Thousands of foreclosures are invalid: Ibanez decision
Richard D. Vetstein, today, he explains a legal case regarding foreclosure:
In late March of this year in the case of U.S. Bank v. Ibanez, Massachusetts Land Court Judge Keith C. Long issued one of the most controversial rulings in recent years which has called into question hundreds if not thousands of foreclosure titles across Massachusetts.The Facts
In the Ibanez case, the Land Court invalidated two foreclosure sales because the foreclosing lenders failed to show proof they held ownership of the foreclosed mortgages through valid assignments. In modern securitized mortgage lending practices, the ownership of a mortgage loan may be divided and freely transferred numerous times on the lenders’ books. But the documentation (i.e., the assignments) actually on file at the Registry of Deeds often lags far behind. The Land Court ruled that foreclosures were invalid when the lender failed to bring the ownership documentation (the assignments) up-to-date until after the foreclosure sale had already taken place.The Ibanez decision has called into serious question the validity of any pending or completed foreclosure where the lender did not physically hold the proper paperwork at the time it conducted its auction. The mortgage industry has criticized the decision as form over substance. The judge is presently reconsidering the ruling, but whatever the outcome, the case will likely end up before the Massachusetts Supreme Judicial Court given its far-ranging impact.
What can you if you are affected by the Ibanez ruling? If you are a homeowner facing foreclosure, you now have a powerful tool to delay or stop the foreclosure sale. Check the Registry of Deeds online to see if your lender has timely recorded the proper assignments, and send a written request for the loan documents. It may be confusing to piece together the chain of custody of your mortgage. If the foreclosure auction has already taken place and you are being evicted, you can request the loan documents in written “discovery requests” filed with the court. You could also file a lawsuit to enjoin the foreclosure.If you are contemplating purchasing a property out of foreclosure or are selling a previously foreclosed property affected by an “Ibanez” issue, check if there’s an existing title insurance policy on the property, and ask the title company to insure over the issue. Some are willing to do this. Others are not, however. The other option (albeit expensive) is to hire an attorney to file a Land Court “quiet title” action to validate the proper assignment of the mortgage loan, assuming you can track the documents down and they were not backdated. You can also try to track down the foreclosed debtor and obtain a release deed from them, assuming you can track them down and they cooperate.
If you are facing foreclosure and need help getting through the legal paperwork maze, contact City Life/Vida Urbana. They are Boston based. Other efforts are starting up all over eastern Massachusetts, too.
If you are buying foreclosed property, get a lawyer, please! (I know you all hate it when lawyers tell you to get a lawyer, but this is a time when you really need one.)
Ibanez is going to make foreclosure slower and more complicated. But, it may also force lenders into doing things right.
Have you ever read your mortgage documents? If you haven’t, pull them out of that dusty old box and take a look. There is a process; lenders need to follow it. If they don’t, the next person buying the house may not have proper title. Remember that you never buy a house; you buy a title.
Are we headed for a paperwork mess of mammoth proportions? Will Ibanez keep it manageable?
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