Henry J. Lane, Attorney, Lane & Hamer LLC

The role of the notary public in the United States has been fairly consistent over the last several centuries. The duties primarily consist of acknowledging signatures and administering oaths. In both cases the notary is responsible for determining that the person who has signed a document is in fact the person who is identified in the document and also that the signature was a voluntary act. Documents that require notarization include deeds, mortgages and self-proving wills. In both cases the notary must personally know the person who is signing the document or must examine documents to establish the person's identity such as a driver’s license, passport or other government issued identification. If such documents are not available, the notary public may rely on identification provided by witnesses the notary public considers to be reliable. In addition to confirming the identity of the individual signing the document, the notary must also determine that the document is being signed voluntarily and that the person signing the document, whether a deed or a will, was not being pressured or forced to sign the deed by another person. In both cases the notary must also be satisfied that the person signing the document understands what the document is although the notary is not responsible for investigating or determining the legality, propriety, accuracy or truthfulness of the document that is being notarized. The second category of documents that require notarization are affidavits and related sworn statements. Affidavits and similar documents are often required when administering estates, applying for public benefits and providing evidence in legal proceedings. When notarizing such documents the notary also has to confirm the identity of the person signing the document and then must administer an oath by requesting the person signing the document to swear or affirm that the contents of the document are truthful and accurate to the best of the person's knowledge.

Although the role of the notary public in United States is generally limited, the term is used much differently in many other countries, including Canada, Mexico and much of Europe. In many other countries the term "notary" or a local variation thereof is used to identify a person engaged in the practice of law. In those countries the term is used to identify a lawyer who prepares deeds, wills, mortgages and handles real estate transactions and the probating of estates. A lawyer in those countries who conducts trials is often referred to as a "barrister" in English-speaking countries or as an "abogado" in Spanish- speaking countries. The distinction between the use of the term "notary" in the United States and the use of the term in foreign countries was of little consequence until large numbers of immigrants from Latin American countries arrived over the last several decades. Many people from Spanish- speaking countries assumed that a "notary public" in United States had the same qualifications as a "notario" in their home countries. And, to add to the confusion, apparently in some communities notaries held themselves out as having the ability to provide legal services with respect to immigration issues.

So, after several hundred years with very little regulation of notaries public, Governor Mitt Romney issued an executive order in December of 2003 which significantly changed the way notary public services were provided in Massachusetts. The Executive Order had three basic components. First, it updated the language used to notarize documents that had traditionally been used and made the requirement to confirm the identity of the party whose signature was being notarized more explicit. Secondly, it formalized the requirement that notaries public who are not attorneys are required to record every notarial act in a bound ledger so that there is a permanent record of those transactions. Thirdly, it reinforced the prohibition against notaries public providing legal advice or services unless they are also attorneys. In the case of notaries public using the term "notario" or other foreign-language equivalent of notary public, an express disclaimer is required indicating that the individual is not an attorney and cannot give advice on immigration or other legal matters.

Mitt Romney may be off pursuing a larger dream but his footprint in Massachusetts remains in the form of his Executive Order modernizing the role of the notary public, a copy of which is available on the website of the Massachusetts Secretary of State.

By Henry J. Lane, Attorney with Lane and Hamer P.C. 

In our last installment, we discussed some of the problems that arose when large groups of individual mortgage loans were sold by lenders and bundled into securities being traded on Wall Street.  The overwhelming amount of work necessary to document the transfer and assignment of individual mortgages being traded led to a number of controversial developments.

Early on, the banks recognized the enormous expense and delay involved in documenting and recording transfers of mortgages every time a bond or other investment vehicle secured by those mortgages was traded. To address the issue, the major banks organized a separate company called Mortgage Electronic Registration Systems, Inc. (MERS) to be the record title holder of all of their mortgages.  So when Bank of America or one of the other large participating banks made a mortgage loan to a typical homeowner, the bank prepared the documents so that the mortgage was being given not to Bank of America but to MERS as an agent for Bank of America. MERS then created an electronic data base indicating that it held the mortgage given to secure a particular loan and that Bank of America was the institution that actually made the loan and owned the promissory note that was secured by the mortgage. Subsequently, when the Bank transferred the mortgage to Fannie Mae, Freddie Mac or another institutional investor, Bank of America notified MERS that the mortgage had been transferred and MERS updated its data base showing the new owner.  If the new mortgage owner then subsequently transferred the loan to another investor it was again simply a matter of notifying MERS to update its data base and the transaction was complete.

Although a loan may have passed through many individual banks, investors and servicing companies during the life of the loan, the title holder to the mortgage was only shown in the Registry of Deeds as MERS. The system operated fairly well for a number of years, but at some point the local Registers of Deeds came to the realization that allowing MERS to hold title to individual mortgages and to separately track the actual owner of the loan on its own data base resulted in individual mortgage assignments not being recorded in the local Registry of Deeds.   Not having to record the individual assignments also meant that the banks did not have to pay the $75.00 recording fee which meant the individual Registries were foregoing a significant amount of revenue for the Commonwealth on an annual basis.

While the controversy over whether or not banks and investments companies could use the MERS private registration data base to track ownership of mortgages as opposed to recording every transfer in the local Registry of Deeds continued to fester, a more serious problem arose when the number of mortgage foreclosures dramatically increased in recent years. Massachusetts law has long required that in order for a mortgage foreclosure to be valid, the bank or other investor foreclosing must be the institution shown as the owner in the local Registry of Deeds.  Since many of the mortgages were now held in the name of MERS, the individual bank or investor could not start foreclosure proceedings until a physical assignment of the mortgage loan was prepared, delivered to the local Registry of Deeds and recorded. That particular requirement was overlooked by many banks in the early days of the foreclosure crisis, leaving many banks and individuals who purchased foreclosed property with defective titles.

In addition, the requirement that the individual mortgage be transferred to the actual owner in the records of the local Registry of Deeds required completing all the necessary paperwork, locating the person authorized to execute the paperwork, having the signature notarized and physically delivering it to the local Registry of Deeds and paying the recording fee.  Since banks and other institutional investors weren't equipped to prepare all that documentation, many of them hired service bureaus to prepare the documentation, and to arrange for recording.  Some of the largest service bureaus were responsible for arranging the necessary documentation for hundreds or thousands of mortgages creating what has become known as the "robo-signing" controversy.  Since only a limited number of people employed by the service bureaus were authorized to sign documents for MERS or large banks and institutional investors, many of the service bureaus would have dozens of people preparing documents and simply deliver them to the authorized signer for signature. In a number of cases, when the individual authorized to sign left the employment of the service bureau or was otherwise unavailable, other employees would simply continue signing documents using the name of the authorized but no longer available employee and have a notary public falsely attest to the signature.  Although on their face, "robo-signed" documents did not appear to be defective, eventually individual title examiners as well as Registers of Deeds noticed that the signature of some of the authorized signers appeared to vary dramatically, suggesting that they were actually signed by different people using the same name and raising immediate questions concerning their authenticity.

As these various irregularities came to light, individuals facing foreclosure have attempted to use them as a basis for delaying or avoiding foreclosure. However, despite the  publicity that the issues have been given, most of the court decisions have resulted in predicable results. If the paperwork was in fact not properly recorded prior to a foreclosure, the foreclosure was defective, requiring many banks to redo foreclosures resulting in an additional delay and expense but ultimately reaching the same result.  Similarly, if a homeowner facing foreclosure was able to establish that one or more of the documents transferring the mortgage was not signed by the appropriate individual, the remedy was simply to require the bank or other institutional lender to file a corrective document.  In virtually all of these cases, since the homeowner did in fact default in making the payments due on the mortgage, ultimately the mortgage holder has been successful in completing the foreclosure.

Recently the Attorney General of Massachusetts filed a major lawsuit naming many of the country's largest banks as defendants alleging that they improperly used the MERS system to circumvent recording requirements, used "robo-signed" documents in preparation for foreclosures and failed to negotiate loan modifications and workouts in good faith.

The Attorney General's lawsuit does raise several public policy questions.  First, with respect to the recording of individual mortgage assignments, does the Commonwealth generally have a real interest in trying to raise money through relatively high recording fees for mortgage assignment documents when a privately managed data base is able to accomplish the same result at a much lower cost? Or, is it important to have all records relating to ownership of real estate and mortgages in a single location?  Second, were any individuals actually harmed by a "robo-signed" document prepared by a service bureau or bank, or, if not, is it crucial for the integrity of the system that documents acknowledged by a notary public are actually signed by the legally authorized person?

The final allegation in the Attorney General's lawsuit, concerning a failure of banks and institutional lenders to handle loan modification and work out proposals in good faith, raises the question of how to weigh the interests of the consumer against the interests of the lender's shareholders or depositors.  The litigation is in the early stages and will probably take many years to resolve if a settlement among all the parties is not reached.

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by Henry J. Lane, Attorney with Lane and Hamer P.C.

The dramatic increase in mortgage foreclosures over the last several years has had the side effect of highlighting some relatively obscure corners of the home finance system and some of the stresses that have developed over the last several decades.

Until the 1970s, the home mortgage system functioned pretty much in the way depicted in that holiday classic: It's a Wonderful Life. Local savings banks took deposits from individuals and used the money to make mortgage loans to local residents buying homes in the community. State imposed limits on branch banking and depression era federal regulations limited the size of banks and the types of loans they were able to make. As local banking regulations eased, and federal programs encouraged the creation of a secondary market for mortgages, local banks began to sell their mortgages to larger institutional investors, through the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, two private "companies” created by Congress to increase the availability of home mortgage loans.

As large institutional investors and Wall Street investment banks got involved in packaging and selling home mortgage loans, they developed sophisticated bonds and related investment vehicles to quickly trade the packages of home mortgage loans to take advantage of minor fluctuations in interest or exchange rates.

Of course, major institutional banks and Wall Street traders had long ago stopped using paper documents or currency to document financial transactions and were perfectly comfortable with electronic book entry accounting for financial records. Unfortunately, the home mortgage loans that were the subject of various exotic investment vehicles being traded were trapped in a paper based 18th century recording system. Since 1731, in Worcester County, every mortgage that secures a home loan must be recorded at the Registry of Deeds to be effective. And since 1731 recording a mortgage has required bringing a physical mortgage document to the Registry of Deeds where it is copied. Historically, the documents were copied in longhand by a scribe. In later years, transcription was done by typewriter, and finally in the middle of the 20th century copy machines came into use. The 21st century has brought the use of scanning technology, but the requirement for bringing a physical document to the Registry for recording remains although persistent rumors suggest that "online" recording will soon be available.

Historically when a mortgage loan was sold, the mortgage itself was transferred to the new owner and the transfer was documented by recording an Assignment at the local Registry of Deeds, again requiring delivery of a paper document and the $75.00 recording fee. Since the single package of home mortgage loans being traded on Wall Street may include hundreds of mortgages, the problem becomes apparent. In order to properly document the transfer of such a large package of loans, someone has to prepare the Assignment for each individual underlying mortgage, have an authorized individual sign the Assignment, locate the appropriate Registry of Deeds, physically deliver the Assignment and pay the applicable recording fee.

Prior to 1641, the Massachusetts Bay Colony did not have any published legal code and when legal disputes arose, the local judges made their decisions based on their individual understanding of the principles of English common law and the biblical principles that were the foundation of the dominant Puritan society, as supplemented or modified by individual enactments of the colonial legislature.

By the late 1630s and early 1640s, the lack of uniformity in the administration of justice led to the need for a more uniform legal code setting out the rights and responsibilities of the citizenry. That need led to the promulgation and publication of what became known as the Laws and Liberties of Massachusetts. The Laws and Liberties were initially drafted in 1641, and were revised over a period of years and published in a more or less final edition in 1647. The Laws and Liberties covered a wide range of civil and criminal activity and again incorporated many of the concepts of civil and criminal justice established for ancient Israel in the Old Testament, and much of it would be considered barbaric by modern standards. For example, the penalty for burglary on Sunday included the severing of one's ear and unrepentant Baptists were banished.  Although it is a fascinating window into early Puritan society, it also has continuing historic significance as one of the earliest documents to recognize what would today be considered "constitutional rights."  As indicated by its title, the document recognized certain rights or liberties that were inherent in the citizenry. 

Among the fundamental rights recognized in the 1641 draft of the Laws and Liberties and continued in the 1647 edition was the concept of a "great pond."  The concept of the great pond did not exist in English common law so the origin is somewhat uncertain. Great ponds include any pond or lake that is at least ten (10) acres in size in its natural state. The Laws and Liberties provided that "every inhabitant who is an householder shall have free fishing and fowling in any great ponds,…provided that no town shall appropriate to any particular person or persons any great pond containing more than ten (10) acres of land." Although the Laws and Liberties as published only reference fishing and fowling in great ponds, the courts have recognize that the public rights in great ponds now include boating, bathing, skating and cutting ice. 

As one might expect, most of the litigation relating to great ponds concerned economic rights. In the early days, many of the disputes concerned cutting and harvesting ice, and the courts established that the business of cutting and harvesting ice was basically a free for all. As with owners of property fronting on the seashore, owners of property fronting on great ponds only owned to the historic low water mark. The land, water and ice below the historic low water mark were owned by the public and therefore, anyone with access to the pond had a right to cut and harvest ice from any part of the pond. The waterfront property had no more right to the ice below the low water mark than any other member of the public. Even clearing snow off of the ice did not give the individual clearing the snow any particular right to the ice under the snow and could not prevent another person from removing the freshly cleared ice or cutting a hole for the purpose of fishing. One can imagine the chaos that ensued.

The second source of litigation involved the development of water power for the industrial revolution that swept through the region in the 19th century. Many mill owners were granted franchises to construct dams to raise the water level and capacity of historic great ponds in order to power the mills that were established near the outlets of ponds. Although mill owners were granted rights to control the water level of great ponds, they were not permitted to reduce the level of the water below the historic elevation of the great pond and could only draw off water which had been impounded by the newly constructed dams. Like many great ponds in New England, Webster Lake was also enlarged with the construction of a dam at its outlet on the northern end of the lake.

Although the rights of the public to boat on great ponds has long been recognized, the nature and extent of that right has not been explored to any great extent. With the decline of the ice harvesting business and the use of water power as a source of energy, the focus of disputes concerning the use of great ponds has changed. During the early part of the 20th century recreational uses of many ponds became the predominant focus of attention.  On many smaller ponds, recreational uses included seasonal cottages and small manually powered water craft. However, on larger water bodies such as Webster Lake, the recreational use had a more commercial component which included large waterfront recreation areas designed to serve day trippers, who had access to the lake by means of public transportation. Since few individuals owned automobiles and even fewer owned personal watercraft, commercial steamboats and ferries provided much of the public with their only opportunity for a boating experience. In subsequent years, the character of the Lake changed again with the decline in the availability of public transportation, the widespread ownership of automobiles and personal watercraft, and the closing of many of the recreational parks.

Recently, further change has resulted in many of the seasonal cottages being converted into year-round houses with permanent residents. As the use of lakefront property has gradually transitioned from seasonal cottages to year-round homes, a more proprietary attitude toward the use of the Lake developed. Based on the rights established by the Laws and Liberties, public policy in Massachusetts has long supported making the use of great ponds available to the public by the construction of boat ramps and beaches, but year-round residents have a natural tendency to favor restrictions on the use of the lake by non-residents. Sometimes attempts to restrict public access to great ponds by waterfront property owners is based on real public safety or nuisance concerns such as attempts to limit the use of jet skis or high speed power boats. In other cases, opposition to expanded public use of great ponds is motivated by a more generalized fear of change.

Webster is currently in the midst of one such battle with recent town meeting petitions proposing to restrict public access to Webster's great pond by limiting the size of boats on Webster Lake. As with all such disputes, the boat size issue has two sides. The lakefront property owners may see the proposed restrictions on the size of boats as a means of ensuring safety and tranquility as well as protecting property values. On the other hand, advocates of individual rights and economic justice may see it as a thinly veiled attempt by lakefront property owners to "appropriate" the great pond to their own use, in contravention of the historic liberty.