Legislature Passes Act Clearing Title To Foreclosed Properties, Awaits Governor’s Signature

by Rich Vetstein on August 4, 2014 · 5 comments

in Massachusetts Real Estate Law

Senate Bill 1987 Passes Legislature at Midnight Hourstop20foreclosure1.jpg

Senate Bill 1987, sponsored by Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association, would render clear and marketable to any title affected by a defective foreclosure arising out of the U.S. Bank v. Ibanez ruling. Estimates are that hundreds of innocent homeowners are affected by paperwork errors by foreclosure lenders, rending them unable to sell or refinance their homes.

After some favorable press in the Worcester Telegram and Boston Globe (to which I was happy to contribute), the Legislature passed the somewhat controversial bill at the midnight hour on July 31, the last night of the legislative session. The bill moves on to the Governor’s desk where housing advocates are still lobbying for rejection of the bill. The housing advocates’ arguments really show a complete lack of understanding of the title defect problem and its disasterous effect on the housing market. The bill preserves the right to challenge foreclosures and sue the banks, while helping innocent homeowners who are stuck with bad title. The upside of the bill is that more affordable homes can hit the real estate market. Isn’t that the goal of housing advocates rather than allow foreclosed homes to sit, blighted and decadent?

If you have been affected by an “Ibanez” title defect and otherwise support the bill, please contact the Governor’s Office through his email system:

http://www.mass.gov/governor/contact-us.html#email

Hopefully, I will have good news to report in the coming days…

  • GuyFawkesIsAlive

    THEY ARE NOT “PAPERWORK ERRORS” THEY ARE FUCKING FORGERIES!!!!~

  • Pingback: Breaking News: Governor Patrick Effectively Kills Act Clearing Titles to Foreclosed Properties | Massachusetts Real Estate Law Blog()

  • Sarah McKee

    Please help me out here. A title can be clouded in one or more of many ways — including by the Ibanez situation. Maybe the foreclosing party was the servicer, not the mortgagee. It has been known to happen. Maybe the foreclosing party failed to comply with applicable foreclosure law. Maybe both situations obtain.

    How would S. 1987 clear up any such clouded titles? Answer: it would not. As to invalidly-foreclosed homeowners only, S. 1987 would merely curtail the 20-year Mass. period for gaining title from a landowner by adverse possession.

    For completed foreclosures, this period would end one year from S. 1987’s effective date, unless tolled within that year by filing or otherwise raising in court a challenge to the foreclosure; getting the court’s permission to record in the Registry a copy of the pleading with the challenge; and getting a copy of the pleading “duly recorded.”

    Court dockets being what they are, these hurdles are well-nigh insurmountable. Yet, as to title, they do nothing more than to terminate the invalidly-foreclosed homeowner’s right to challenge the foreclosure and recover the home.

    S. 1987 leaves clouds on the title untouched. If a servicer with no title had foreclosed, as I understand it, the true mortgagee could still come in and claim the property.

    Title insurance companies might of course deem that, after a year, the operation of S. 1987 will reduce the risk of challenge to most invalid foreclosures sufficiently that they’ll again write title insurance on foreclosed properties. That’s scarcely the same as clearing title.

    How can any statute actually go into the relevant Registry, and have new documents recorded that remove a cloud and render a clouded title marketable? Surely that requires an investigation into the precise basis for each cloud, and a judicial resolution of each — home by home by home.

    So, if Governor Patrick vetoes S. 1987, it would be fair both to invalidly foreclosed homeowners, and to purchasers of invalidly-foreclosed properties who may fail to understand that their titles are not, in fact, clear.

    These third-party purchasers are not without recourse. The consumer protections of M.G.L. c. 93A provide for triple damages plus attorney’s fees. Not shabby.

    If this misses something, I’d be grateful to have it explained.

    • Sarah, the bill does clear title by providing as follows: “The affidavit, if executed in the statutory form, shall, after 3 years from the date of its recording, be conclusive evidence: in favor of an arm’s length third party purchaser for value at or subsequent to the foreclosure sale; that the power of sale under the foreclosed mortgage was duly executed; and that the provisions of this chapter and section 21 of chapter 183 were duly exercised.” The statute establishes a presumption of clear title three years after the recording of a compliant foreclosure affidavit which are filed with every foreclosure. As with every real estate purchase in Mass, each title would be checked by a title examiner to ensure compliance with the affidavit requirement and the statute. That’s how it works. Title would then be certified pursuant to MGL 93 s. 70 and yes, owner’s title insurance would issue.

      State statutes clear title all the time based on the recording of certain documents or the expiration of certain time periods. See MGL 183A, sec. 6D for example. Check out the REBA title standards or Crocker’s Notes on Common Forms for more examples.

      I also disagree with you on the recourse available to homeowners. They are in the same boat as the foreclosure victims, facing the prospect of spending thousands in legal fees to sue Bank of America et al. Most don’t have the legal resources to mount such a fight, and most lawyers won’t take such a case unless they charge standard fees. Most of these victims do not have title insurance so they are stuck.

      What you clearly don’t realize is that back in 2005 and 2006, the purchasers of these properties had no idea they were buying defective title because the title standards in place said that mortgage assignments could be recorded after the foreclosure had commenced provided that the mortgagee matched up, etc. So everyone was operating under rules which later were ruled to be invalid.

      • GuyFawkesIsAlive

        Hey Richard,
        When you are a closing attorney, are you continuing to uphold “Banker Law” when you accept a “Lost Note Affidavit” and an indemnity agreement while foregoing getting the original promissory note to convey property??? An inquiring mind wants to know.

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