New Massachusetts Law Provides Clarity for how long the title can be challenged when buying a foreclosed home
On November 28, Massachusetts Governor Charlie Baker signed An Act clearing titles to foreclosed properties into law. The 2011 Supreme Judicial Court decision,U.S. Bank National Association vs. Ibanez¹ had an immeasurable effect on the sale of foreclosed residential real estate in Massachusetts because it essentially opened up the doors to allow previously foreclosed homeowners to seek to invalidate foreclosures throughout the Commonwealth, with the result being that any title issued subsequent to the foreclosure could be invalidated. The result of the decision was that good faith purchasers of the foreclosed homes could not sell or refinance their homes because of the uncertainty over title. (Side Note: If you are a licensed real estate agent in Massachusetts, can you look yourself in the mirror or your clients in the face right now and honestly tell them that you were aware of Ibanez when you sold them a home with a past history of foreclosure? Do you think the attorney is/was solely responsible for advising the buyer who may or may not have purchased homeowners title insurance? And what about the lender's title policy that was exposed because of Ibanez?). Oh, but I divert, because this is Massachusetts and as ususal, no harm, no foul. The legislature is here to help once again.
Under this new law, bona fide purchasers will be protected by limiting the amount of time others would have to challenge the "legitimacy" of a Massachusetts foreclosure and sue for title (or invalidation of the foreclosure procedings) up to three years. After the three year period the courts would view the foreclosure as proper.
¹U.S. Bank National Association v. Ibanez Supreme Judicial Court of Massachusetts 941 N.E.2d 40 (Mass. 2010) Facts This holding combines two cases with almost identical facts. U.S. Bank National Association (U.S. Bank) and Wells Fargo Bank, N.A. (Wells Fargo) (plaintiffs) each foreclosed on a property and each bought the property back at the foreclosure sale. They each filed a claim seeking declarations that they were the fee simple owners of the foreclosed properties. U.S. Bank claimed that it was assigned its mortgage under a trust agreement, but it never presented the trust agreement to the court. U.S. Bank did submit a private placement memorandum (PPM) that indicated that the mortgage “will be” assigned to the trust. Wells Fargo also claimed that it was assigned its mortgage. To back up that claim, Wells Fargo presented an unsigned copy of a pooling and servicing agreement (PSA) as well as a mortgage loans schedule that purportedly included the mortgage at issue, but contained only loan amounts zip codes, and cities, and not property addresses, mortgagors’ names, or loan numbers. The trial judge ruled against the plaintiffs. The plaintiffs appealed.