The Massachusetts Appeals Court ruled in favor of the banks today in a decision that challenged the validity of mortgage assignments prior to a foreclosure. In Shea v. Federal National Mortgage Association, a homeowner challenged the validity of the foreclosure against his home on the basis that the underlining assignment of his mortgage was void. In short, this homeowner tried to argue that Federal National Mortgage Association (“Fannie Mae”) was never a valid recipient of his mortgage. The Appeals Court rejected these arguments, and supported its decision by citing several, prior Appeals Court and Supreme Judicial Court decisions that limit the ability of homeowners tochallenge the assignment of their mortgages.
The lesson from Shea is that challenges to mortgage assignments are difficult to make. While there is documented evidence of “robo signing,” fraudulent assignments, and missing paperwork, homeowners have limited means to challenge the assignment of their mortgages unless they can show that the assignment is void, and never legally binding in the first place. Shea reaffirms that both the underlining debt for the purchase of a home (“promissory note”) and the security interest for this debt (“mortgage”) can be freely transferable to third parties, with the original homeowner having few defenses to the person or entity acquiring these items.