Massachusetts Real Estate Lawyer Blog
Massachusetts Governor Charlie Baker recently signed into law “An Act Clearing Titles to Foreclosed Properties.” The Act, which went into effect on December 31, 2015 and is retroactive, limits the statutory time period that former owners will have to challenge a foreclosure sale of their homes. The purpose of the Act is to clear legal title for those Massachusetts homeowners who purchased their homes through foreclosure sales, many of whose titles became clouded after a 2011 case decided by the Massachusetts Supreme Judicial Court.
In U.S. Bank Nat’l Assoc. v. Ibanez, 458 Mass. 637, 648 (2011), the Supreme Judicial Court held that the entity foreclosing on a property must be the assignee of the mortgage at both the time of the notice of sale as well as the time of the subsequent foreclosure sale. The holding went against industry custom and widespread practice, and it had the effect of potentially invalidating thousands of previous foreclosures. Many of these title-holders were Massachusetts individuals who had purchased properties in foreclosure sales in an effort to fix them up and resell them, live in them, or rent them. However, with a clouded title, many were left with houses that could not be sold.
Responding to the needs of these title-holders, the Massachusetts Legislature drafted a bill to clear title to properties foreclosed upon in the manner Ibanez deemed invalid. The Act signed by the Governor provides that a party challenging a foreclosure must do so within three years. After the three-year period, the foreclosure will be deemed to have been conducted legally.
Significantly, the Act only applies to foreclosures of homes that were purchased by arms-length third-party buyers, not to financial institutions such as mortgage companies or their affiliates, government agencies, or other entities that continue to hold the title after a foreclosure sale. Specifically, the Act protects third-party buyers who purchased the property in an arms-length transaction for value. It is defined in the Act as those who purchased the property directly at a foreclosure sale, or those who purchased the property after the foreclosure sale.
It is important to note that there are many exceptions to these provisions of the Act. In addition, there are many issues left open to interpretation, particularly in foreclosure challenges currently pending in the courts. Nevertheless, the Act does clarify the law and provide protection for those who have purchased foreclosed homes, or those who have purchased a previously foreclosed upon home from another seller.
If you have questions concerning the recently enacted Act Clearing Titles to Foreclosed Properties, seek additional guidance from the Massachusetts real estate attorneys at Pulgini & Norton. Our skilled lawyers provide experienced and comprehensive legal representation to clients in a variety of residential property matters, including foreclosures, land transactions, mortgages, zoning issues, and more. To schedule a consultation with one of our knowledgeable lawyers, call (781) 990-2200 or contact us through our website.
More Blog Posts:
Massachusetts Appeals Court Reverses Summary Judgment, Allows Homeowner to Continue Suit Against Mortgage Company, Massachusetts Real Estate Lawyer Blog, published November 17, 2015
Massachusetts Court Voids Foreclosure for Failure to Comply with Mortgage Provision, Massachusetts Real Estate Lawyer Blog, published December 22, 2015