on a variety of environmental, land use, and real estate issues. She  received her J.D. and Masters of Environmental Law and Policy from Vermont Law School, and was admitted to the Massachusetts bar in 2015. She can be contacted by email at

Thursday, October 6, 2016

Throw Back Thursday - Philip S. Lapatin - Recent Developments in Massachusetts Case Law

Now in his 37th year at these meetings, Phil continues to draw a huge crowd with this session. His presentation on Recent Developments in Massachusetts Case Law is a must‐hear for any practicing real estate attorney. Phil is the 2008 recipient of the Association’s highest honor, the Richard B. Johnson Award.

Tuesday, September 27, 2016


By Paul F. Alphen, Esquire
I don’t know Superior Court Judge Richard E Welch III, but it appears that he either called one of the defendants, or counsel for one of the defendants, dumber than “the dullest first year law student” in a case pertaining to the grant of an easement in exchange for a promise to convey a parcel of land. Notwithstanding the execution of what the court referred to as “ put it charitably, not a well drafted legal document”, and the granting of an easement by the plaintiffs followed by the construction of a retaining wall on the plaintiffs’ land, the plaintiffs never received the parcel of land from the defendants. The Court ruled in favor of the plaintiffs and ordered that the retaining wall be removed, and in doing so started the decision off with these strong words:
“Even the dullest first year law student learns in the first year contracts class that one cannot legally obtain something of value in exchange for an empty promise. That same student also understands that a party to a contract must act in good faith and cannot intentionally undermine the value of the agreed upon bargain. One hopes that any ethical adult would understand these basic rules of fair dealing without attending a law school. Unfortunately, not all act in good faith. This is an example of bad faith dealing which constitutes a breach of contract….  After carefully considering all the credible evidence, it is rather easy to conclude that this case presents an example of a company utilizing bad faith when breaching a contract with one of its neighbors.Nicoli v. Gooby Indus. Corp., No. 2014-1216 B, 2016 WL 4607900, at 1 (Mass. Super. Sept. 2, 2016)
Paul F. Alphen, Esquire
Alphen& Santos, P.C.
Westford, MA

Wednesday, September 14, 2016

Defenseless, In the Gathering Storm

By Robert M. Ruzzo
Sarah Connor: “What did he say?”
Gas Station Attendant: “He said there is a storm coming in.”
Sarah Connor: “I know.”
Closing scene from “The Terminator” Orion Pictures, 1984

It’s time to connect some not altogether random thoughts as the haze of summer recedes.
Summertime, when the living was easy, this year also entailed: the death throes of the municipal planning defense doctrine, the expiration of zoning reform efforts in the state Senate and the demise of proposed housing production legislation launched through the efforts of the Massachusetts Housing Partnership (“MHP”) and carried forward by a number of housing advocacy groups.
What could it all mean?
Summer had not yet technically begun when the Appeals Court officially pulled the plug on the attempt to assert a “municipal planning defense” in order to deny a Comprehensive Permit application filed under Chapter 40B (the Commonwealth’s “Affordable Housing Law”) in Eisai v. Housing Appeals Committee (“HAC”).
After years of largely lying dormant since its first pronouncement in the Harbor Glen decision in 1982 (“Harbor Glen”), the  planning defense sprang back to life in Stuborn Ltd. P’ship v. Barnstable Bd. Of Appeals (“Stuborn II”) and even enjoyed a short lived day in the sun in 2009, when the 28 Clay Street v. Middleborough decision applied the defense in a land use setting far less exotic than either Harbor Glen (750 acre former military base) or Stuborn II (waterfront property).
While admittedly arcane, the municipal planning defense afforded its fans the promise of a “different path”- a means of achieving the directional goals of the Affordable Housing Law while injecting a degree of local control consistent with the public expectations of a home rule state.
Hopes (Fears?) for a broader application of the doctrine were dashed by two HAC decisions in 2014.  It was clear from the these two decisions that the HAC had come not to praise the municipal planning defense, but to bury it.  The Appeals Court, bound by the deferential standard of review for admistrative law appeals, had little choice but to follow suit.  As an added bonus, the unusual procedural posture of the Eisai case introduced a further complication to the already byzantine world of standing under Chapter 40B, but let’s save that tale for another day(s).
Andover’s planning efforts, which were the subject of the Eisai decision, met with what seemed to be a particularly harsh fate at the hands of the HAC.  While Andover was below the 10% Subsidized Housing Inventory threshold at the time of the permit application, it had at one time been above that magical number, although the HAC concluded that this was not as a “result of the town’s planning efforts” but instead despite Andover’s master plan and affordable housing plan.  A pretty neat trick, to say the least.
Dismissing the town’s well documented planning work and “longstanding efforts to preserve” the site and the area in question for commercial and industrial uses, the Court affirmed a Superior Court decision to let stand a HAC determination that the last vacant lot within a commercial subdivision should become a housing development.  This was at least in part because the Andover zoning board could not “point to possible foregone employment associated with future businesses that might be reluctant to locate in a subdivision whose future is uncertain.”
A cynic might protest that the best defense for a municipality under this line of thinking would be to poorly propose and half-heartedly market such commercial zones, and thereby preserve the ability to claim that any incursion into a commercial area jeopardized the coherence of the planning exercise as a whole.
Tellingly, the Appeals Court echoed the HAC’s complaint that a “major shortcoming” of Andover’s planning efforts was the fact that “multifamily housing is not permitted as of right anywhere in the town.”
Which shifts the focus back to Beacon Hill and competing efforts to address our distressingly high housing costs in Massachusetts via legislation.  The Senate’s efforts to enact zoning reform advanced one step further than in the last legislative session.  In 2014, a similar bill was reported out of committee favorably.  Before the expiration of this year’s formal session, zoning reform legislation that had been revised substantially to address some (but far from all) criticisms of real estate industry groups was actually passed by the upper chamber.
Nonetheless, at the end of the (legislative) day, we collectively remained in the same position that we were in two years prior: in a low interest rate, high demand, overheated housing market, with a fundamental zoning law incapable of producing new units in sufficient numbers and devoid of any meaningful link between planning and zoning.  Our ersatz solution, the Affordable Housing Law, becomes increasingly overtaxed, as it is called upon to create more market rate housing than it was ever designed to produce.
A storm is coming in, indeed.
While it is always difficult to predict the future of such things, the proponents of the Senate’s zoning reform legislation certainly have no reason to feel disheartened.  They will most assuredly be back in force when a new legislature convenes in January.  Some type of comprehensive zoning legislation is inching ever closer to reality.  Fortune favors the prepared mind.
Also returning to the hearing rooms next session will be housing advocates who, building upon the foundation of a research paper published by MHP some two years ago, advanced legislation that would have, among other things, required every municipality to have a certain percentage of its land area zoned for multi-family housing.
Is there any sign of potential progress?  Any hope for the elusive common ground?
Well, ironically the aforementioned provision requiring as of right multi-family zoning is the very type of provision that, had it been in effect in Andover at the time of the HAC’s initial decision, may have (indeed should have) allowed Andover’s assertion of the municipal planning defense to pass muster.
So there’s always hope… even for the municipal planning defense.
This article was written by Robert Ruzzo, Senior Counsel in the Boston office of Holland & Knight LLP, and it will appear in an upcoming issue of REBA News.  Bob can be contacted by email at

Monday, September 12, 2016


By: Noel M. DiCarlo

To hackers, we are all walking around with a bullseye on our back.  It’s that plain and simple.  Real estate lawyers, particularly conveyancers, transfer large amounts of money on a daily basis, and sometimes operate with sub-par and outdated cyber security systems.  If you and your clients are the target of any of these hackers and scam artists, you could face losses of six figures, or more.
The days of the obvious scam emails from a foreign prince (usually from Nigeria!) seeking your aid in securing his rightful legacy have long passed.  Today’s scammers are far more sophisticated and savvy.  The three most common scams are: the Compromised Wire Instruction Scam, the Counterfeit Check Scam, and the Forged IOLTA Check Scam.
Compromised Wire Instructions
The most prevalent and alarming scam targeting real estate lawyers  involves compromised wire instructions, also known as the Business Email Compromise (BEC) or the “Man in the Email Scam”.  The FBI has estimated the losses from these scams at over $2 billion in 2015.
In this scenario, you receive emailed wire instructions from the seller.  The deed goes on record, and you wire the funds pursuant to the wire instructions emailed to you.  The seller then calls looking for her sale proceeds that have not yet hit her account, despite the fact that they left yours.  As it turns out, the wire instructions you received were not for the sellers account.  The message came from an email address that was very similar to the seller’s address, but you would have to be looking very closely to realize that it was slightly different.   There are of course many variations of the same theme.  Here, the hackers targeting real estate lawyers, hack into your email account and monitor your account for a period of time tracking a transaction that involves a transfer of money.  At the moment in the deal that wire instructions are requested, the hacker makes his move and provides false instructions.  If the wire instructions were already sent by the correct party, the hacker may wait some time then send a subsequent email acting as the party stating that they actually want to change their previous email instructions and wire the funds to a different account. Once the money leaves your account, the funds are lost and the bank may not liable because it merely followed your instructions. 
Hackers particularly like to strike on the Friday before a long weekend, at the end of the month, or the days before a holiday – all times when they know that conveyancers are overloaded, busy and may overlook small details.
Here are some red flags you should look out for:
1.       Wire requests and instructions received on a Friday, especially a Friday before a long weekend, or the day before a holiday;

2.       Any revisions to wire instructions previously provided;

3.       Wires to foreign countries;

4.       Changes in the email addresses or the look of an email from prior email messages;

5.       A sense of urgency by the requestor or beneficiary.
Counterfeit Check Scam
In the counterfeit check scam, a new client contacts your office seeking representation.  You may even have several telephone calls with the would-be client, and then proceed to send over an engagement agreement.  It is important to note that these scammers are incredibly informed on the would-be deal. They can be very convincing.  They will then send you a seemingly legitimate bank cashier’s check for a retainer.  You deposit the check into your IOLTA account. Shortly thereafter, the client contacts you and tells you that the matter is resolved or that they no longer require representation.  They instruct you to deduct any amount for legal fees accrued and to wire the remainder back to them. You follow the client’s instructions and two to three days later, your bank tells you that the check was counterfeit and that you are responsible for the shortfall. Some banks make “funds immediately available” as an accommodation to conveyancer clients, but it is important to understand that this is a “provisional credit” only.  If the check does not clear (which can sometimes take up to even 10 days), the bank will retract the credit.  Again, your bank is not liable because they followed your wire instructions.
Forged IOLTA Check Scam
Think of how many IOLTA checks you circulate on a daily basis and how many municipalities, organizations, and people have access to those checks. The forged IOLTA check scam, like the previous scam, involves very good counterfeit checks.  These checks are so artfully forged, even the experts may have a difficult time catching the forgery on its face.   The scammer will obtain the account and routing number from your check or wire instructions and then create a fake check payable to “cash”. 
There are more than these three scams lurking around, such as malware that makes dummy websites nearly identical to bank sites in order to steal your log-in information.  All these scams however, have one thing in common: they want to steal from you and your client.  Conveyancers beware.
Noel Di Carlo is a Partner at Warshaw, Di Carlo & Associates, PC, where she concentrates her practice in real estate and personal planning.  She also serves on the REBA Board of Directors.  Noel can be reached at