Title Defects

A recent court ruling confirms a legal principle in Massachusetts which a lot of folks may be surprised to learn. Under the legal theory of adverse possession, if you mow your neighbor’s lawn and otherwise conduct typical suburban lawn care on that property openly and adversely for 20 or more years, you can claim legal ownership of that area. I’m not kidding, this is the law, and this principle comes up more than you think in boundary line disputes in Massachusetts.

Boundary Line Dispute In Newton

The case is Miller v. Abramson (Mass. Appeals Court Aug. 29, 2019) and is a good example of a classic adverse possession lot line dispute.

The Miller family lives in a single-family home at 11 Fellsmere Road in Newton, on a corner lot at the intersection with Ward Street. The Abramson family lives at 211 Ward Street in Newton. Fellsmere Road dead-ends onto Ward Street. As shown on the plan (left), the back of the Millers’ property directly abuts one side line of the Abramsons’ lot. The parties’ shared lot line is straight, running from Ward Street to the back of the Abramsons’ property. The area disputed by the parties forms a thin triangle, about 492 square feet in size, the base of which is along the Abramsons’ back lot line and one side of which is along the parties’ shared lot line. Since the Millers bought their property in 1986, a line of shrubs and small trees have formed a demarcation of the disputed area from the Abramson’s property. Since 1986 to the present, the Millers and their landscaping company mowed the lawn weekly and undertaken typical residential landscaping work within the disputed area.

Lawn Mowing and Typical Suburban Landscaping Can Constitute Adverse Possession

On appeal after the Millers prevailed at a Superior Court jury-waived trial, the Abramson’s argued that lawn mowing and landscaping was not sufficiently intense a use to establish adverse possession. As I have argued in other cases, the three judge panel confirmed that “typical suburban lawn care” can establish adverse possession so long as it was conducted for 20 or more years. The Appeals Court reasoned that “the context supplied by the surrounding landscape is significant in an adverse possession case — a use that is sufficient to establish ownership in a densely populated neighborhood may be inadequate in an isolated, wooded setting.”

So basically what the Appeals Court is saying is that the uses which would qualify for adverse possession depend on the type of property and the typical uses of land for that type of property. Here, in the single family residential setting, typical suburban lawn mowing, tree pruning and landscaping will be sufficient for a landowner to make a valid adverse possession claim. If the property is in a more open, heavily wooded area, more uses may be necessary, such as cutting trees and clearing the land. Conversely, if the property is in a dense urban area, uses such as paving a driveway, installing a fence, or the like may be enough. It depends on the situation, and every case is different.

Take-Away’s — Get a Plot Plan and Owner’s Title Insurance

As a prospective buyer, seller or real estate agent, how can you minimize the risk of adverse possession and boundary line disputes? The gold standard is to have a licensed surveyor undertake an instrument survey and run survey stakes along all lot lines. However, such a survey does cost upwards of $1,000 or more. Most lenders require a mortgage plot plan (around $125) at closing, however, these are not 100% accurate, but they will typically flag a potential encroachment. Owner’s title insurance with enhanced coverage does provide some coverage (subject to a cap) for boundary line disputes, so I always recommend that buyers get this. While buyers often pay the most attention to inside the home with their inspection, it’s a good idea for buyers to walk the property and try to scope out any potential lot line issues.

If you are dealing with a Massachusetts property line or boundary line dispute, please feel free to contact me at [email protected].

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Horry, SC Booking Photo — Allen J. Seymour

As I’ve written here before, I have been representing three families victimized by convicted felon, Allen Seymour, in a brazen complex real estate forgery scam where he forged deeds and sold properties out from under owners. I’m happy to report that the Worcester Superior Court just sentenced Seymour to a prison term of 3-5 years at MCI-Cedar Junction. This sentence was for his violation of the terms of his probation from his first criminal conviction in a similar scam in 2010. He remains under indictment for 22 counts of forgery, larceny and money laundering in the most recent case involving my clients. We expect that he will receive another substantial prison term once that case goes to trial later this year.

As reported by the Worcester Telegram, Worcester Superior Court Justice Janet Kenton-Walker sentenced Seymour, 52, to 3-5 years in state prison, with 5 years of probation to follow, and also ordered to pay $750,000 in restitution and was prohibited from working in the real estate industry. Assistant Attorney General Edward Beagan had asked Judge Kenton-Walker to sentence Seymour to 6 years in state prison on the violation. He further asked the judge to keep Mr. Seymour on probation on one of the charges and allow the $750,000 restitution order to remain in place.

I have filed three civil actions in Middlesex Superior Court, seeking to quiet title and restore ownership to the victims. The cases are ongoing.

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It’s been awhile since I’ve posted, and that’s due in large part to my work on several complex cases involving challenges to deeds. So I figured since I’ve done a ton of legal research and writing on the subject in the actual cases, why not write about it?

When you think about undue influence and mental capacity, one conjures up the classic scene of the “evil” son putting a deed to the family house in front of a dying parent in the hospital, signing over the house and excluding all of the other siblings. Now, I’ve had a case where that actually occurred! But these cases run the gamut of situations.

These cases are often intra-family disputes, and can involve challenges to deeds and real estate transfers, as well as wills. Will contests are a different animal altogether, so I won’t cover those in this post. The common theme in these cases is that someone (say an heir of a deceased person or a sibling) is unhappy that a parent or sibling signed over a deed to someone else (say a brother or son) and thinks there was something nefarious behind it, and wants to essentially un-do that transfer.

Legal Standards Governing Deeds and Notaries Public

Let me start with some basics about the law of deeds and notarizations. In order to be considered enforceable and accepted for recording at the registry of deeds, a quitclaim deed must be executed before a notary public. A notary public’s job is essentially to ensure that the signatory is signing the deed is doing so freely and voluntarily. A Notary Public is governed by a comprehensive set of regulations under Executive Order No. 455 — Standards of Conduct for Notaries Public passed by Gov. Romney in 1994. A notary must examine a government issued form of identification in order to verify the identify of the person signing the deed. The notary does not have to make a medical or psychological determination as to whether the signatory is legally competent. Under the regulations, however, the notary is prohibited from notarizing a deed if the signatory “has a demeanor that causes the notary public to have a compelling doubt about whether the principal knows the consequences of the transaction or document requiring the notarial act,” or “in the notary public’s judgment, the principal is not acting of his or her own free will.”

A notary must also keep a journal of all notarizations performed (however, attorneys are exempt from this rule). The journal must contain the date, time and location of the notarial act, the signature, name and address of the person signing the document, the type of identification provided, and a description of the document notarized. The notary journal can prove to be a critical piece of evidence in a deed challenge case. (Note that the absence of a journal entry or journal itself does not render the deed or document invalid on its face).

Importantly, a notary public does not act as a lawyer or judge overseeing the legality of the deed or the conveyance in general. The regulations specifically provide that a “notary public has neither the duty nor the authority to investigate, ascertain, or attest to the lawfulness, propriety, accuracy, or truthfulness of a document or transaction involving a notarial act.”

Now this is very important. A quitclaim deed that is validly executed and acknowledged properly by a notary public and recorded with the registry of deeds is presumed by the law to be valid and enforceable. So how can someone challenge a deed which looks to be validly executed and notarized? Let me explain.

Undue Influence

Undue influence typically arises when the signatory to a deed (often elderly or mentally challenged) is under the influence of someone he or she trusts (often a close relative), and that person uses such influence to make them sign a deed under coercion or duress of some kind. The law defines undue influence as “whatever destroys free agency and constrains the person whose act is under review to do that which is contrary to his own untrammelled desire.” Four factors are usually present in a case of undue influence: (1) an unnatural disposition is made (i.e, the recipient would not otherwise have been entitled to own the property) (2) by a person susceptible to undue influence to the advantage of someone (3) with an opportunity to exercise undue influence and (4) who in fact has used that opportunity to procure the contested disposition through improper means. If undue influence can be established, a court can render the deed voidable and essentially undo the transaction in certain circumstances.  

Proof of undue influence is often challenging and involves recreating the circumstances of the deed signing and also examining the medical history of the person signing the deed many years ago. Medical records will need to be obtained. We often hire medical experts to give opinions on the victim’s neurological state. These cases are complex and can be expensive to litigate.

Lack of Mental Capacity

A person signing a deed must have a minimum level of mental capacity and awareness to know and understand what they are doing and that they are doing so under their free will. Mental capacity and undue influence often overlap. Lack of mental capacity may be found where a person may be affected by congenital deficiencies in intelligence, mental deterioration that accompanies old age, the effects of brain damage caused by accident or organic disease, and mental illnesses evidenced by such symptoms as depression, bipolar, or other neurological impairment. Like undue influence, proof of mental capacity can be challenging and involves medical records and expert medical witnesses as to the signatory’s mental state. A notary public should usually be the first line of defense in a situation where the signatory appears mentally incompetent, but often that does not happen or the signatory does not appear mentally challenged for the few minutes it takes to sign a deed. If lack of capacity can be established, a judge can invalidate the deed.

Forgery

Forgeries are a different situation all together. A forgery occurs when the person who is supposed to sign the deed did not sign it at all — someone else forged their signature on the document, and somehow had it notarized (often falsely). In my publicized forgery cases involving the accused criminal Allen Seymour, he allegedly forged victims’ signatures on deeds, then used a fake notary stamp on the deeds.

Under the law, if a deed is forged it is completely null and void — as if the deed never existed in the first place. Title reverts back to the original owner, and any subsequent good faith buyer or mortgage companies are out of luck. (That’s why you always get owner’s title insurance).

Proof of forgeries often requires a handwriting expert. Handwriting analysis is an interesting science, and I’ve dealt with it in several cases. Experts are usually former FBI agents or police detectives.

Litigating Challenges to Deeds

These cases are often brought in the Superior Court or Land Court under their quiet title jurisdiction. Sometimes they are brought in Probate Court. Claimants often seek a lis pendens (notice of legal claim) at the start of the case in order to prevent the property from being transferred or mortgaged while the case plays out. Sometimes, the signatory to the challenged deed is deceased, making the evidentiary history far more difficult to obtain and prove. Sometimes, the notary public is deceased or cannot be located. And sometimes the attorney who drafted the deed and participated in the signing has passed or cannot be located. Each case presents its own unique factual history and challenges.

It goes without saying that you need a very experienced real estate litigation attorney to handle this type of case. They are complex, both legally and factually, and can get very expensive, very quickly. But the stakes are usually quite high, with property values being so astronomical here in Massachusetts.

If you are dealing with one of these situation, please feel free to call (508-620-5352) or email me [email protected], and I would be happy to take a look at your case.

Good luck, Rich

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Allen Seymour, 50, formerly of Oxford, MA

As I’ve written here before, I have been representing three families victimized in a well publicized criminal real estate scheme involving forged deeds and the theft of millions of dollars in real estate.

I’m happy to report that Attorney General Maura Healy’s Office has announced a new round of indictments issued by a statewide Grand Jury against the suspected mastermind of the scheme and his son. Allen Seymour, 50, was indicted on charges of larceny of more than $1,200 and four counts of forgery. Seymour’s son, Corey Seymour, 26, of Worcester, was indicted on one count of conspiracy to commit money laundering and three counts of money laundering.

Thanks to my clients’ grand jury testimony, Seymour was previously indicted on 22 felony charges of forgery and money laundering. His former wife, Tina Seymour, was also indicted in the scheme.

Seymour, who used the alias “Rich Chase,” targeted elderly and unsophisticated homeowners, using forged deeds and fake notary stamps to sell their properties out from under them, flipping them to wealthy investors, and pocketing the cash. Seymour targeted properties in Cambridge, Brookline, and Somerville. As claimed in my lawsuits, Seymour also worked with a group of accomplices including Newton police lieutenant, Francis Foley III, who was not indicted but remains under investigation and on paid leave from the force.

I have filed three separate civil lawsuits seeking to undo the fraudulent transactions which remain pending. I am hopeful that all of my clients will receive the justice they deserve.

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Attorney General Healy Announces Indictments Against Allen Seymour and Ex-Wife

As I’ve written here before, I have been representing three families victimized by convicted felon, Allen Seymour, in a brazen complex real estate forgery scam. As a result of the courageous testimony from my clients, I’m happy to report that a statewide Grand Jury has just handed down a 22 count indictment against Seymour on charges of forgery, uttering, larceny, and money laundering. Seymour’s ex-wife, Tina Seymour, was also charged with conspiracy to commit forgery.

Seymour, who used the alias “Richard Chase,” targeted elderly and unsophisticated homeowners. He used forged deeds and fake notary stamps to sell their properties out from under them, flipping them to wealthy investors, and pocketing the cash. Seymour targeted properties in Cambridge, Brookline, and Somerville. As claimed in my lawsuits, Seymour also worked with a group of accomplices including Newton police lieutenant, Francis Foley III, who was not indicted but remains under investigation and on paid leave from the force.

Allen Seymour fled the state and was apprehended in South Carolina in May, and is currently being held without bail pending probation surrender hearing scheduled for a later date. He will appear in Worcester Superior Court on Jan. 7, 2019 for a hearing regarding his probation surrender. Tina Seymour will be arraigned in Hampden Superior Court at a later date.

I have filed three civil actions in Middlesex Superior Court, seeking to quiet title and restore ownership to the victims. The cases are ongoing.

First American Title Company has issued a statewide Fraud Agent Alert concerning this scheme.

Boston 25 News reported on the indictment below

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Court Shoots Down Lender’s Attempt to Expand Doctrine of Equitable Subrogation

In the interesting case of Wells Fargo Bank v. Comeau (Nov. 15, 2017), Justice Peter Agnes of the Appeals Court has held that a surviving wife is not financially responsible for paying back a refinanced mortgage where the wife neither signed the promissory note nor the refinance mortgage, even though she originally held title to the home as a married couple (tenants by the entirety) and signed the original mortgage on the property. In so ruling, Judge Agnes rejected Wells Fargo’s argument to expand the doctrine of equitable subrogation to cover a situation such as this.

Parties to Deed Must Match Up With Mortgage!

Nancy and William Comeau owned their Haverhill home jointly in the traditional Massachusetts form of ownership called “tenancy by the entirety” where title passes automatically to the surviving spouse upon death of a spouse. When the couple purchased the home, they both signed a first mortgage to Haverhill Cooperative Savings Bank. It appears that Nancy was not an applicant for the loan because she did not sign the promissory note. However, the cardinal rule is that the parties to the deed must match the parties to the mortgage, otherwise there will be problems (foreshadowing what happened in this case).

When the couple went to refinance the Haverhill Savings loan with Wells Fargo, only William, the husband, signed the note and mortgage. Big mistake! Since Nancy, the wife, remained on the title as a joint owner, she should have signed the mortgage as well. After the refinancing, William unfortunately dies. His estate is probated, but Wells Fargo makes another mistake and fails to file a claim within the one year probate statute of limitations.

Lender Goes To Court

In an attempt to get Nancy to pay up on the mortgage, Wells Fargo went to Superior Court and made the creative argument that the wife should be responsible under the little known legal doctrine of equitable subrogation which gives courts equitable power to reform mortgages, to restore once-extinguished mortgages, and to adjust priorities among existing mortgages where it is fair and just to do so. Wells lost in Superior Court. On appeal, Justice Agnes agreed, ruling that this case was not appropriate for the equitable subrogation remedy, thereby leaving Wells Fargo with a total loss on its mortgage debt. Judge Agnes reasoned that the situation was entirely of Wells Fargo’s making, and that it had the opportunity to have Nancy sign the mortgage or make a claim against William’s estate, but it failed to do so.

Having handled many title insurance claims in my prior practice, we often used equitable subrogation in cases where a title examiner missed a mortgage in connection with a refinance. Those types of human error would allow for equitable subrogation, however, this case would not, as Judge Agnes correctly ruled in my opinion.

This case is a good example why closing attorneys should always have both married spouses execute the mortgage even if one spouse is not on the loan.

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Kenney v. Brown:  First Reported Decision Under Act Clearing Title to Foreclosed Properties

In a ruling applauded by the conveyancing bar and title underwriters, Land Court Justice Robert Foster has dismissed a borrower’s challenge to a 2007 foreclosure sale even though the borrowers recorded an affidavit reflecting the alleged title defect within the time period set by the Act. This is the first court ruling that I am aware of interpreting the new Act Clearing Title to Foreclosed Properties.

The Title Clearing Act, now codified in Mass. General Laws Chapter 244, section 15,was enacted by Gov. Baker last year in an effort to minimize the impact of several troublesome SJC rulings which cast doubt on titles coming out of foreclosures, including the seminal case of U.S. Bank v. Ibanez. The Act establishes a three-year deadline to bring a legal challenge to a foreclosure. To timely bring a challenge, an aggrieved homeowner must file lawsuit challenging the validity of the foreclosure sale, and must also record a copy of the lawsuit in the registry of deeds before the limitations period expires.

The plaintiffs argued that even though the Act expressly calls for the timely filing of a copy of the complaint challenging a foreclosure sale with the Registry of Deeds, the timely recording of their affidavit provided sufficient notice of their claim to satisfy the intent of the statute.

But Judge Robert B. Foster found the plain language of §15 controlled. “The language of the Statute is conjunctive,” Foster ruled. “It requires both the commencement of an action in court and the recording of the complaint or pleading with the registry before the deadline. The recording requirement is not surplusage. It is not simply a notice provision, but rather an additional requirement necessary to file a timely suit.”

Because the plaintiffs failed to comply with §15’s requirement to record their amended complaint within one year of the effective date of the act, Dec. 31, 2016, the judge concluded that their wrongful foreclosure claims were barred.

This is a great ruling for the conveyancing bar. Judge Foster’s decision furthers the underlying purpose of the statute to provide clarity of title in the wake of the foreclosure crisis and the Supreme Judicial Court’s 2011 decisions on wrongful foreclosure in Bevilacqua v. Rodriguez and U.S. Bank National Association v. Ibanez. The whole purpose of the act is to slowly clear away these defective foreclosure titles. It was also important for Judge Foster to clarify that so-called “5B affidavits” do not satisfy the act’s recording requirements. I have seen an increased prevalence of borrowers and attorneys recording bogus 5B affidavits in an attempt to cloud titles and shake down third party buyers and title insurance companies.

The 23 page court opinion can be read below.

Kenney v. Brown (Mass. Land Court) by Richard Vetstein on Scribd

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Appeals Court Upholds MERS Mortgage Assignment System

by Rich Vetstein on July 25, 2017

Strawbridge v. Bank of NY Mellon:  Appeals Court Justice Peter Agnes Gives Judicial Blessing to MERS Assignment System, Rejects Other Foreclosure Challenges

The most recent foreclosure case heard by a Massachusetts appellate court should allow title underwriters and foreclosing lenders to sleep better at night. In Strawbridge v. Bank of NY Mellon, No. 16-P-1244, embedded below, Appeals Court Justice Peter Agnes upheld the MERS system of holding and assigning mortgages in Massachusetts as a “nominee.” Judge Agnes also ruled that the borrower lacked standing to raise defects in the pooling and servicing agreement by which the bank created a securitized mortgage trust, because she is not a party to that intra-lender agreement. This ruling should simultaneously benefit the housing market, while taking away a major weapon for foreclosure defense attorneys.

The case was brought by well-respected foreclosure defense attorney Glenn Russell, Esq. who represented the borrower, Sandra Strawbridge. Attorney Russell’s cases are typically on the cutting edge of foreclosure defense law, and thus, should always be read with interest.

Foreclosure Challenge

Strawbridge challenged the foreclosure on the grounds that the Bank did not comply with Massachusetts foreclosure law after the SJC’s decision in Eaton v. FNMA which held that a foreclosing lender must establish it holds both the promissory note and the mortgage. (Title companies have issued comprehensive underwriting guidelines after the Eaton ruling). Strawbridge also claimed that MERS’s assignment of her mortgage to the Bank was void because the assignment occurred after a date established in the pooling service agreement (PSA) of the securitzed trust.

Countrywide-MERS Assignment System

In 2007, Strawbridge obtained a $370,000 mortgage from Countrywide Home Loans. The mortgage designated Mortgage Electronic Systems, Inc. (MERS) as the nominee for Countrywide. In 2009, Strawbridge defaulted on her note by failing to keep up with her mortgage payments. In February, 2010, MERS assigned Strawbridge’s mortgage to Bank of New York Mellon which held the mortgage as part of a securitized trust. A MERS “Assistant Secretary and Vice President” executed the assignment, which was notarized and recorded at the appropriate registry of deeds. Later, in March, 2015, a “Second Assistant Vice President” at the Bank’s loan servicer executed an “Affidavit Regarding Note Secured by Mortgage Being Foreclosed.” That affidavit states that the Bank is the holder of the note. In addition, in April, 2015, the Bank’s loan servicer executed a “Certificate Relative to Foreclosing Mortgagee’s Right to Foreclose Pursuant to 209 C.M.R. 18.21A(2)(c),” which certified that the Bank is the “holder of the Mortgage” and “the holder of the Note or is authorized agent of the Note holder with the specific authority to enforce payment and pursue foreclosure of the Mortgage on behalf of such Note holder.” Finally, in July, 2015, the Bank sent Strawbridge a notice of foreclosure sale, informing her that a foreclosure sale would take place in August. The borrower challenged the sale in the Superior Court which ruled against her.

Appellate Rulings

On appeal, Judge Agnes ruled that “MERS’s nominee status does not preclude it from validly assigning the mortgage, or does it limit MERS’s power to exercise a right of [foreclosure] sale.” The Court also rejected the borrower’s argument that the Bank is required to provide a complete chain of assignments of the mortgage, opting instead to hold the Bank to a less onerous standard of merely producing a single assignment directly from MERS, the last holder of record. Lastly, the judge ruled that the borrower lacked standing to raise defects in the pooling and servicing agreement because she is not a party to that intra-lender agreement.

Take Aways

The impact of this decision is a reaffirmation that the MERS system of assigning mortgages remains legal and binding in Massachusetts. MERS mortgages account for the vast majority of conventional mortgage financing in Massachusetts. This ruling will also make it more difficult for distressed homeowners to challenge foreclosures, clearing the way for banks to sell REO property. I spoke to Attorney Russell about the case, and he indicated that he is considering taking an appeal up to the Supreme Judicial Court. So this may not be the last word on the matter.

Strawbridge v. Bank of NY Mellon by Richard Vetstein on Scribd

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licensenotary-public-2An Act Regulating Notaries Public to Protect Consumers And The Validity And Effectiveness Of Recorded Instruments

On October 6, 2016 Governor Charlie Baker signed Chapter 289 of the Acts of 2016, An Act Regulating Notaries Public to Protect Consumers And The Validity And Effectiveness Of Recorded Instruments. The Act is a product of cooperation between the Real Estate Bar Association and the title industry. The Act officially codifies Mitt Romney’s Executive Order No. 455 (04-04), which in 2004 reformed the standards of conduct for notaries.  It also codifies the prohibition that a notary public cannot oversee and conduct a real estate closing; only a licensed attorney can handle closings. It also addresses several bankruptcy court rulings which called into question the effectiveness of notary acknowledgements involving powers of attorney.

Unauthorized Practice of Law
In the last decade, the practice of so-called “witness-only closings,” or “notary closings,” by non-lawyer notaries has spread from other states to Massachusetts. This practice has been vigorously opposed by REBA which filed a successful lawsuit effectively barring the practice in REBA v. National Real Estate Information Services, 459 Mass. 512 (2011). The Act codifies the rule of law that a non-attorney notary may only notarize documents but may not conduct a real estate closing. Only licensed attorneys may conduct real estate closings in Massachusetts.

Title Curative Provisions

Recent rulings from the Bankruptcy Court called into question the validity of mortgages with notary acknowledgements involving powers of attorney. The result of these rulings were that many mortgages were held null and void due to defective acknowledgements. The Act addresses these issues by providing, among other things:

● A revision to the standard acknowledgment clause, when the document is executed by the signatory in other than an individual capacity, to assist the notary in making clear that the document is the voluntary act of the principal, not merely the signatory [M.G.L. c. 222, § 15(b)]
● Notaries may vary from the forms set forth in the statute if they are using a form that is authorized or required by statute, regulation or executive order, including one executed in a representative capacity by one who acknowledges his voluntary act but fails to acknowledge the deed or instrument as the voluntary act of the principal or grantor [M.G.L. c. 183, § 42, as revised] [M.G.L. c. 222, §§15(h), 20]
● Failure to state that a document signed by an attorney in fact or in another representative capacity is in fact being signed as the voluntary act of the principal, not merely the signatory, shall not make the document invalid.  [M.G.L. c. 222, § 20(b)(iii)]

Other Provisions

Chapter 289 includes most of the Executive Order’s provisions, some in a modified form. The legislation also added other new provisions in M.G.L. cc. 183 and 222 —

● Notaries shall continue to maintain a chronological official journal of notarial acts, except that attorneys and their office staff shall continue to be exempt from this requirement.  [M.G.L. c. 222, §§ 12, 22, 24]
● Requirements for the notarial seal or stamp (expiration date affixed, exclusive property of the notary, etc.), except that a failure to comply shall not affect the validity of any instrument or the record thereof [M.G.L. c. 222, § 8, as revised]
● Qualifications for a notary; the grounds for which the Governor may decline an application for appointment or renewal of a notary commission, and the seven-year term of office, all as incorporated into the statute [M.G.L. c. 222, §§ 13, 14]
● Types of notarial acts that a notary may perform and prescribed forms for an acknowledgment, jurat, signature witnessing or copy certification [M.G.L. c. 222, § 15]
● Obligations of the notary to determine the appropriateness of the circumstances under which the notary is asked to perform a notarial act (identity and demeanor of the principal, incomplete notarial certificates, no undue influence by the notary, the notary’s relationship to the transaction or to the parties, etc.) [M.G.L. c. 222, §§ 16, 19, 20]
● Prohibition against notarizing signatures of family members shall not apply to notaries who are Massachusetts attorneys, as when the attorney takes the acknowledgement of an employee family member who witnesses a will, as provided in the Executive Order, but also if the family member employed by the attorney is the notary who takes the acknowledgement of the attorney.  [M.G.L. c. 222, § 16(a) (vii)]
● Failure of a document to contain the statutory forms shall not have any effect on the validity of the document or the recording thereof.  [M.G.L. c. 222, §§ 16, 19, 20]
● Notary public’s commission may be revoked for official misconduct, or for other good cause.  [M.G.L. c. 222, §§ 1, 26]

For more information, go to the Mass.gov Notary Public Page.

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Foreclosure2-300x225.jpgMany Titles Automatically Cleared As Of Dec. 31, 2016

While 2016 may have been a tough year for some, the new year brings some relief to those affected by foreclosure related title defects. For some homeowners saddled with bad titles due to improper foreclosures, when the Times Square ball dropped, their titles defects magically disappeared under The Act Clearing Title to Foreclosed Properties. They are now free to sell or refinance after waiting many years in most cases.

The Act, now codified in Mass. General Laws Chapter 244, section 15, was enacted by Gov. Charlie Baker last year in an effort to minimize the impact of several troublesome SJC rulings which cast doubt on titles coming out of foreclosures, including the seminal case of U.S. Bank v. Ibanez. The Act, which I testified in support of at the State House, establishes a new three year statute of limitations for challenging foreclosures and clears titles with foreclosures conducted prior to Dec. 31, 2013, unless the homeowner brought a lawsuit and records it with the Registry of Deeds.

Practice Pointer: Under the Act, any defective title stemming from a foreclosure completed prior to Dec. 31, 2013 is now cured, provided there is no legal challenge filed and complaint recorded with the Registry of Deeds and no other statutory exemption applies. Speak to your title underwriter or consult an attorney for guidance.

Covered Time Period

The Act establishes a three-year statute of limitations period to bring a challenge to a foreclosure. To timely bring a challenge, an aggrieved homeowner must file lawsuit challenging the validity of the foreclosure sale, and must also record a copy of the lawsuit in the registry of deeds before the limitations period expires. The Act reaffirms the mortgagee affidavit requirements of the foreclosure law, including the provision that the recording of a valid affidavit is “evidence that the power of sale was duly executed.”  The Act also provides that after three years from the date that the foreclosing lender records a validly executed affidavit, the affidavit serves as “conclusive evidence” that the power of sale was duly executed.

Retroactive Application

The Act applies retroactively. To address constitutionality concerns, for mortgagee affidavits recorded prior to December 31, 2015, the statute of limitations period is the longer of the full three-year period or one year from the effective date of the Act, December 31, 2015. Thus, by the terms of the Act, for all foreclosures completed prior to December 31, 2013, the deadline to assert and record a challenge was December 31, 2016. For foreclosures completed between January 1, 2014 and December 31, 2015, the three year statute of limitations runs from the date of the foreclosure.

No Relief to REO/Fannie Mae Owned Properties, But….

The Act does not apply to mortgagees, noteholders, servicers, their affiliates, or government entities like the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) that continue to hold title to properties following foreclosure sales. The Act only applies “arm’s length third party purchasers for value,” defined as a party who either (1) purchased the property directly at the foreclosure sale, or (2) purchased the property from the bank or another entity at some point after the foreclosure sale, to the extent the power of sale was not duly exercised.” While foreclosing parties, noteholders, and mortgagees will not benefit directly from the Act on properties that they own or service, they will benefit from the resolution of title disputes, the insurability of properties they formerly owned or foreclosed, and the validity of mortgages that they currently service.

Broader Applicability?

The Legislature clearly intended for the Act to resolve title defects arising out of the Ibanez case. But the Act, as drafted, is not limited to just Ibanez defects. It could also be applied to defects arising out of other SJC rulings, including Eaton (promissory note status), Pinti (cure notice) and Schumacher (cure notice).  Because the Act is retroactive and silent as to what specific title issues it resolves, a recorded mortgagee affidavit could cure many other issues aside from Ibanez issues. We will see how title underwriters and the courts apply the Act in the months to come. As always, the best practice is to get your title underwriter’s opinion in an email and place in your file.

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notary-public

SJC Decision Provides Clarity to Title Attorneys

Now that the summer is over, it’s time to get back to blogging! During the quiet summer months, the Supreme Judicial Court issued an important decision for real estate attorneys and the title community in Bank of America v. Casey (June 16, 2016) (link to case). The SJC confirmed that a statutory curative attorney’s affidavit may be recorded with the registry of deeds correcting a defective notary acknowledgment on a mortgage which otherwise could have invalidated the instrument. This is a very helpful decision, and should result in more titles (and properties) being cleared and sold.

Defective Notary Acknowledgment

In 2005, Alvaro and Lisa Pereira refinanced their New Bedford property with Bank of America, N.A. The Pereiras individually initialed the bottom of each page of the mortgage agreement except the signature page, on which the full signature of each appears. Attorney Raymond J. Quintin, the closing attorney, also signed this page, as the notary to the Pereiras’ execution of the mortgage. The mortgage agreement contains a certificate of acknowledgment (acknowledgment) on a separate page. The Pereiras individually initialed the acknowledgment page at the bottom, but the acknowledgment itself is blank in the space designated for the names of the persons appearing before the notary public, and the Pereiras’ names do not appear elsewhere on the page. Quintin notarized the acknowledgment, affixing his signature and his notary public seal. 

Seven years later (which is unexplained in the ruling), Attorney Quintin signed and recorded an “Attorney’s Affidavit, M.G.L. Ch. 183, Sec. 5B” stating that he properly witnessed the Pereiras signing the mortgage and that “through inadvertence, the names of the parties executing this mortgage, Lisa M. Pereira and Alvaro M. Pereira, were omitted from the notary clause.” Parenthetically, these curative affidavits are quite common in the industry.

Approximately six months later, Mr. Pereira filed for bankruptcy and sought to be released from responsibility under the mortgage on the ground that the mortgage contained a material defect — the omission of the mortgagors’ names from the acknowledgment.

SJC–Attorney Affidavits Pursuant to G.L. c. 183, sec. 5B May Cure Defective Notary Acknowledgment

The Court first went over the general rule that a defective notary acknowledgment is usually grounds to void any recordable instrument altogether. Mass. General Laws chapter 183 section 5B provides a cure to this problem by providing that “an affidavit made by a person claiming to have personal knowledge of the facts therein stated and containing a certificate by an attorney at law that the facts stated in the affidavit are relevant to the title to certain land and will be of benefit and assistance in clarifying the chain of title may be filed for record and shall be recorded in the registry of deeds where the land or any part thereof lies.”

The Court then ruled that the curative affidavit recorded by the closing attorney cured the defect and validated the mortgage. The Court said the attorney’s affidavit must comply with the formal requirements of § 5B, attests to facts that clarify the chain of title by supplying information omitted from the originally recorded acknowledgement, and references the previously recorded mortgage. As long as it does that, the problem is solved.

This isn’t a “sexy” opinion, but it is nevertheless important to the real estate bar and community.

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AG Rejects Challenge To Foreclosure Title Clearing Law

by Rich Vetstein on January 20, 2016

maura-healeyGood news to report today! Massachusetts Attorney General Maura Healy has summarily dismissed a petition by the Massachusetts Alliance Against Predatory Lending (MAAPL) to repeal the Act Clearing Titles to Foreclosed Properties. The Act would automatically cure foreclosure related title defects after a one year waiting period.

In a three-page letter to Secretary of State William Galvin yesterday, Healy wrote, “I have concluded that it is not lawfully the subject of a referendum petition.” Healy’s main citation for the denial is a clause in the state constitution that says no law related to the power of the courts can be subject to a voter referendum.

As reported by Banker and Tradesman, Attorney Doug Troyer, co-chair of the Massachusetts Real Estate Bar Association’s Legislation Committee, said he thought the attorney general made the right decision. “It looked like the attorney general really took it into consideration, taking over 20 days to fully analyze all aspects in order to see if the petition could lawfully go to a referendum – and found that it couldn’t,” he said.

Opponents to the Act vow they will challenge it in court. However, they need to find a live case which may be difficult. Going forward, the Act will remain law, and after the one year waiting period, most Ibanez related title defects will be automatically cured by operation of law. Good news for the market!

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Anti-Foreclosure Activists Challenge Title Clearance Act

by Rich Vetstein on January 17, 2016

1201110897_7507Former Green Party Gov. Candidate, Grace Ross, Leads Repeal Effort

A group of anti-foreclosure activists recently filed a petition to repeal the Act to Clear Title to Foreclosed Properties, which was signed by Gov. Baker just before the new year. The leader of the repeal effort is Grace Ross, the former gubernatorial candidate and coordinator of the Massachusetts Alliance Against Predatory Lending.

The new law, which aims to protect homeowners who purchased foreclosed properties with defective titles, has already gone into effect, but activists are using a seldom-used referendum process to try to suspend the law and put it on the ballot in November 2016. However, they need over 43,000 signatures to do this. Ms. Ross struggled to get 15,000 signatures for her 2010 election bid. They also plan to sue to block the law, however, no lawsuit has been filed to date.

As reported in Massive.com, State Sen. Will Brownsberger, D-Belmont, who worked on the bill as chairman of the Legislature’s Judiciary Committee, said he thinks the law will stand. “I think it’s a sound bill,” Brownsberger said. “I think it’s a complicated area, and there are people who interpret the law differently, but I’m pretty confident that we got the basics right and the bill will be upheld.”

The goal of the bill is to protect the rights of homeowners who legally purchased a house that was once foreclosed on. “Once a house has been sold to a third party, they shouldn’t have to worry forever about whether there was some problem with the mortgage way back when,” Brownsberger said.

Brownsberger said lawmakers tried to protect the rights of foreclosed homeowners by preserving their ability to sue for damages. “It’s not in the interest of anybody to keep legal matters open and unsettled for years,” Brownsberger said. “What this is designed to do is create some finality and stability in the housing market.”

The Massachusetts Land Title Association, which represents title insurers, was the major proponent of the bill. (Disclaimer: I also testified in favor of the bill on behalf of the Boston Bar Association). Thomas Bhisitkul, president of the Real Estate Bar Association for Massachusetts, said the law will help homeowners who may be two or three owners removed from a foreclosure but who found themselves unable to sell or refinance after the Supreme Judicial Court ruling.

I would be surprised if the activists’ repeal efforts are successful, and I am confident in the constitutionality of the new law. However, this being Massachusetts, anything is possible. I will, of course, keep the readers posted as to developments.

Until the Attorney General, Secretary of State or a court says otherwise, the Act remains valid and in full force and effect. Attorneys, check with your title rep for specific guidance.

Photo Credit: Boston.com

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Foreclosure Title Clearance Bill Signed Into Law

by Rich Vetstein on December 1, 2015

Charlie BakerNew Law Will Resolve Thousands of Foreclosure Title Defects In Wake of U.S. Bank v. Ibanez Ruling

After a five year legislative struggle (in which I testified before the Joint Judiciary Committee), I’m very pleased to report that Governor Baker has signed into law the Act Clearing Title To Foreclosed Properties (Senate Bill 2015), embedded below. The bill will resolve potentially thousands of land titles which were rendered defective and un-transferable after the SJC’s landmark ruling in U.S. Bank v. Ibanez. The Ibanez ruling invalidated thousands of foreclosures across the Commonwealth due to lenders’ paperwork errors.

The problem addressed by the legislation is that scores of innocent buyers purchased these foreclosed properties, fixing them up, renting them out, etc., but they were unaware of the title defects — only to discover them once they went to refinance and sell. Title insurance companies have been bogged down trying to solve these defects, and in the meantime, many of these innocent folks are left with homes which cannot be sold or refinanced. The same bill passed the Legislature last year, but former Gov. Patrick, bowing to housing activists, vetoed it with a poison pill. After several amendments addressing housing activists’ concerns, a new bill was again passed, and just signed into law by Gov. Baker on November 25, 2015.

The bill, which is effective on Dec. 31, gives foreclosed owners a three (3) year statute of limitations to file a challenge to a foreclosure, after which the foreclosure is deemed to have been conducted legally. For foreclosures which have already been concluded, the new law has a one year waiting period, so that a defective foreclosure would be considered non-defective on Dec. 31, 2016. The bill does retain a homeowner’s right to seek compensatory and punitive damages for a wrongful foreclosure, provided it is within the statute of limitations. The bill also requires the Attorney General’s Office to spearhead more robust foreclosure prevention solutions with the HomeCorps Program and housing activists groups.

The passage of the bill is fantastic news for both owners and potential buyers/investors of foreclosure properties. There is a  shadow inventory of defective title properties which will be able to go on the market.

The bill was sponsored by Millbury Democrat Michael Moore whose office (especially Julie DelSobral) worked tirelessly for the passage of the Act.

MA Act Clearing Title to Foreclosed Properties by Richard Vetstein

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title-insurance

Policy Changes Make It Harder To Insure Foreclosed/REO Properties

In the aftermath of the Supreme Judicial Court’s July 17th ruling in Pinti v. Emigrant Mortgage Company, which voided a foreclosure over a defective notice of default, two leading title insurance companies — First American Title and Fidelity/Chicago — have announced that they will be significantly changing the manner in which they underwrite foreclosed properties. These new policies will make it much harder to insure foreclosed properties, and may dramatically affect the sale and marketability of foreclosed/REO/bank owned properties.

The most drastic change comes from First American, which has the largest market share in Massachusetts. Under FATICO’s new policy (embedded below), lenders must obtain a judicial decree that the foreclosure was conducted in compliance with the Pinti ruling. (This applies only to foreclosures conducted after July 17, 2015). Because Massachusetts is a non-judicial foreclosure state (i.e, lenders do not need a judge’s approval to foreclose except for confirmation that the borrower is not in the active military), getting court approval for a foreclosure will require either a Superior Court or Housing Court action and will be expensive, lengthy and burdensome for lenders.

Fidelity/Chicago’s new policy requires closing attorneys to “verify that any preforeclosure default notices were sent by the foreclosing Mortgagee on or before July 17 [and] verify that the attorney for the foreclosing Mortgagee has included a statement to that effect in a recorded Affidavit that is part of the foreclosure documentation.” Closing attorneys must also “determine that the mortgagors, or any parties claiming under them, are no longer in possession of the premises or otherwise asserting any rights.”

The question is whether the other title insurance companies will follow suit. As of this writing, Stewart, CATIC, Old Republic and Westcor have not adopted a new foreclosure underwriting policy. I will monitor if that changes.

Act Clearing Title To Foreclosed Properties

These underwriting changes only underscore the importance of the Legislature passing the Act Clearing Title to Foreclosed Properties, Senate Bill 1981. The bill would protect arm’s length third party purchasers for value, and those claiming under them, who purchase at the foreclosure sale or in a subsequent REO transaction. It is the result of years of negotiation, and represents an honest effort to balance the interests of third party purchasers with mortgagors who legitimately believe they have been wrongfully foreclosed upon. Lenders who have conducted defective foreclosures would remain liable to the mortgagors. This is the same bill that was passed by both branches of the legislature at the end of the legislative session last fall, but was sent back with poison pill amendments by Governor Patrick and died. The bill should be voted on by the Senate soon after Labor Day. If passed, it will be considered by the House shortly afterward.

First American Mass. Foreclosure Policy

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SJC Voids Foreclosure Over Defective Notice of Default

by Rich Vetstein on August 6, 2015

Foreclosure2.jpgRuling Enables Foreclosed Owner to Live in Premises For Over 6 Years, Leaving New Owner with Defective Title

In a decision which could affect how title examiners and title insurance companies underwrite title to foreclosed properties, the Supreme Judicial Court has ruled that a lender’s defective notice of default is grounds to void and nullify a foreclosure sale — even after the property was purchased at auction by a third party without knowledge of the problem. The decision is Pinti v. Emigrant Mortgage Co. Inc. (SJC-July 17, 2015).

The defective aspect of the default notice was relatively minor. The notice was required to say that the borrower had the right to bring “a court action” to challenge the default or foreclosure. The actual notice instead referenced a “lawsuit for foreclosure and sale.” The problem is that in Massachusetts there is really no such thing as a lawsuit for foreclosure, because we are a non-judicial foreclosure state. In order to challenge a foreclosure, a borrower must bring an injunction proceeding in Superior Court. Over this minor discrepancy, the Court throw out a 3 year old foreclosure, leaving the subsequent buyer with defective title.

“This ruling is yet another reason why it’s absolutely critical to obtain owner’s title insurance for any home purchase–especially a foreclosure property.”

This ruling had a disastrous impact on the foreclosing lender and the buyer of the property at foreclosure (and his title insurance company, presumably). The borrower, who was represented by Greater Boston Legal Services, stopped paying her mortgage six years ago in 2009, and the lender foreclosed in 2012. A third party purchased the property (with the borrower in occupancy) shortly thereafter, then commenced eviction proceedings. It appears that the borrower has been able to live in the premises for the entirety of the litigation, presumably mortgage payment free. After this ruling, the lender will need to re-start foreclosure proceedings from square one.

Change In Title Exam Practices?

In a typical title examination involving a previously foreclosed property, the examiner and attorney will only look at the foreclosure notices and “green cards” — the certified mail foreclosure notices. In light of this ruling, the examiner may be required to look back even further to the default notices sent by the lender (which are not recorded with the registry of deeds) and ensure compliance with the mortgage and loan documents. Attorneys should consult their title companies for guidance on this ruling. (The ruling’s effect is prospective only; a title insurance company that I work with has already stated that they will not be changing their underwriting standards after Pinti).

Effect On Foreclosures

The SJC’s reasoning for requiring strict compliance with the default notice provisions in the mortgage was based on the fact that Massachusetts uses a non-judicial foreclosure process. That is, lenders do not need a judge’s approval to start foreclosure (with the except that they need Land Court approval that the borrower is not in the armed services). Accordingly, even the most hyper-technical defect in a default notice by the lender could render a foreclosure void.

Following a long series of pro-borrower rulings starting with the historic U.S. v. Ibanez decision, the SJC’s decision in this case is yet another cautionary tale to lenders that they must dot their “i’s” and cross their “t’s” before conducting a valid foreclosure sale.

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Superman's_classic_poseLike Superman, A Use and Occupancy Agreement Can Save the Day, But Be Aware of the Risks!

Tom and Mary Ryan, and their two little kids, Abigail and Jake, are relocating from California to the Boston area so Tom can take a job with a local tech company in Burlington. They have already sold their California home, and have been living in a cramped rented condominium in Santa Monica for two months already. Their loan has hit some snags because Tom was out of work for half of 2013, and had some IRS issues, although he is on solid footing now with his new job. The closing is scheduled for the end of this week and they have their cross country movers booked and scheduled and their life is now packed in boxes. Just when they finish packing their last box, their loan officer calls with somber news. “Tom, unfortunately, our underwriting department is dealing with delays getting your tax transcripts from the IRS. We are going to have to push back the closing for about a week. I’m so sorry.” Canceling the movers will cost several thousand dollars, and they will have to cancel furniture shipments as well. To make matters worse, new tenants are supposed to move into Tom’s rented condo unit right after they leave.

While all characters appearing in this work are fictitious, and any resemblance to real persons, living or dead, is purely coincidental, Tom and Mary are in trouble. With the prevalence of back-to-back closings and unforeseen underwriting issues and title defects, these situations are not uncommon. And with new TRID closing disclosure rules coming online in August, which are bound to cause even more loan approval delays, we may be seeing more of these situations in the months to come.

Fortunately, there is a solution to this situation. The sellers are willing to let the Tom, Mary and family move into the home prior to the closing under a Use and Occupancy Agreement. This will enable the buyers to complete their move, move into the house, but before the actual closing. A use and occupancy agreement, however, is not without its risks and downside, which I will discuss below.

One of the most important aspects of a Use and Occupancy Agreement is what it is versus what it is not. The agreement should specify that it creates a mere license to occupy the premises, not a tenancy or a landlord-tenant relationship. This will make it easier to remove/evict the occupants if something goes wrong. In any event, if the sellers are forced to remove the occupants, they will still have to resort to judicial eviction proceedings, which in Massachusetts can potentially take several months. This alone is the biggest drawback of a Use and Occupancy Agreement. The seller should always put language in the agreement that the buyers will be responsible for all attorneys’ fees and costs in case of an eviction.

The parties have to agree on a rental rate, typically based on the fair market rent for the premises or the mortgage and carrying costs. Websites such as www.rentometer.com can give you an idea of what a fair rental rate should be. Your Realtor should give you guidance as well. The rent should be divided by 30 for a per diem basis. You can also charge penalty rent if the term is extended past the original deadline.

The sellers should also include general indemnification language providing that “during the period of occupancy, Buyers shall maintain the Premises in good, clean condition and shall not make nor suffer any strip or waste to the Premises, nor make nor suffer any unlawful or improper use of the Premises and Buyers agree to indemnify Sellers and save them harmless from all liability, loss or any damage arising from such additions, alterations, strip, waste or unlawful or improper use, any nuisance made or suffered on the Premises by Buyers, including their family, friends, relatives, invitees, visitors, agents, or servants, or from any carelessness, negligence or improper conduct of any person.”

Lastly, the buyers should do their pre-closing walk through before they move in under a Use and Occupancy, because once they move in, the home will be a mess for awhile. That way, everyone will be on the same page as far as the property condition goes on the date of move in.

Many attorneys advise clients never to agree to Use and Occupancy Agreements. I am not one of those attorneys. With any risk, it depends on the situation. The sellers need to be comfortable that any delays will be resolved favorably and quickly. Sellers also need to appreciate that despite any language in the agreement, it could take months to remove an occupant if things so south. As long as everyone understands the risks, a Use and Occupancy Agreement can be a life saver.

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massachusetts condominium super lienUpdate 3/30/16: SJC Reverses Appeals Court, Allowing Rolling Lien Procedure

Ruling Hurts Condominium Associations’ Collection Efforts

The Massachusetts Condominium Act gives condominium associations the ability to file a “super-lien” for unpaid monthly condominium fees, six months of which is given priority over a first mortgage against the unit. The super-lien has proven to be a very effective method for condominiums to collect delinquent fees because lenders will often pay off the super-priority amount so as not to affect their mortgage priority.

But what happens when a unit owner owes more than six month’s worth of condo fees? In that situation, innovative condominium attorneys have developed a practice of filing multiple lien lawsuits to create a “rolling” lien for successive 6 month periods. Unfortunately for condominium associations, the Appeals Court recently put the kibosh on this practice in the case of Drummer Boy Homes Association v. Britton (Nov. 7, 2014).

Rolling Lien Practice

In the Drummer Boy case, the unit owner withheld payment of condo fees in a dispute with the condominium trustees over parking rights and fines. (Note, this is a big “no-no” as the law provides that a disgruntled unit owner must pay fees under protest). The condominium lawyers filed three separate and successive lawsuits asserting a super-lien over 18 months worth of unpaid fees. The lawsuits were all consolidated. A district court judge ruled, however, that the association had a super-priority lien over only the first 6 months before the first lawsuit, not the 18 months’ worth claimed.

Court: Super-lien Limited To 6 Months Of Fees

On appeal, the Appeals Court likewise held that the association’s super-lien only covered the initial 6 month period, not the 18 month period claimed. The Court reasoned that the Mass. Condominium Act was modeled after the Uniform Condominium Act which clearly provided that the maximum amount of a super-priority lien was 6 months worth of fees, and that this was a fair balance between the interests of lenders and condominium associations. Of course, the condominium association is free to collect all of the outstanding fees from the unit owner and sell the unit at auction, but the first mortgage will have priority over all of the fees except for 6 months plus attorneys’ fees, so it’s essentially a Pyrrhic victory.

As the condominium attorneys over at Perkins|Ancil are saying, this ruling may be appealed to the SJC and going forward associations will likely be forced to avail themselves of the remedy of foreclosure sooner rather than later in order to fully protect their financial interests. Failing that, condominium associations will have to lobby the Legislature for a change in the super-priority lien amount over above the 6 month cap. This remains a case to watch!

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mass ibanez titleSenate Bill 1987 Would Have Cleared Title For Innocent Homeowners

Acceding to the demands of fair housing community activists, Massachusetts Governor Deval Patrick has rejected Senate Bill 1987, An Act Clearing Titles to Foreclosed Properties. The bill would have cleared title of homes affected by defective foreclosures with a one year waiting period from enactment of the bill while giving homeowners three years to challenge wrongful foreclosures. The Governor filed an amendment to the bill, raising the statute of limitations for homeowners to challenge foreclosures from 3 years in the current bill to 10 years. The Senate and House are unlikely to agree on such an absurdly long statute of limitations, so Patrick’s action should effectively kill the bill.

This is truly devastating news for the thousands of innocent homeowners who are stuck with bad title due to botched foreclosures.

The bill had cleared the Senate and House with near unanimous support. The bill also received favorable press in the Worcester Telegram and Boston GlobeThe bill preserves the right to challenge foreclosures and sue the banks, while helping innocent homeowners stuck with bad title. Despite this, organizations such as the Massachusetts Alliance Against Predatory Lending and activist Grace Ross were successful in getting Governor Patrick on their side.

The Governor’s statement accompanying his action on the bill states as follows:

Massachusetts is emerging from a period of far too many foreclosures, on far too many families, and in far too many communities facing significant economic challenges. It is no secret that, too often, the foreclosure was not properly effectuated.  The entity purporting to foreclose did not have the legal authority to do so.  The effect of these impermissible foreclosures has been lasting.  Families were improperly removed from their homes.  Buyers who later purchased the property — or, at least, believed they had done so — are now faced with title questions.  Many of these buyers were investors, but many are now homeowners themselves. I commend the Legislature’s effort to address these problems.  But I believe the proposed three year period is insufficient.  A family improperly removed from its home deserves greater protection, and a meaningful opportunity to claim the right to the land that it still holds.  The right need not be indefinite, but it should extend for longer than three years.  Certainty of title is a good thing — it helps the real estate market function more smoothly, which ultimately can help us all.  But this certainty should not come at the expense of wrongly displaced homeowners or, at least, not until we have put this period further behind us.

As a long time supporter of this bill, I am truly disheartened at this result. I thought the bill did a great job in balancing the rights of innocent home buyers who are stuck with unsellable properties through no fault of their own with the rights of folks who are fighting foreclosures. A three year statute of limitation — which is the same length for malpractice and personal injury claims — is a reasonable amount of time to mount a challenge to a foreclosure, especially when debtors have many months prior notice before a foreclosure sale. The people who would have benefited from this bill are everyday people who bought properties out of foreclosure, put money into them and improved them. I have personally assisted several of these families. Everyone agrees that the banks are largely at fault for the mess left behind with the foreclosure crisis but why put the rights of those who don’t pay their mortgages above those who do? I will never understand this rationale. Perhaps that’s why I could never be in politics!

So where do we go from here? I honestly don’t know. Fortunately, the Land Court recently issued a ruling which may help clear some of these toxic titles. Maybe the legislation will get another chance at the next session or when Patrick leaves office at the end of the year.

 

 

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mass ibanez titleIt appears we may be nearing the end of the misery resulting from the infamous U.S. Bank v. Ibanez foreclosure decision, which has caused hundreds if not thousands of title defects across the Commonwealth. A recent Land Court ruling combined with significant movement on curative legislation may clear the vast majority of these defective titles.

By way of background, titles of properties afflicted with Ibanez title defects came out of faulty foreclosures, and in worst cases, cannot be sold or refinanced. Many homeowners have been waiting for 5 years or longer for some kind of resolution so they can sell or refinance their homes. 

Daukas v. Dadoun Land Court Ruling

This past week on July 23, 2014, Land Court Justice Keith Long (ironically the same judge who wrote the original Ibanez ruling) held that an Ibanez title can be cleared through the foreclosure by entry procedure as long as three years have passed since the faulty foreclosure. Typically in Massachusetts lenders use both the power of sale/auction method and entry method of foreclosure. Unlike the power of sale/auction method, however, a foreclosure by entry takes three years to ripen into good title. Judge Long ruled that even where the power of sale/auction method was defective due to non-compliance with the Ibanez decision, the foreclosure by entry method would not be affected by this non-compliance provided that the lender was the “holder” of the mortgage at the time of the entry and three years have passed since the entry.

So what does that mean in plain English? It means that titles with Ibanez defects may be insurable and marketable provided that (1) the foreclosing lender conducted and recorded a proper foreclosure by entry, (2) the entry was conducted by a lender who was the proper holder of the foreclosed mortgage, and (3) three (3) years have passed since the foreclosure entry. If you have been dealing with an Ibanez defective title, it’s best to contact an experienced title attorney and/or your title insurance company (if you have one) to see if you qualify. Feel free to contact me at [email protected].

Thank you to Attorney Jeffrey Loeb of Rich May PC for alerting me to the Land Court case.

Senate Bill 1987

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 after 3 years have passed from the foreclosure. The bill, which has been passed by the Senate and is now before the House, is very close to being passed by both branches of the legislature, hopefully during this summer legislative session.

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.

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