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In a recent decision in the case Mbazira v. Ocwen Loan Servicing, LLC (In re Mbazira)[1], the United States Bankruptcy Court for the District of Massachusetts determined that a bank, which was an assignee of a mortgage, lost its mortgage in bankruptcy due to a faulty acknowledgment appended to the mortgage document.  The decision sends the message to borrowers that they can use bankruptcy as a device to wipe out otherwise valid mortgages encumbering property by pointing to purported flaws in a lender’s recording of the mortgage document in real property records.

This article discusses (i) one of the mechanisms for avoidance of mortgage liens and other encumbrances in bankruptcy; (ii) the requirements for recording of interests in real property under Massachusetts law; (iii) the Court’s decision in the Mbazira case; and (iv) the key takeaways of that decision. 

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