Massachusetts Real Estate Law

Title Insurance Demystified

by Rich Vetstein on August 11, 2009

in Massachusetts Real Estate Law, Mortgages, Title Defects, Title Insurance

title-insuranceIn my opinion, title insurance is an absolute necessity in every real estate conveyance transaction. Even though I’m an experienced real estate attorney, when I purchased my own house, I obtained owner’s title insurance. With the instances of title and bank paperwork problems on the rise, I prefer not having to worry about hidden title defects which could affect my ability to refinance and sell my house down the road.

The problem is that most home buyers don’t know what title insurance is or what it covers, and only see it for the first time on the closing settlement statement. Closing attorneys and title insurance companies need to do a better job explaining the excellent benefits and value of title insurance, so consumers don’t have the perception that it is just another junk fee.

What Is Title Insurance?

Title insurance is policy of insurance (technically an indemnification policy) protecting homeowners and lenders from actual financial loss in the event that certain covered problems develop regarding the rights to ownership of property. While Massachusetts closing attorneys search and certify each title to real estate before a closing, there are often hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.

There are two types of title insurance, lender’s and owner’s policies. Lender’s policies are required by most every public mortgage lender in the U.S., and are typically paid as part of closing costs.  Owner’s policies are optional and paid for by home buyers. I will discuss owner’s policies in this post.

Title Defects:  What Does An Owner’s Policy Of Title Insurance Cover?

The recent foreclosure paperwork mess and the Massachusetts high court ruling in U.S. Bank v. Ibanez are perfect examples of the importance of title insurance. Thousands titles in Massachusetts coming out of faulty foreclosures were rendered defective because of the Ibanez ruling. Those without owner’s title insurance were left to fix the title problems on their own at great expense. Those with title insurance, by contrast, were able to sell their property with the title insurer issuing “clean” policies over the defects.

Here are some other real world examples of how title insurance protects you. I recently represented a condominium seller who was shocked to learn a day before the closing that there were several un-discharged mortgages and liens on her unit left over from the original developer. Fortunately, she had an owner’s title insurance policy which allowed her closing to go forward as scheduled. I represented a young family who was dismayed to learn that the property they were about to buy was subject to the claim of a long-lost heir of a prior owner. The title insurance company agreed to file litigation against the “missing” heir, and clear the title. If title insurance was not available in these transactions, the deals would have been canceled altogether, or the closings would have been delayed by months if not years until the issues were resolved, if at all.

In addition to undischarged mortgages and the sudden appearance of unknown or missing heirs claiming an interest in the property, an owner’s policy of title insurance also covers a myriad of other types of title defects, including:

  • Faulty foreclosures
  • Forged deeds or impersonations
  • Incorrect legal or boundary descriptions
  • Recording errors

There is also a new extended or enhanced coverage policy available from all major title insurance companies which covers:

  • Building permit violations
  • Adverse possession or prescriptive easements
  • Building encroachments
  • Incorrect surveys
  • Pre-existing violations of subdivision, zoning laws, restrictive covenants.

For a full list of just about every conceivable situation covered by title insurance, please read my article: 50 Ways To Lose Your Home.

How Much Does Title Insurance Cost?

Title insurance is a one-time premium paid at closing and is calculated based on the purchase price of your home. The cost is for standard coverage is $3.65 per $1,000 in home value. Enhanced coverage policies run $4.00/thousand, and provide better coverages (i.e., for boundary disputes) and inflationary protection. These days, we are always recommending enhanced coverage as it’s a better value. When you purchase both lender’s coverage (always required by mortgage lenders) and owner’s coverage at the same time, there is a substantial discount.

Title insurance is a good deal because you pay once and it continues to provide complete coverage for as long as you or your heirs own the property. Those who decline title insurance rationalize that the risk of a title defect is minimal and not worth the premium. That is false. As a former claims counsel for a national title company, I could write a treatise on the different types of title problems I have seen derail closings and drag on for years.

The Role Of The Closing Attorney

The closing attorney ensures that the title examination is done on the property, certifies that the title is “marketable,” and issues the title insurance policy. While all U.S. public lenders require lender’s policies of title insurance, closings attorneys should always recommend owner’s policies for buyers. Attorneys do share in the title premiums generated. However, as I said before, even the most careful title search cannot reveal a hidden title defect that can wreck havoc on any subsequent sale or refinancing of the property.

To borrow from Nike’s old slogan, Title Insurance:  Just Get It.

Please contact me at [email protected] if you have any further questions about title insurance.

{ 21 comments }

Massachusetts Security Deposit Law: To Take A Security Deposit Or Not To Take One, That Is The Question.

by Rich Vetstein on August 5, 2009

in Landlord Tenant Law, Massachusetts Real Estate Law, Rental Housing

images-9My last post on this blog and on Boston.com on Massachusetts landlord-tenant law spawned many questions on the Massachusetts security deposit law.  So, I decided to go into more detail about the topic.

Massachusetts Security Deposits–An Overview

Last month’s rent and security deposits are one of the most heavily regulated aspects of Massachusetts landlord-tenant law and are fraught with pitfalls and penalties for the unwary, careless landlord. Any misstep, however innocent, under the complex Massachusetts last month’s rent and security deposit law can subject a landlord to far greater liability than the deposit, including penalties up to triple the amount of the deposit and payment of the tenant’s attorneys’ fees. This is why I advise landlords not to require security deposits. If a deposit is necessary, take a last month’s deposit, the requirements of which are less strict than security deposits. If landlords insist on taking a security deposit, they must follow the law to the letter.

Requirements For Holding A Security Deposit

The following steps must be followed when a landlord holds a security deposit:

  1. When the deposit is tendered, the landlord must give the tenant a written receipt which provides:
    • the amount of the deposit
    • the name of the landlord/agent
    • the date of receipt
    • the property address.
  2. Within 30 days of the money being deposited, the landlord must provide the tenant with a receipt identifying the bank where the deposit is held, the amount and account number.
  3. Within 10 days after the tenancy begins, the landlord must provide the tenant with a written “statement of condition” of the premises detailing its condition and any damage with a required disclosure statement;
  4. The tenant has an opportunity to note any other damage to the premises, and the landlord must agree or disagree with the final statement of condition and provide it to the tenant.
  5. The security deposit must be held in a separate interest bearing account in a Massachusetts  financial institution protected from the landlord’s creditors.
  6. The landlord must pay the tenant interest on the security deposit annually if held for more than one year.
  7. The security deposit may only be used to reimburse the landlord for unpaid rent, reasonable damage to the unit or unpaid tax increases if part of the lease. Security deposits cannot be used for general eviction costs or attorneys’ fees. Within 30 days of the tenant’s leaving, the landlord must return the deposit plus any unpaid interest or provide a sworn, itemized list of deductions for damage with estimates for the work. Only then can the landlord retain the security deposit.

What Do I Do If The Landlord Mishandles My Security Deposit?

First, talk with the landlord about the situation and respectfully remind him or her of the law’s requirements. Many landlords will balk at the potential penalties for a security deposit violation, and most issues can be resolved amicably, usually with the return of the deposit with interest. If that doesn’t work, send the landlord a certified demand letter under the Massachusetts Consumer Protection Act, Chapter 93A. If that fails, take the landlord to Small Claims Court (the limit for these type of claims involving triple damages is $6,000) or contact an attorney.

{ 25 comments }

Massachusetts Landlord Tenant Law: A Legal Refresher Course For Landlords

by Rich Vetstein on July 28, 2009

in Housing Discrimination, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Rental Housing

istock_000008947813xsmall-300x223.jpgWith the impending influx of renters and students invading the Greater Boston area soon, let’s review some often asked questions concerning Massachusetts landlord tenant law to assist landlords in navigating the rental process.

Screening Prospective Tenants: What You Can and Cannot Ask?

Landlords can legally ask about a tenant’s income, current employment, prior landlord references, credit history, and criminal history. Your rental application should include a full release of all credit history and CORI (Criminal Offender Registry Information).  Use CORI information with a great deal of caution, however, and offer the tenant an opportunity to explain any issues. Landlords should also check the Sex Offender Registry as they can be held liable for renting to a known offender. Use the rental application and other forms from the Greater Boston Real Estate Board.

Under Massachusetts discrimination laws, a landlord cannot refuse to rent to a tenant on the basis of the tenant’s race, color, national origin, ancestry, gender, sexual orientation, age, marital status, religion, military/veteran status, disability, receipt of public assistance, and children. It’s best to stay away from asking about these topics.

Students, especially undergraduates, often create problems for landlords. Meet with students personally before signing the lease and firmly explain a “no tolerance” policy against excessive noise, parties and misbehavior.

Careful screening of tenants is far less expensive than the cost of evicting a problem tenant.

Security And Last Month’s Rent Deposits:  Should I Take One?

I advise landlords not to take security deposits because any misstep, however innocent, under the complex Massachusetts security deposit law can subject the landlord to far greater liability than the deposit. Among other requirements, the security deposit law provides:

  • a landlord must give the tenant a written receipt with information as to where the deposit is being held;
  • a landlord must hold a security deposit in a separate interest bearing account, and pay interest to the tenant yearly;
  • at the beginning of the tenancy, a landlord must provide the tenant with a written “statement of condition” of the rental unit detailing its condition and any damage;
  • the tenant may note any damage on the statement of condition
  • At the end of the tenancy, if the landlord desires to deduct repair costs from the security deposit, it must provide the tenant with written notification and copies of all estimates within 30 days of the tenant’s move-out.

Under the law, any slip-up on these requirements can subject the landlord to liability for 3 times the deposit plus the tenant’s attorneys’ fees. That’s why I advise my landlord clients that security deposits aren’t worth the money. If you need a deposit, take a last month’s deposit, the requirements of which can be found here in the Massachusetts last month’s deposit law.

Due to the high interest in security deposits, I wrote a full post on the topic.  Click on Massachusetts Security Deposits to view the article.

My Property Has Lead Paint, What Do I Do?

Under the Massachusetts Lead Paint Law, landlords (and real estate agents) must disclose to tenants the presence of known lead paint for property built before 1978. The property must be de-leaded if a child under 6 will live there. That means if a young couple moves into a unit, then has a baby, the landlord must de-lead the property. There is no way around de-leading other than risking a discrimination claim for not renting to families with small children which is illegal. (Of course, many landlords unlawfully reject families with children). Exposing children to lead paint puts a landlord at huge legal risk.  Financial aid and tax credits for de-leading are available to qualified property owners. For all Massachusetts rental property built before 1978, landlords must provide all tenants regardless of family composition with a Massachusetts Tenant Notification and Certification form, and all lead inspection reports and testing information, if available.

Can I Take A Finder’s Fee?

Only a licensed real estate broker can lawfully collect a finder’s fee for bringing together a landlord and a tenant.  Landlords who don’t work with brokers cannot charge a finder’s fee.

For more information, I recommend reading the Landlord’s Guide To the Law by the Massachusetts Attorney General’s Office.

_________________________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts landlord tenant and eviction attorney. Please contact him with any questions.

{ 9 comments }

Hiring A Massachusetts Home Improvement Contractor: 10 Things You Need To Know

by Rich Vetstein on July 14, 2009

in Construction Law, Home Improvement, Lead Paint, Massachusetts Real Estate Law

Sadly, completing a home improvement project on time, on budget and with good, quality work is the exception rather than the norm these days. I have seen homeowners pour their home equity lines and savings into home improvement projects only to see the project left incomplete and riddled with defective and poor quality work, or worse, with the contractor abandoning the project and going bankrupt.

Homeowners can avoid ending up in this predicament by following my 10 Things You Need To Know About Hiring A Massachusetts Home Improvement Contractor. As the saying goes, an ounce of prevention is worth a pound of cure.

1. Pre-Construction Planning:  Budget, Budget, Budget

Recognizing that even the most thought-out home improvement projects tend to run up to 10% over budget, careful planning and budgeting before the work starts is paramount. There are almost always going to be contingencies and unknowns (like the mold in your walls that you never knew about) cropping up during construction so you need to allocate a sufficient reserve (10-15% should do) to cover these unknown risks. Once the budget is set, stick to it, even if it means foregoing that gorgeous Italian tumbled marble in the master bath. Also, come up with a written construction schedule.

2.  Interview At Least 3 Contractors and Obtain Written, Detailed Estimates From Each

I cannot tell you how many times homeowners select the first contractor to whom they were referred without vetting them through a proper bidding process. Interview 3 contractors, be with them when they walk through hour home, and more importantly, get written, detailed estimates from each contractor. None of this, “Yeah, this project should run about 10k.” This is also your best opportunity to negotiate the best price as you can play each contractor against each other. Be aware that the cheapest bid does not necessarily equate with the best work.

3.  Obtain 3 References And Check The Better Business Bureau

This is a critical, yet often overlooked piece of preventative maintenance. Most folks are referred to a home improvement contractor through a friend or family member, however, you should ask the contractor for at least 3 references. Call each of them, then ask each of them if they know anyone else who has worked with the contractor and call them too. (The contractor will always list their most “friendly” references). Ask them if the contractor performed quality work on time and within budget. Were there issues with scheduling, delivery of the correct materials, and the labor?  This is your opportunity to get the real scoop. Search the Better Business Bureau for any complaints about the contractor. The BBB has a good resource for spotting contractor rip-off artists.

4.  Check License/Registration Status Of Contractor

You should always select a licensed home improvement contractor. They are regulated by the state and using them entitles you to the protection of the Massachusetts Home Improvement Law and Contractor Guaranty Fund if there is a problem. There are 2 types of home improvement contractor licenses in Massachusetts. A Home Improvement Contractor (HIC) license covers most types of typical home improvement work, except for structural work. Structural work must be performed by a contractor holding a Construction Supervisor License (CSL). You can search for Massachusetts HIC or CLS licensed contractors here. The license search also discloses any complaints against the contractor.

5.  Sign A Written Construction Contract In Compliance With Massachusetts Home Improvement Law (General Laws Chapter 142A)

The Massachusetts Home Improvement Law provides the bare minimum of what is required to be in home improvement contracts over $1,000, but most contracts supplied by the contractor are non-compliant and terribly one-sided. Here’s what you need in your home improvement contract:

  • The home improvement contract must be written, dated, and signed by both parties. Make sure the contractor executes the agreement under the entity which is pulling the permits. Some contractors attempt to work  under another contractor’s company or worker’s compensation policy–this is a red flag. If the contractor is not incorporated but is a “dba” (unincorporated doing business as), he must sign individually. The contractor needs to list his license number as well.
  • The home improvement contract must provide the start date of the work and the date of “substantial completion.”
  • The home improvement contract must provide a detailed description of the work and materials involved.  I suggest incorporating that detailed estimate provided by the contractor discussed previously. (You can attach it as an exhibit or addendum to the end of the contract).
  • The contract must detail the scope of work, being as specific as possible. I cannot emphasize this enough.  Itemize the exact type of materials involved (Andersen windows, California paint, Italian ceramic tile, etc.), and work to be performed (full kitchen remodel with installation of new flooring, appliances, etc.). If you are not specific in the contract, and there’s a problem later, your claim will be severely weakened, if not dead on arrival.
  • The contract must provide the total contract amount and the timing of progress payments. Massachusetts law prohibits a contractor requiring an initial deposit of over 33% of the total contract price unless special materials are ordered.  Any contractor demanding over a 33% deposit should raise a huge red flag . (I recommend setting up payments into thirds, with the first payment due at the start of work, the second payment due halfway through the work, and the final payment due at the satisfactory completion of the work.)  The homeowner should always “holdback” up to 33% of the total cost until the work is done and done right.
  • There are other requirements mandated by the Home Improvement Law.

To be safe, I recommend having an attorney review the contract. Proposed contracts which do not comply with the Home Improvement Law are a red flag.

6.  Hold A Pre-Construction Meeting

Seems pretty obvious, but again frequently contractors jump into a job right after signing the contract without taking the take to meet again with the homeowner. Walk through the project again after the initial estimate. Discuss any changes and scheduling issues. Pin down the contractor as to exactly when the crew will be on the job. Talk about expectations for day end and clean up.

7.  Verify Sufficient Liability Insurance and Worker’s Compensation Insurance

Obtain the contractor’s Worker’s Compensation Insurance Coverage sheet showing that it has worker’s compensation insurance in place as well as the coverage page for its Commercial General Liability (CGL) policy. Request that the contractor add you (and your spouse if you own the home jointly) as “additional insureds” on the policy with at least $1M in liability coverage in place. This should protect you if a worker injures himself on the project site.couplewithhouse

8.  Ensure The Contractor Pulls All Permits

Always have the contractor pull the building, plumbing and electrical permits. Owners who secure their own permits are ineligible for protection under the Home Improvement Law. If a contractor is reluctant to pull permits himself, it’s a red flag.

9.  Document All Changes In Writing

I cannot tell you how many times that after signing a comprehensive written agreement, homeowners and contractors alike change the work and increase the contract price orally without any written documentation. This is a huge No-No and will get the homeowner into trouble every time. Ask the contractor for a “change order” to fill out and sign, or create one yourself.  It should, at minimum, provide the original contract price, a detailed scope of the new work, its cost, and the updated total, signed and dated by both parties.

10.  Carefully Monitor The Project And Keep Lines Of Communication Open

Seems like common sense, but don’t go on vacation during a home improvement project, lest you arrive home to a mini-disaster. Keep a log of daily activity that you can match up with the project schedule. Another common complaint is when the construction crew inexplicably fails to show up when you expect and is instead at another project. This happens a lot at the end of the project when the contractor is focusing on the next job. Email or write the contractor and get his firm commitment to finish your job or else you will withhold final payment. If there are any issues or problems, the best way to cover yourself is to document them. Email works great here as it is not too formal yet more than adequate to memorialize the event. Create a final punch list for all incomplete items and withhold final payment until it is completed.

If you are seeking a licensed general contractor in the Greater Boston area who follows these guidelines, call George Lonergan of Lonergan Construction, Inc., (Tel: 508-875-0052) based in Framingham. He also certified under the new Lead Paint Removal Regulations.

Best of luck with your Massachusetts home improvement project!

{ 18 comments }

The Catch-22 Impact Of New Fannie Mae (FNMA) Condominium Lending Regulations

by Rich Vetstein on July 1, 2009

in Condominium Law, Fannie Mae, Massachusetts Real Estate Law, Mortgage Crisis, Mortgages

Recent Fannie Mae (FNMA) condominium lending regulations are beginning to live up to the hype as having an onerous impact on condominium sales and project development. The changes, made in January 2009, were part of an effort by mortgage giants Fannie Mae and Freddie Mac to limit risky lending in a segment of the housing market particularly hard hit by foreclosures in recent years.

Here is a brief overview of the Fannie Mae condo guideline changes:

  • For new construction and newly converted condominium developments, 70% of the units must be pre-sold (closed or under contract). This guideline is being increased from 51%.  This is the real Catch-22.  Fannie Mae won’t approve condominium mortgages unless 70% of the units are sold, but a developer cannot sell 70% of the units without buyers being able to obtain conventional Fannie Mae compliant mortgages. Buyers who run into problems here are being forced to get loans from small local banks who hold their own mortgages and are not bound by the FNMA guidelines.
  • No more than 15% of condominium units within a single project can be more than 30 days delinquent on condo fees. This is an existing guideline that is now being applied to new condominium projects. The requirement was also changed from being 15% of the total fee payments to 15% of total units.
  • Fidelity insurance will be required for condominiums with 20 or more units, ensuring that homeowner association funds are protected. Presently, this requirement applies to new projects and is now being extended to include established condominiums.
  • Borrowers must now obtain an HO-6 condominium unit owners insurance policy unless the condominium master policy provides interior unit coverage; coverage may not be less than 20% of the assessed value. A condominium owners policy, known as an HO-6 policy, typically covers personal property, personal liability, and the physical unit from the studs and in. Many policies also include special assessment coverage or the option to include a special assessment coverage rider. Click here for a more extensive post on HO-6 policies.
  • No more than 10% of a project can be owned by a single entity. Apparently, this was to keep the so-called “vulture buyers” from taking over project.
  • No more than 20% of a project can consist of non-residential space. The new guidelines therefore severely impact most mixed commercial-residential use projects, a highly popular development scheme.
  • The condominium/homeowners association must have at least 10% of its budgeted income designated in a capital reserve fund for replacement reserves and adequate funds budgeted for the insurance deductible. Many older condominium associations keep woefully inadequate reserves and operating budgets, so they are non-compliant.
  • No pending litigation involving the structural soundness, safety or habitability of the condominium project. Fannie Mae underwriters will reject financing if the condominium association is involved in litigation over the construction of the project. I’ve written about this more extensively here. Borrowers may ask for a waiver if they can establish adequate insurance coverage for the litigation or otherwise little or no risk of loss to the association.
  • Fannie Mae and Freddie Mac have also boosted fees on mortgages for condominium units. Buyers without a minimum 25% down payment have to pay closing-cost fees equal to 0.75% of their loan, regardless of their credit score, under new rules that took effect in April. Fannie Mae has said it will drop that fee in August for cooperative apartments and detached condos.

According to a Fannie Mae, the guidelines can be modified for condominium projects on a case-by-case basis.  Therefore, these guidelines may not apply to all condo projects.

Click here for the guidelines.

What’s the impact of the changes?FNMA condominium guidelines

Certainly, the revised guidelines are negatively affecting condominium buyers’ ability to obtain conventional loans for either a new or established condominium if the project does not conform. Most notably, the changes are dramatically affecting new developments, especially in hard hit areas such as Florida and California.

Fannie Mae has already approved a number of projects. Click here for the full list of FNMA approved projects.

Through discussions with some fellow Massachusetts real estate professionals, the impact here in the Bay State is not as bad as some of the harder hit states, but it’s proving to be a major thorn in many transactions. Real estate attorneys on both sides of the table are working hard to get existing condominium developments in compliance with the new regulations.

Rep. Barney Frank (D-Mass.), who ironically spent the last year lambasting Fannie Mae for its questionable lending practices, is now calling for Fannie Mae to relax these guidelines. We’ll see what happens in D.C., and keep you posted on any changes coming down the pipeline.

Update:  Since I posted this article, I’ve been retained several times to issue attorney opinion letters certifying to a lender that a particular condominium project is in compliance with the new FNMA regulations. If you are in need of such an opinion letter, please contact Richard Vetstein at [email protected].

{ 51 comments }

Massachusetts Foreclosures Down Almost 60%, A Good Sign or Statistical Aberration?

by Rich Vetstein on June 30, 2009

in Foreclosure, Massachusetts Real Estate Law, Mortgage Crisis, Mortgages

The Boston Globe is reporting that foreclosures in Massachusetts took a steep dive in May, the second consecutive month they have fallen, according to data released yesterday by Boston real estate tracking firm Warren Group.

According to the Globe, there were 582 foreclosure deeds recorded in May, a 58.6 percent decrease from 1,405 during the same month in 2008, and a 24.3 percent drop from April.

Others attribute the drop to the so-called Ibanez decision by the Massachusetts Land Court in late March that invalidated two foreclosures because the lenders failed to show proof they held titles to the properties. The Ibanez decision is a product of the Massachusetts conveyancing practice struggling to keep up with modern mortgage lending practices. The ownership of a loan may be divided and freely transferred numerous times on the lenders’ books, but the documentation (i.e., the assignments) actually on file at the Registry of Deeds often lags far behind. The Land Court ruled that foreclosures were invalid when the lender brought the ownership documentation (the assignments) up-to-date after the foreclosure sale had already taken place — even if the effective date of the assignment was before the first foreclosure notice. The ruling, which is ultimately expected to head to the Massachusetts Supreme Judicial Court, has prompted concern throughout the conveyancing and mortgage industry, and is stalling sales of foreclosed properties, real estate specialists say.

Based on discussions I have had with other real estate attorneys, up to 20% of all foreclosure titles in Massachusetts may be affected by the Ibanez decision.

This is causing so much angst in the industry that title insurers are refusing to insure foreclosure titles affected by the problem. That means in cases where this issue is present, the lender cannot foreclosure, and the real estate sits barren for the indefinite future. This is bad for the lender who is trying to get rid of a non-performing asset, for the potential buyers interested in purchasing foreclosed properties, and certainly for the neighborhoods affected by blighted foreclosed properties.

Here is a copy of a portion of a memo sent by Stewart Title Company to its local title agents suspending authorizations to issue title insurance over titles derived from foreclosures which are affected by this problem:

Date: April 22, 2009
To: All Massachusetts Issuing Offices
RE: Recent Land Court Decisions Requiring Suspension of Authorization to Insure Massachusetts Titles Based on Foreclosures with Post-Foreclosure Assignments

Dear Associates:

As you may be aware, the Land Court issued two recent decisions that call into question the validity of several titles coming out of foreclosure.

The result of these two decisions is that titles based on foreclosures by an Assignee lender are potentially fatal unless the Assignment in question was executed and held by the foreclosing lender prior to the commencement of foreclosure under M.G.L. c. 244, §14. Foreclosures based on Assignments that were dated after the foreclosure sale were deemed invalid even if the Assignments were “backdated” (i.e., contained an “effective date”) prior to the first c. 244, §14 notices.

Accordingly, subject to certain exceptions discussed later in this Bulletin, until further developments in these cases and the law upon which these cases were decided, Stewart Title Guaranty Company is suspending authorization to insure titles derived from foreclosures where the recorded Assignment into the foreclosing Lender is not dated prior to the date of the first publication under c. 244, §14.

I will be monitoring the Land Court decision through what will surely be an appeal to the Supreme Judicial Court, the highest appellate court in Massachusetts.

Update (Aug. 27, 2009):  I have been informed by attorneys involved in the Ibanez case that the lenders have filed a motion to reconsider the Land Court’s ruling. Also, the Real Estate Bar Association of Massachusetts has taken the unusual step of filing a “friend of the court” brief, urging the Land Court to reconsider its decision. The National Consumer Law Center and well known consumer class action attorney Gary Klein has also joined the fray. As of now, Judge Long of the Land Court has not made a final decision. I will update you when the ruling comes down. Either way, this case is going up to the Supreme Judicial Court, and probably on direct appellate review.

{ 2 comments }

Next Entries →