Some Relief for Purchasers of Previously Foreclosed Homes

Earlier this year, the Massachusetts Attorney General's Office reached a settlement with Bank of America, Chase, Citi and Wells Fargo that will provide people who bought previously foreclosed homes that are now recognized to have title defects due to missing or late pre-foreclosure assignments with assistance in clearing those defects.

The following is from a release on the AGO's website:

In 2011, the Massachusetts Office of the Attorney General brought suit against the banks for allegedly violating the Massachusetts Consumer Protection Act (G.L. c. 93A, §§ 2 and 4) by foreclosing on homes before receiving an assignment of the mortgage. Under Massachusetts law, a bank, or other foreclosing entity, must strictly comply with the state’s foreclosure laws in order to transfer the ownership of a property through foreclosure. When a party conducting a foreclosure does not strictly follow the foreclosure laws, the foreclosure is “void.”  People who purchase properties after a void foreclosure may have a title defect that could prevent them from refinancing their mortgage or selling the property.

The settlement provides a hierarchy of assistance to be extended to the "downstream purchaser" of these properties by the lender that did the foreclosure.  Some of the options include assistance with making claims against title insurance, with obtaining a deed from the original mortgagor, or with redoing the foreclosure.  This only applies to the four lenders who were parties to this settlement, but they did many foreclosures in Massachusetts so it should provide some assistance to homeowners.  How effective these measures will be remains to be seen.