Legislation To Fix “Ibanez” Foreclosure Title Defects Primed For Passage

by Rich Vetstein on February 5, 2014 · 3 comments

in Foreclosure, Massachusetts Real Estate Law, Mortgage Crisis, Mortgages, Title Defects, Title Insurance

mass ibanez titleShould Result In Much-Needed Inventory Boost To Housing Market

Good news to report for property owners saddled with toxic titles resulting from the seminal U.S. Bank v. Ibanez foreclosure ruling. Massachusetts lawmakers are poised to pass into law a new bill aimed at legislatively clearing up all of these defective titles.

By way of background, properties afflicted with Ibanez title defects, in worst cases, cannot be sold or refinanced. And homeowners without title insurance have been compelled to spend thousands in legal fees to clear their titles, while some have not been able to clear their titles at all.

The new legislation, Senate Bill 1987, would render clear and marketable any title affected by a defective foreclosure after 3 years have passed from the foreclosure. Most of these toxic titles were created prior to 2009, so the vast majority of them will be cleared up.

The bill does preserve any existing litigation over the validity of foreclosures. The legislation does not apply if there is an existing legal challenge to the validity of the foreclosure sale in which case record notice must be provided at the registry of deeds. The bill also does not shield liability of foreclosure lenders and attorneys for bad faith and consumer protection violations over faulty foreclosures.

The bill has recently been passed by the Senate and now moves on to the House. Word is that it should pass through the House and on to the Governor’s Desk.

Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association have sponsored this effort for several years now. I have been supporting this effort as well.

This is great news for the real estate market. I don’t have firm numbers, but there are probably hundreds, if not thousands, of these unsellable properties just sitting on the sidelines, and now they can get back onto the market. This is exactly what the inventory starved market needs.

(Hat tip to Colleen Sullivan over at Banker and Tradesman for passing along this important information).

  • Bob

    I found this article in a search for clearing a title since I am having trouble selling my 2 family home because of Ibanez. I was unaware of the defect when I purchased the property, rented the property, and now put the property up for sale 7 years later. Only now that I am about to lose my offer because of the defect do I find that there is an issue. I vacated the property to make it more marketable, have been paying a mortgage for 5 months now with no secondary income, and also paying for mine and my families livelihood, and this looked like a good thing. Until I read the response from the Gov. He wants to change the 3 years to 10 years, which would mean I’d have to wait another 3 years before I could sell my house. I’m looking foreclosure in the eye at this point barely able to make the mortgage payment, let alone maintenance and now having to take it off the market and rent again? So in the Governor wanting to protect families that were foreclosed on, and not feeling that 3 years is enough time for them to remedy their situation, he is helping new families get foreclosed upon, guaranteeing me my wife and my new baby coming to be renters for life. Thanks Devil!

    • Rich Vetstein

      Bob, now that Charlie Baker is governor we are hopeful that this bill will be refiled and passed in 2015.

  • Pingback: Lawmakers To The Rescue? Legislation Filed To Fix “Ibanez” Foreclosure Title Defects | Massachusetts Real Estate Law Blog()

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