The Massachusetts Legislature and Governor Baker have taken a much needed step to limit further problems resulting from the Ibanez decision and its progeny. Those cases made clear that a foreclosure by a party that did not yet hold an assignment of the mortgage failed to convey good title. As a result, many third party buyers who had purchased foreclosed property before the Ibanez decision were left holding, at best, flawed title.
In many instances it has been difficult (and frequently impossible) to locate the owner of the improperly foreclosed-upon property, or to get the assignment(s) necessary to attempt to re-foreclose. As a result, it also has been difficult to clear title to the foreclosed homes.
To address these issues, on November 19, 2015, Governor Baker signed into law An Act Clearing Title to Foreclosed Properties , Chapter 141 of the Acts of 2015. The legislation takes effect on December 31, 2015.
In essence, this Act provides that an appropriate affidavit regarding the foreclosure sale shall be conclusive evidence vesting title in an arm’s length purchaser for value after three years has passed following the recording of that affidavit or the effective date of the Act, with some minor variations.
The Act does not protect a purchase by the foreclosing entity. It also does not cure the title if the owner at the time of foreclosure commences an action challenging the sale (and records the complaint or other pleading challenging the foreclosure sale) before the deadline. Note that a different deadline applies where the borrower still occupies the mortgaged premises as his principal place of residence and asserts a defense arising from a botched foreclosure in an eviction or similar case.
However, barring timely challenges, an innocent purchaser’s Ibanez problem is effectively cured by the filing of the affidavit and the passage of the appropriate time period.
This Act attempts to balance the interests of homeowners with the interests of innocent purchasers for value of homes with flawed titles due to foreclosure problems. It also should enable many properties to be returned to the Commonwealth’s housing stock.