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Galvin wants foreclosure tribunal

Seeks to ease uncertainty following SJC ruling on mortgage ownership

WILLIAM F. GALVIN WILLIAM F. GALVIN
By Jenifer B. McKim
Globe Staff / January 11, 2011

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Massachusetts Secretary of State William F. Galvin is calling for the Legislature to create a special tribunal to deal with homeowners’ concerns about foreclosures, following Friday’s ruling by the state’s highest court that puts into question the ownership of thousands of properties repossessed by lenders.

Lawmakers should recommend that the state’s Land Court appoint a judge to oversee hearings for owners of foreclosed homes who are worried about the validity of their property titles, Galvin said. A tribunal could also address questions from financially troubled homeowners about whether banks have the legal right to seize their properties, he said.

“There is a lot of uncertainly out there,’’ Galvin said of the foreclosure crisis. “We can’t let this sit here for months and fester.’’

The proposal follows a Supreme Judicial Court ruling that upheld a Land Court decision invalidating two Springfield foreclosures because the lenders could not prove they held the property titles at the time they took back the homes.

Friday’s 6-to-0 decision is expected to increase pressure on major US lenders to prove they own mortgages before foreclosing and gives people seeking to keep their homes additional reason for legal action. As a result of the ruling, lenders will have to redo the paperwork for an undetermined number of foreclosures. In cases where someone was wrongly foreclosed upon, banks could be forced return a property to its former owners.

Galvin, who as secretary of state heads the Massachusetts Registry of Deeds, said officials should quickly move to address title questions that could further stall the housing market’s recovery by scaring prospective buyers and keeping thousands of properties in legal limbo.

Over the last three years alone, lenders have completed more than 33,000 foreclosures in Massachusetts, according to Warren Group, a Boston company that tracks local real estate.

Galvin also wants legislators to set a time limit for homeowners make title claims, so that ownership questions do not remain unresolved indefinitely.

“We have to have some order in the system,’’ he said.

The SJC confirmed a 2009 Land Court ruling that rebuffed the way lenders have routinely conducted foreclosure in recent years without having all the documentation in place at the time a property is taken back. Title ownership became an issue because of the housing boom, during which millions of home loans were bundled into bonds and sold to investors. As that process was repeated over and over, it often became difficult to follow the trail of documents.

Before the 2009 ruling, lenders assumed they could foreclosure on a home and later produce formal proof they owned the mortgage.

Representative Angelo M. Scaccia, a Readville Democrat, said he supports Galvin’s proposal, but only if judges are hired on a temporary basis. He said he would include the plan as part of a broader bill to be filed this month that will require judicial approval of all foreclosures.

“You need to get a whole bunch of people involved very quickly,’’ Scaccia said. “We are talking about a lot of properties. These properties aren’t going to be sellable.’’

A spokeswoman for the Supreme Judicial Court said the justices have not seen Galvin’s proposal, but noted that the court system already faces “severe understaffing due to budget cuts and an ongoing hiring freeze.’’

Local real estate lawyers, voicing similar concerns about how a tribunal would operate, were guarded in their support for Galvin’s proposal.

Meanwhile, several lawsuits are making their way through state courts that could address questions about the rights of people who purchased bank-owned properties or were unfairly foreclosed upon.

The SJC recently agreed to review another Land Court decision by Justice Keith C. Long that found a home buyer had no right to a house he bought in Haverhill because the lender that seized it didn’t have all the documents in place at the time. In his decision, Long said he was sympathetic to the plight of the plaintiff, Francis Bevilacqua, who was seeking a clear title to the property. But he added that Bevilacqua’s “proper grievance and proper remedy’’ is with the lender that improperly foreclosed on the house.

Also, a statewide class action filed by homeowners who allege they were wrongfully foreclosed upon will now move forward. The 2008 case against GMAC Mortgage, Avelo Mortgage, and US Bank National Association among others was on hold pending Friday’s SJC decision, said Kevin Costello, a Boston lawyer representing the plaintiffs. Yesterday, Costello said he has requested that the US District Court in Boston reopen the case, which seeks to halt affected foreclosures and provide damages.

Jenifer B. McKim can be reached at jmckim@globe.com.