The Massachusetts Supreme Judicial Court’s ruling last year in U.S. Bank v. Ibanez dramatically altered how foreclosures are conducted in the Commonwealth and created title clouds on many titles in the state where a foreclosure had taken place somewhere in the chain of title, even if it was several owners before the current owner. The SJC affirmed a lower court ruling, which held that the practice by foreclosing lenders of completing a foreclosure and then obtaining and subsequently recording an Assignment of the foreclosed mortgage from the holder of record to the foreclosing lender, was improper and that such foreclosures were invalid, because only the holder of record of the foreclosed mortgage had the right to complete foreclosure proceedings. The impact of this decision was far reaching. Property owners who thought they acquired their property with clear title, now found that if there had been a foreclosure in their chain of title, even several owners before, their title was now suspect. Such suspect titles posed such a problem that at least one major lender decided it would no longer underwrite loans in Massachusetts because it felt it could not foreclose on its collateral if necessary, and title insurance companies became very reluctant to insure these titles, making refinancing or selling the properties virtually impossible.
Mass. Senate Bill 830, sponsored by State Senator Michael Moore, D-Worcester, provides that objections to foreclosures completed by a lender, who was not the record holder of the foreclosed mortgage and who recorded an Assignment for the foreclosed mortgage from the record holder after that, must be brought within ninety (90) days from the recording of such an Assignment. Otherwise, the foreclosure would be deemed valid. In a single stroke, Senate Bill 830 would clear up many properties with title clouds due to improperly completed foreclosures in the title chain. However, consumer advocates maintain that, in practice, a foreclosure doesn’t come under scrutiny until much longer than 90 days after the foreclosure deed and the necessary Assignment have been recorded, often when the homeowner is being evicted by the lender through court proceedings.
Another seismic case now before the SJC, Eaton v. Fannie Mae, may further and dramatically impact titles to foreclosed properties. In Eaton the SJC is being asked to decide whether the foreclosing lender must not only be in possession of an Assignment from the record mortgage holder, but also the original Promissory Note evidencing the underlying debt. If the SJC ruling in Eaton requires a foreclosing lender to be in possession of the original Promissory Note, more land titles with foreclosures in their chain will become suspect.
Mass. Senate Bill 830 at least has started the dialogue by the legislature to address how best to provide a solution to the countless land titles tainted by improper foreclosures. While the Eaton case is still pending, any attempt to finalize Bill 830 would be premature. Hopefully the legislature will wait for the Eaton decision and then craft the final Bill in such a way as to address the title concerns raised by both Ibanez and Eaton.
Here at Doherty, Ciechanowski, Dugan & Cannon, P.C. we have attorneys that focus their practices in the real estate area of law, including the buying and selling of land impacted by foreclosures. So we can offer you the best legal advice to make sure your real estate matter is handled properly.