Wednesday, March 14, 2012

An Act clearing titles to foreclosed properties

This week's issue of Banker & Tradesman has a front page story about Senate Bill 830, "An Act clearing titles to foreclosed properties."  This bill, filed by State Senator Michael Moore of Worcester, addresses the Ibanez problem.  In Ibanez, the Supreme Judicial Court ruled that an entity conducting a foreclosure must have the subject mortgage assigned to it prior to the commencement of the foreclosure proceeding; any foreclosure conducted pre-assignment would be void.  Since this holding was contrary to a fairly widespread practice in the conveyancing business, there are many previously-foreclosed properties out there with defective titles.  This bill would retroactively ratify those defective foreclosures but only if the property owner fails to file an action in court disputing the foreclosure within 90 days of the recording of the foreclosure deed or the effective date of the law, whichever is later.

The full text of the bill, which seems to be working its way successfully through the legislative process, is as follows: 

SECTION 1. Section 15 of Chapter 244 of the General Laws is hereby amended by adding the following second paragraph:

Such affidavit shall be conclusive evidence in favor of a good faith purchaser for value at or subsequent to the foreclosure sale that the foreclosing party identified or referred to in such affidavit or the foreclosure deed to which it relates as the holder of the foreclosed mortgage is the holder of the mortgage for purposes of such foreclosure unless the holder of the equity of redemption under the mortgage files an action in Superior Court, Land Court or Housing Court to invalidate the sale for lack of title in the foreclosing party within 90 days from the date of recording of such affidavit and records a memorandum of lis pendens pursuant to chapter 184, section 15, within 30 days of the commencement of such action.

SECTION 2. The provisions of this act shall apply to such affidavits recorded before, on or after the effective date of this act, provided, however, that, as to such affidavits recorded before the effective date of this act, the holder of the equity of redemption shall have a period of 90 days from said effective date to commence such action.

SECTION 3. Notwithstanding any general or special law to the contrary, the division of banks shall adopt regulations to provide the holder of equity of redemption with notice of any rights granted pursuant to Section 1 of this Act. 

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